Dear friends and colleagues,

Reports of Hewlett-Packard's acquisition of Compaq are coming in just as the E-ZINE moves into production. We'll cover the IT services implications of the deal in the months ahead, but a first comment is clearly in order. Both firms have strong services capabilities, and both have recently announced greater commitments to services-led strategies. Post-acquisition, the new HP can become a more complete solutions provider, with substantial capabilities in mission critical services; maintenance and support; packaged and managed services; and network and systems integration. The combined firm will still have difficulty in competing with IBM, EDS, and Accenture on very large services deals, however, until it develops or acquires more high-end professional services capabilities.

Mega-mergers are notoriously difficult, though. Compaq itself has only just finished integrating Digital Equipment Corporation after that 1998 acquisition. Even if the new deal passes muster with U.S. and European regulators it will be an enormous challenge to combine the still-dominant product sides of both houses while hastening the transformation of HP-Compaq into the services star both leaderships envision.

We're curious about your reactions; please let us know what you think. While pondering the implications, check out this month's E-ZINE for new ideas on marketing solutions, thought leadership, and new ITSMA brand studies. And if you haven't seen the program for our upcoming annual conference, please review that as well. Chicago in mid-October is the place to be for services marketers!

—Rob Leavitt, director of member advocacy, editor of ITSMA E-ZINE

What's Hot: Channel Surfing: Money Isn't Everything

Working more effectively with channel partners was near the top of almost everyone's priority list at ITSMA's recent Services Sales Forum. Marketing and sales managers alike highlighted the need to build more successful channel relationships to help boost revenue and profits. How best to do this, however, was a little less clear.

Sandy Anderson, senior director of strategy and integration for global services sales at Sun Microsystems, presented a recent Sun initiative that suggests some of the strengths and weaknesses of a purely incentive-based strategy. Resellers often criticize large firms like Sun for failing to provide adequate financial incentives, yet Sun's initiative suggests that money isn't everything.

Determined to boost indirect sales of support services, the firm developed a new quarterly incentive program to reward partners for increasing the rates at which they attached services to hardware sales. The attach rate for enterprise services sales hovered around 40 percent for channel partners, compared to a Sun goal of at least 70 percent. Increased attach rates would presumably lead to more satisfied customers (since they would receive better service for their systems), less risk for Sun and the partners, and greater profitability (given the sale of high margin services). Yet Sun perceived that its partners were failing to make services attach rates a priority.

Sun's response was to create a tiered system whereby partners would receive higher commission rates as they achieved higher attach rates. For example, commissions on services sales within an overall 33 percent attach rate per quarter might be 15 percent, but commissions within an overall 66 percent rate might be 25 percent.

Sun launched the new program with great fanfare, and the effort quickly paid off. Channel partners responded to the program with a measurably increased awareness of the need and the benefits of selling services. Partners moved quickly into the higher tiers, with overall attach rates and services revenue climbing dramatically.

Almost as quickly, however, it became clear that the new incentive plan was mostly a short-term fix. The dramatic boosts earlier this year began to level off. The program failed to promote longer term behavioral change on either side, according to Anderson. Sun hadn't developed the more comprehensive channel support program required for sustainable success, and the partners had not begun to shift toward a more solutions-oriented sales approach.

Anderson and others participants at the sales forum agreed that providing channel partners more complete sets of information, tools, and training is essential to services sales success. No longer can the indirect channel be treated as an afterthought, with channel representatives feeling like second-class citizens. Marketing and sales organizations need to treat channel reps as much as possible as if they were part of the internal sales force, and develop similarly comprehensive programs to supporting their efforts.

Sandy Anderson's presentation on "Leveraging the Channel for Greater Services Sales" was only one highlight of ITSMA's Annual Services Sales Forum. Other featured presenters included Jeff Lowe, formerly of BMC Software, on research-based marketing; Rick DeTurck of Cisco Systems on Internet-based sales tools; Lyn Trodahl of IBM on managing top accounts; and Anne Baxter of Deloitte Consulting on thought leadership and services sales. (See "Deloitte Research: Making Thought Leadership Pay Off" in this issue for more on Deloitte Consulting and thought leadership marketing.) To see the complete two-day program, visit http://www.itsma.com/Events/event_desc/E08220101.htm.

