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IT Decision Makers Survey Gives Insight To New Procurement Strategies

IT Decision Makers Survey Gives Insight To New Procurement Strategies

IT Decision Makers Survey Gives Insight to New Procurement Strategies

The IT industry is undergoing a fundamental shift in the way companies buy IT solutions. This shift is driven by three trends: The decision-making process is being influenced by a diverse and larger set of individuals within the company, these individuals are increasingly tech savvy and self-educated, and easy-to-buy, cloud-based options are gaining market share.

This is affecting the way IT vendors compete, forcing them to alter their sales and marketing strategy. Our firm, L.E.K. Consulting, the global management consultancy, conducted a study of 228 IT decision makers across all verticals and company sizes in the U.S. In a recently published white paper called “Cloud Disturbance: How IT Vendors Can Succeed In a Time of Shifting Buying Trends,” we reveal the silver lining to the change and offer advice to IT vendors looking to capitalize on this movement in the industry.

IT-Strategy

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Many People to Please

Our first insight from the survey was that purchases-by-committee are becoming common place. An average of 11-13 people are now involved in the IT purchase and decision-making process. This results in a lengthier buying process to satisfy the desires of multiple stakeholders.

The People are Tech Savvy and Self-Educated

Making the IT sales rep’s job even more difficult, these de facto purchasing committees now consist of self-educated buyers that form early opinions on technologies and vendors with minimal direct input from the vendor or the channel. Instead, they rely on company websites, online communities and Google search results to self-educate and help develop their preferences. Value-added resellers (VARs) continue to play a role in the customer discovery and purchase-decision process, but their importance is diminishing. While VARs are engaged nearly 80% of the time in the procurement decision process, the study found that they are consulted late in the process and are influencing purchase decisions less and less.

In Comes the Cloud

Many purchasers—especially the end users who need software to power the processes that impact them directly—are frustrated by purchases-by-committee. These individuals are looking for a way out of the long process. To alleviate this frustration, these buyers often turn to cloud-based options for a relatively cheap and easy transition to third party, internet-based hosts.

The benefits of cloud deployment are well-known and have certainly been hyped: improved disaster recovery, lower upfront capital requirements, flexibility to add or reduce seats, and reduced requirement for in-house IT staff. But our research shows that vendors still need to address the negative perceptions associated with cloud-based services—privacy and security, lack of internal control, high total cost ownership, and WAN reliability.

The average preference for pure cloud services (versus on-premise and on-premise managed services) is still less than 20% and varies dramatically by software application and customer profile. The applications most preferred for deployment in the cloud are audio conferencing, web collaboration and CRM, while the one that IT decision makers least prefer to access via the cloud is ERP.

Three Solutions for IT Vendors

Stop selling and start helping. An omnichannel marketing strategy is now a necessity, including a strong online presence (website, online communities, SEO, etc.) But vendors must change their mindset from “sell at all costs” to “education first and foremost,” and prioritize content marketing over advertising and direct sales in most instances. We advise vendors to focus on the value proposition of the product as it pertains to each stakeholder involved in the decision-making process.

Engage with and empower the channel. VARs may be involved in 80% of the vendor selection decisions, but many are not involved early on when the foundation is laid for the final vendor choice. VARs need to entrench themselves in this process, understanding each customer’s IT strategy. Vendors should have programs that enable and motivate VAR partners to build expertise and stand-alone capability from local marketing to technical sales, integration, execution and customer support.

Ensure you have a robust cloud solution. Our research shows that the cloud won’t be right for every customer at this point, but having a solution for those customers for whom the cloud presents a compelling business case will be essential. IT vendors need to provide cloud solutions that more seamlessly integrate with enterprise IT environments, and then back their solutions by addressing the concerns of conservative large-enterprise buyers. Success in some sectors may require a hybrid approach that combines the benefits and capabilities of traditional on-premise solutions with multi-tenant cloud capabilities in a single system.

If IT vendors put these strategies into play, they will be able to exploit the shift in the way companies procure IT solutions.

By Aaron Smith/Mark Arman

Authors Aaron Smith and Mark Arman are located in L.E.K. Consulting’s San Francisco Office and can be reached by e-mailing A.Smith@lek.com or M.Arman@lek.com

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