Editor's Notebook: CIOs Have Their Turn to Speak

As we enter the dog days of summer, those of us who are not on vacation (sigh) have more uninterrupted time to contemplate. For me the timing is perfect. As part of a cross-organizational team (Babson College and ITSMA), I am in the midst of analyzing a series of interviews with CIOs and other high-ranking business executives. The topic? Solutions. Last year, as you might remember, Babson and ITSMA researched the vendor side of the solutions story. This year it is the customer's turn to speak. And we are listening, and learning!

One of the things the CIOs are telling us is that they are more willing than they have been in years to consider doing business with solution providers with which they have not previously done business. Great news! But, of course, this begs the question, "How can vendors get your attention in a crowded marketplace?" The answer is not encouraging. In so many words, what the CIOs have told us is, "It is next to impossible."

CIOs report receiving more than 200 unsolicited emails and phone calls a week from firms trying to sell them solutions. Every once in a while, one of these communications will hit home and a firm will be invited to present, but the probability is next to nil. So how do these business managers learn about prospective new solution providers? From their own research and that of their staffs. Most CIOs at large companies dedicate staff to scouring the market looking for viable solutions. They read the trade and general business press. They go to conferences, seminars, and occasional trade shows. They solicit opinions from industry analysts and surf the Web. In short, your new customer is going to find you!

The implications for marketing are enormous. A marketing-oriented sales process is essential. Marketing needs to create awareness, instill knowledge, build the relationship, and then pass the lead to the sales force to do its job. And incidentally, it is also marketing's responsibility to support the sales force (see "What's Hot: Marketers Refocusing Sales Support for Solutions Selling").

What are you doing to make it easy for your new prospective customers to find you? What thought leadership are you putting out there to entice them to learn more? Are your value propositions compelling enough for them to invite you in for a presentation?

If you want to learn more and get greater insight into the customer psyche, be sure to sign up for ITSMA's Annual MarketingServices/2003 Conference, October 20-22, in Berkeley, California. You can view conference information at http://www.itsma.com/events/event_desc/03AC10N13.htm. Yours truly will be presenting all the results from ITSMA's latest research with customers, and there will be a lively CIO panel moderated by Peter Solvik, managing director of Sigma Partners and former CIO of Cisco Systems. See you there!

—Julie Schwartz, guest editor, jschwartz@itsma.com

What's Hot: Marketers Refocusing Sales Support for Solutions Selling

As IT companies continue to shift their orientation toward selling high-end solutions, sales support has emerged as a major stumbling block. Marketers have tended simply to blame their sales forces, arguing that if sales would just "get with the program," everything would be fine. As the solutions shift has continued, though, many marketing leaders are taking on more responsibility to help solve the problem rather than sit back and point fingers.

Salespeople themselves, according to ITSMA research, point to three major challenges in selling solutions:

• Articulating the value of the solutions. Solutions are generally more complex than services and products alone. Moreover, to be compelled to buy, customers need to understand the business value.

• Working within a solutions sales team. Solutions usually require cross-organizational collaboration. Combining all the resources that are needed to understand and address customer issues can result in much larger teams than salespeople are accustomed to.

• Having the right tools and support. Due to the inherent nature of most solutions—complex issues addressed, a combination of products and services, a focus on core business problems, etc.—salespeople need new and different tools.

Marketing can and should play a major role in addressing all three of these challenges. Let's look at each of these critical problem areas and how marketing can help to overcome them.

The emerging era of solutions has put a new twist on the old problem of marketing and sales collaboration. Both sides are recognizing that they can't do it alone. The lengthy and complicated sales cycle for multifaceted solutions relies more and more on cross-functional support and teamwork. Marketers that invest in addressing the value challenge head-on, supporting more effective team selling, and creating an integrated portfolio of support tools are three steps ahead of the game in building the internal cooperation required for successful solutions selling.

—Steve Hurley, shurley@itsma.com

ITSMA's recent briefing, The Role of Marketing in Selling Solutions, outlines the three main levers that marketing has to improve solutions selling: tools, systems, and skills. The briefing is available without charge to ITSMA members (password required) and for sales to others. Details at http://www.itsma.com/research/abstracts/olb071503.htm.

Features

Enterprise Network Services: Showing Some Signs of Life

Technology companies may still be facing troubling times, but at least one market sector is seeing the light at the end of the tunnel. Customers are reporting more optimistic spending plans, and although some companies have come and gone, the leading providers of enterprise network services—Cisco, IBM, and AT&T—remain at the top of their game. Despite the signs of life, ITSMA's 2003 Brand Tracking Study - Competing for Leadership in Network Services: Buyer Preferences in the Enterprise Market shows that it is still very much a buyer's market. Customers remain very demanding and sales cycles continue to lengthen.

ITSMA interviewed 300 IT and business executives and asked about their enterprise networking spending plans for 2003, services firm perceptions and preferences, vendor selection criteria, and decision processes. Just over half the customers interviewed reported that their networking services spending would remain stable in 2003. Another 26% stated that their budgets would actually increase. Only 22% indicated a decrease in spending compared to 2002 spending levels. Nonetheless, we are not yet out of the woods. Customers remain demanding—they want flawless execution at a rock-bottom price. Consequently, vendors must be on the lookout for opportunities to strengthen their go-to-market strategies, create differentiation, and better address the needs of a tough customer group.