ITSMA itself will dedicate greater resources to the sales channel issue in the months ahead. If you have questions, comments, success stories, or suggestions on particular channel topics, please let us know.

—Rob Leavitt

Research Desk: Critical Challenges in Marketing Solutions

Definitions remain hazy and critics are legion, but technology and professional services firms are racing headlong into marketing "solutions" and stamping the term almost everywhere. About three-quarters of technology services marketers rate the solutions business as "extremely important" to their companies, according to the latest ITSMA member survey.

Digging into definitions reveals both common themes and conflicting perceptions. Generally speaking, many marketers agree that technology "solutions" must include several important criteria:

• Combining and integrating products and services, or multiple services, to solve a business problem or opportunity
  
• Addressing complex business issues that cut across multiple technologies, processes, and/or business relationships
  
• Involving partners in delivery and implementation
  
• Delivering measurable business results, often described in financial metrics

But marketers' actual presentations of solutions vary substantially with regard to the degree of customization required. At one end of the solutions continuum lies extreme customization. Some IT and professional services firms suggest that "solutions" require extensive customization for individual clients. They focus on unique client problems and emphasize implementation of new business processes. Such solutions are high-risk and labor-intensive and offer few economies of scale to the provider.

The other end of the continuum highlights product-centered packages of goods and services that can quickly and easily be applied to many client situations. Technology product firms tend to gravitate toward this definition. They see in this approach a valuable way to simplify services sales and delivery, provide consistency, and capture additional services revenue by bundling services in with core product sales. Such solutions are lower-risk and less labor-intensive and offer more economies of scale.

Moving toward a viable middle position on the solutions continuum is the first challenge in developing an effective solutions marketing strategy.

Stick too close to the pure customization side and it becomes too difficult to scale the business and leverage past successes for more profitable "mass-customized" engagements. Simply put, you can't make money.

Stick too close to the purely packaged solutions side and you lose too much of the flexibility required to truly meet individual customer needs. Your solutions don't really solve anyone's specific business problems.

Other top challenges are largely organizational in nature:

• Facilitating effective collaboration among internal product and services development and delivery organizations
  
• Integrating solutions marketing strategies and capabilities at the highest level of corporate marketing (versus maintaining a separate solutions marketing group)
  
• Selecting the right partners and developing effective collaboration with them
  
• Developing consultative sales skills and capabilities to sell solutions

Perhaps the most difficult challenge of all is aligning all your solutions development, marketing, and sales initiatives around clearly definable customer segments and needs.

In ITSMA's view, successful solutions marketing ultimately will rely on bringing a truly customer-centric approach to all four pillars of the marketing life cycle:

• Designing strategy and market planning around clearly targeted and profitable customer segments
  
• Developing and managing a portfolio of solutions in concert with highly credible, successful, and collaborative business partners
  
• Basing marketing communications programs around compelling value propositions for key customer segments
  
• Managing client relationships to continually add value, develop new opportunities, and serve as a trusted advisor

We're still in the earliest phase of understanding, much less effectively marketing, solutions. But solutions marketing is here to stay because clients are demanding that marketers move beyond simply promoting product and services features to grapple with real business problems. Integrating the principles of solutions marketing into ongoing marketing programs is no longer an option.

—Steve Hurley shurley@itsma.com
—Julie Schwartz jschwartz@itsma.com

The New Rules of Marketing: Sergio Zyman, Founder and CEO, Zyman Marketing Group (New Report)

Marketers have forgotten that marketing is a strategic discipline focused on selling more stuff, to more people, more often, for more money, according to Sergio Zyman, author of The End of Marketing as We Know It and former chief marketing officer at Coca-Cola. In this new ITSMA Viewpoint, Zyman presents technology marketers with a series of "new rules" for marketing and highlights the importance of ongoing strategic planning, brand differentiation, connecting with your customers, project budgeting, and measuring marketing results every day.

