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

(Image Source: Shutterstock)

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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One Response to IT Decision Makers Survey Gives Insight To New Procurement Strategies

  1. I would add a couple of other areas that are dominated by cloud vendors.
    Ecommerce is almost 100% cloud based, there are a few organizations that insist of on premise hosting of ecommerce sites, but these are very exceptional.
    Eprocurement has two parts marketplaces are 100% cloudbased, purchasing systems are mainly ERP based with links out to cloud marketplaces.
    We see a trend of increasingly complex organizations getting ecommerce sites to sell to their buyers, and plug into all the ERP systems and marketplaces.  
    The most complex services that we have started building ecommerce sites for are providers of social care, e.g. Home care where the system needs to be easy enough to use for elderly and disabled users, and support the complexity of booking in a 30 minute get up morning visit 4 days a week.  Cloud based services are very simple in comparison.

    I am leading a project to assist cloud suppliers  by automating the ordering and integration of buying complex cloud services and the automated provisioning, on behalf of the software industry, so that there is a vendor neutral standard for ordering x hours of a service, and the resulting service being automatically deployed.
    A worked example is easier.  
    A user connects from an ERP to a cloud providers ecommerce site or a marketplace.  
    Selects the service they want to buy e.g. 5 days of compute time on a cluster for $ 4,350
    This shopping basket is returned to the ERP for approval
    The basket is approved and a purchase order sent out to the supplier 
    with the cloudXML message that allows the service to be automatically deployed.
    This provides a significant benefit since otherwise the cloud provider gets a pdf with a different description of the service and a real risk of the wrong service being provisioned along with significant work trying to tie up the order with either the quote or enquiry.

    Anyone that is interested in developing the standard please contact me, and of course contact cloudBuy if you would like an ecommerce site that links in with all the ERP’s and marketplaces.

    Best regards
    Ronald Duncan
    CloudBuy.com
    Connect via linkedin if interested in CloudXML
    http://www.linkedin.com/in/ronaldduncan

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