The New Rules of Marketing was recently distributed to all member delegates. The report is also available for sale at ITSMA member and nonmember rates. For more information or to order your copy, talk to your ITSMA delegate about online access to ITSMA's Member Research Library, visit http://www.itsma.com/aspfiles/Research/ol_mr_sbd.asp, or contact Rich Staples at +1-781-862-8500, ext. 17, or info@itsma.com.

Deloitte Research: Making Thought Leadership Pay Off

Investing in thought leadership is widely recognized as important by services marketers, but often seems like a luxury, especially in today's economy. White papers, journal articles, breakfast seminars with prominent academics—these are all nice to have, but where's the payoff? Can you really afford to fund this "ivory tower" stuff when you're already working overtime and barely meeting quarterly targets?

The answer is absolutely yes, according to Ann Baxter, global director of Deloitte Research at Deloitte Consulting. ITSMA highlighted Deloitte Consulting's thought leadership program in early 2000, within our Building Brand Loyalty focus report. The program combines a dedicated research team with an extensive effort to involve the firm's own consultants, universities, think tanks, and clients in a series of industry-oriented studies on such topics as e-health consumers, strategic flexibility in the communications industry, e-government, and business-to-business (B2B) antitrust.

Baxter argues that thought leadership is even more important in a down market. "Now, more than ever," she says,

"You have to assist executives in their understanding of the gobal and industry-specific issues critical to improving the performance and competitiveness of their businesses. In tough times, you can't just push products and services. You need to focus less on what you sell and more on providing a point of view on how companies must compete today and build capabilities to compete in the future. In other words, you have to translate your thought leadership into specific value for your clients."

Moreover, Baxter notes, "while the downturn is no joke, and cost reductions are often important, executives should not become fixated on the downturn the way many were dazzled by the boom of the late 1990s." Just as many executives were blind to the possibility of tough times before, many are still wearing blinders today, she says. "It's important that executives today not close off options or miss opportunities inadvertently as they focus on cost structures." Deloitte Consulting's thought leadership efforts today are designed to highlight those options and opportunities that remain vital even amid the downturn.

Deloitte Consulting's thought leadership effort has paid off over the last year with extensive media coverage, several hundred executive briefings for top clients and prospects, thousands of client requests and downloads of Deloitte Research studies and reports, and numerous speaking engagements at targeted industry events.

The key to success, says Baxter, is having an integrated strategy for turning ideas into value for Deloitte Consulting, for individual clients, and for specific client engagements. This requires moving beyond simply publishing high-quality and innovative research that builds recognition and credibility for the firm (difficult and important though that is). A more integrated though leadership strategy needs to include:

• Involving clients in the idea generation and research processes themselves, to ensure that topics and reports are highly relevant to their needs
• Orienting research toward potential solutions to key business problems
• Tying research to the development of new services offerings
• Building multi-level and ongoing marketing programs around thought leadership research to generate new business opportunities
• Educating and assisting consulting staff to incorporate new research into project design and implementation

Baxter's biggest lesson learned over the last several years is the need to dedicate substantial resources to building internal awareness and understanding of the research. "If it just sits on a shelf, that's useless. You have to focus on the commercialization process and develop programs to leverage the work throughout the organization," she advises. As such, the Deloitte Research team organizes regular "Webinars," e-mail outreach initiatives, office presentations, liaison teams to work with specific practice groups, media and speaker training programs on the issues, and presentation templates for sales and consulting teams.

Finally, Deloitte Research has worked hard to ensure that thought leadership project work is highly valued throughout the firm. Partly this means maintaining strong leadership support and helping other staff gain internal recognition for their contributions to research projects. It also means making sure that involvement with Deloitte Research projects is integrated with yearly goal setting. "That's the ultimate way to get real commitment," notes Baxter. "If people feel like they are being recognized and rewarded, that's the key to revving up the engine."

Are you maintaining or even increasing investments in thought leadership? What are your keys to thought leadership success?

—Rob Leavitt

For more information on Deloitte Research, visit http://www.dc.com/obx/pages.php?Name=AllResearch.

For more information on ITSMA's Building Brand Loyalty report, visit http://www.itsma.com/research/abstracts/F005.htm.

Sign Up Now! Sponsorship Opportunities for Two ITSMA Brand Studies: Professional Services and Network/Telecom Enterprise Market

Brand differentiation has never been more important in technology services. Competitors are pulling out all the stops to win new prospects, while existing customers are increasingly skeptical of the potential returns from services offerings. In this environment, understanding customers' changing needs and perspectives and determining the effectiveness of branding initiatives are prerequisites for success.

ITSMA's multiclient brand and market positioning studies provide critical data that assist market leaders in calibrating and evaluating their marketing strategies. Companies such as IBM, EDS, Cisco, DiamondCluster International, Accenture, Oracle, and many more have turned to ITSMA's previous brand studies for detailed answers to such key positioning questions as: How strong is my brand versus key competitors? How do senior decision makers view my organization? Do my marketing messages resonate with my target audience? What brand attributes are important to buyers, and how has that changed over time?

ITSMA is now pleased to announce two new brand studies for Fall 2001:

• IT Professional Services Brand and Market Positioning Study, a survey of 400 U.S.-based senior IT and business decision makers from Fortune 1000 companies in a range of vertical markets
  
• Network and Telecom Services Enterprise Market Brand and Market Positioning Study, a survey of 300 U.S.-based senior decision makers from Fortune 1000 companies in a range of vertical markets

Both new multiclient studies have two sponsorship options, primary and secondary. All sponsors will receive detailed rankings, study data, a final report, and access to a group Web briefing of key findings. Primary sponsors are also able to add private questions and receive a custom briefing analyzing their specific results versus peers and competitors. Armed with study data, sponsors will be better able to plan marketing initiatives, shape market perceptions, and track brand effectiveness on an ongoing basis.

For more information on sponsoring the Network/Telecom Study, view a study prospectus online or contact Matt Leary at +1-401-635-2148 or mleary@itsma.com.

Upcoming Events:

4 October 2001, 12:00-1:00 p.m. EDT: Value Pricing in Action (Online Briefing; free for ITSMA members)

Value pricing, defined as pricing based on the perceived value to the client, remains an elusive ideal for many services marketers. Notwithstanding years of research and discussion on the benefits of value pricing, few companies have institutionalized the practice. IT services providers continue to compete as though their services are commodities, focusing heavily on price and often discounting to make the sale. Can you transcend the pack with a stronger emphasis on value pricing? Can the sales force sell value? Will customers buy it? Join Julie Schwartz, ITSMA's vice president of research, for a discussion of the pros and cons of value pricing, examples of how some leading companies are implementing it, and practical recommendations on incorporating perceived value into your pricing system.

For more information or to register online, visit http://www.itsma.com/Events/event_desc/e09140101.htm.

12-14 November: European Client-Centric Marketing Course: Critical Solutions Marketing Techniques for Survival and Growth (Surrey, U.K.)

ITSMA's highly acclaimed core course in services marketing comes to the UK for the second time with a refined program adapted to the current European environment. The course provides a structured approach to help marketers ensure that all marketing strategies and initiatives are focused on the development of client relationships, a company's greatest assets. Participants will gain valuable knowledge, skills, and tools to help develop and execute services marketing programs that effectively communicate the value of technology services in the European marketplace. Specific topics include client-based analysis, services and solutions mapping, value proposition development, integrated marketing communications, and leveraging the sales force.

For more information or to register online, visit http://www.itsma.com/events/event_desc/e11120100.htm or contact Melanie Oakley at +44-1628-527691 or moakley@itsma.com.

Event Sponsorship Opportunities

As the premier industry association for IT services marketing, ITSMA offers companies event sponsorship opportunities throughout the year. Event sponsors benefit from direct access to services marketing executives and managers from the world's leading IT services firms as well as the broader association with ITSMA.

For more information on event sponsorship opportunities, benefits, and costs, visit http://www.itsma.com/events/other_desc/01_sponsorprg.htm or contact Rich Staples at +1-781-862-8500, ext. 17, or info@itsma.com.

Events Calendar for 2001: http://www.itsma.com/aspfiles/Events/calendar.asp

Toolbox: Services Sales Readiness Rating Guide

Each month ITSMA highlights a new idea, application, or other type of tool that services marketers can use immediately to strengthen their programs and organizations.

Developing and launching new services successfully rests heavily on the ability of marketing managers to address the needs of the sales force, conform to the sales system, and fit with the personality of sales leaders.

The Services Sales Readiness Rating Guide provides 10 simple questions that gauge potential sales success. The guide can be used by both marketing and sales personnel, and the resulting scores can be used to target areas for improvement. Visit ITSMA's Tools page to view the guide: http://www.itsma.com/research/toolkit_free/readiness_guide2.htm.

Member Voices: Marketing Professional Services at COMDEX

Last month we noted that ITSMA has begun working with Key3Media Group, Inc. to develop programs and strategies that will grow the IT services segment at COMDEX Fall 2001 and COMDEX Chicago2002.

The idea is to enhance the COMDEX program in ways that better serve the IT services community and increase the visibility of IT services with the buyers and sellers who make up the COMDEX marketplace.

We've got ideas on how to do this, of course, but we're especially interested in what you think. Have you tried marketing services at COMDEX already? Was the effort successful? How might show organizers better support your efforts? Are there specific types of IT services—or IT services buyers—most amenable to a COMDEX-type trade show environment?

Let us know what you think, E-ZINE readers, and we'll publish a selection of comments in the October issue. E-mail us at advocate@itsma.com.

For more information on COMDEX Fall 2001, visit http://www.key3media.com/comdex/fall2001/.

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Customer Perspective: A New Fit for the Gap

Gap Inc., the ubiquitous $14 billion apparel giant, recently initiated a three-year project to completely overhaul its supply-chain and warehouse operations, in partnership with Retek, a retail solutions provider, Oracle, and Answerthink. Gap CIO Ken Harris led the partner selection process:

"We started going out in the marketplace and looking at companies that had good, quality packages. Equally important, [they had to have] the kind of mentality that said, 'We want to join with some of the best retailers, continue to develop our product set and form a powerful alliance that could end up being a really dominant [player], working together ultimately to support our customer, the end consumer....A lot of companies produce very good technology. We were not just looking for technology. We were looking for good technology that could be used effectively to provide a better experience for our customers. Retek got that. It understood that. And it was willing to recognize that its role in this equation was not just providing the technology, but over the long term making sure the technology works to support real customers."

Harris' comments jibe neatly with ITSMA's customer research, which continually reiterates the point that buyers want providers who understand and are focused on their industry and their business. Good technology is not enough, and marketers ignore the importance of industry knowledge and vertical marketing at their peril.

Interested in the details of the Gap's initiative? Read the complete article in VAR Business: http://www.varbusiness.com/sections/strategy/strategy.asp?articleid=29249.

New ITSMA Winners!

Congratulations to Ted Koontz of Symbol Technologies and John Hines of Sun Microsystems, winners of the drawing for ITSMA shirts from all participants in the recent ITSMA online member survey on solutions marketing. Stay tuned for another online member survey later this month. Next topic: marketing budgets and priorities.

(c) Copyright 2001, ITSMA

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About ITSMA
ITSMA specializes in helping companies market and sell services and solutions more effectively. As a membership organization, we provide research, consulting, and training to the world's leading technology, communications, and professional services providers to generate increased demand, strengthen customer relationships, and improve brand differentiation. ITSMA is based near Boston, and has offices in London and Tokyo. Learn more at www.itsma.com.