Enterprise networking services firms have come and gone. Those that have survived the downturn need to embrace the renewed opportunity by repositioning themselves to address the most pressing customer needs. Vendors must pay careful attention to the way their desired positions stray from their actual positions. The nature and size of these gaps, combined with customer priorities, will help vendors determine the most effective marketing investment strategy. According to ITSMA's enterprise networking research, customer priorities today remain very similar to those seen a year ago. Customer priorities revolve around credibility and accountability. They are looking for vendors that can deliver on their promises, meet or exceed their expectations, and are client oriented and financially stable. What about price? Not surprisingly, competitive pricing is also a key selection criterion, equal in importance with the others.

The sales process has become very challenging. Even as budget constraints loosen, ITSMA does not expect the process to become any easier. This is a change that is here to stay. Business and IT leaders across various management levels and departments now share the purchase power. CIOs and CTOs may be the gatekeepers for defining solutions at the front end and authorizing purchase decisions at the back end, but other IT and business executives are also involved in driving decisions during the rest of the purchasing cycle. They are responsible for generating the vendor lists, evaluating proposals, and negotiating contracts. Consequently vendors have a variety of stakeholders with whom they must build relationships, educate, and satisfy. There are a lot of people to please in an environment of added complexity.

At this stage of the game there are some clear enterprise market winners. IBM, Cisco Systems, and HP currently dominate in the data network environments. Meanwhile, Nortel Networks, AT&T, Avaya, and Sprint lead in supporting voice environments. The bottom line is that other network services vendors need to choose their battles wisely. Do they want to go head to head against the market leaders or leverage relationships with those very same market leaders? For smaller vendors or newcomers, the best strategy might just be to specialize in niche areas such as wireless, converged voice and data networks, or security, or to partner with the already established leaders. Undoubtedly the established leaders are looking to partner.

Two companies that clearly know and leverage the value of their partnerships for delivering services are IBM Global Services and Cisco Systems. IBM Global Services has been very successful at attracting new partners by offering incentives, training, tools, and programs such as PartnerWorld™. Meanwhile, Cisco Systems has established itself as a key partner. According to ITSMA's recent study Competing for Leadership in Network Services: Buyer Preferences in the Enterprise Market, Cisco Systems is a must-have partner. A noteworthy percentage of respondents, 44%, mentioned them as a credible end-to-end networks solutions partner.

The enterprise network services market is slowly recovering, remains highly fragmented and has a handful of players that have established themselves as market leaders. Opportunities for challengers and newcomers are abundant, especially in up and coming areas such as wireless, converged voice and data networks, and network security. The key is for vendors to recognize that understanding and responding directly to customer priorities is as important as creating awareness and preference with those who have decision-making power.

—Adnelly Reyes, areyes@itsma.com

ITSMA's new report, Competing for Leadership in Network Services: Buyer Preferences in the Enterprise Market, ITSMA 2003 Brand Tracking Study, includes detailed data and analysis on buyer perceptions based on interviews with 300 decision makers from seven vertical markets. The report covers unaided and aided awareness of network services firms, familiarity and favorability, relative market positioning, partnerships, preferred company attributes, and decision influencers. The report will be available for sale after September 1, 2003, at member and nonmember prices. Visit http://www.itsma.com/research/abstracts/BNE002.htm.

Are You a Cost Leader or a Brand Leader?

ITSMA's Spring 2003 survey research with customers revealed that customers are even more risk averse and cost conscious than they were last year. However, there is an unquestionable change in the tenor of customers' comments. Last year the dominant message was risk minimization. This year it is most definitely price reduction. In fact, when given binary decisions in the interviews, many commented that they were more willing to take a chance if the price was lower. An interesting consequence of the prevailing attitudes is that customers appear to be naturally segmenting themselves into two camps. They are either brand sensitive or price sensitive.

ITSMA asked 100 decision makers the following question: If both companies had the expertise, who would you rather hire—the more expensive market leader or the less expensive emerging company? A slight majority (57%) chose the less expensive emerging company. Follow-up questions revealed that customers differed on a number of factors, depending on how they answered this telling question.

Most obviously, price-sensitive customers are willing to forgo the safety of a well-known brand for the sake of reducing their expenses. Brand-sensitive customers are more driven to reduce risk than to reduce costs. What other differences do we see between these two distinct groups of customers?

Interestingly, investment plans are very much the same. In the past, price-sensitive customers were less likely to be purchasers of custom application development. Not today. Today price-sensitive customers have more options than ever, including off-shore, near-shore, and hybrid software developers. Of course, price-sensitive customers are more likely to prefer the less expensive off-shore or near-shore services firms.

Price-sensitive and brand-sensitive customers also differ on how they prioritize services firm selection criteria. Both groups placed equally high importance on solution delivery as promised, which is their number-one vendor evaluation criterion. However, price-sensitive customers also put available resources to meet deadlines high of their lists. In past ITSMA research, customers equated lack of resources with low-cost providers. Apparently, price-sensitive customers want to be sure to avoid that pitfall.

Not surprisingly, the brand-sensitive customers reported that service firm reputation was high on their evaluation list. They also placed more emphasis on existing relationships. The fact that they had used a firm previously for a project was of higher importance.

Given that customers today appear to be polarizing into two groups—brand sensitive and price sensitive—what are the implications for IT services firms? Although customers continue to be risk averse, for many, reducing costs may be worth the risk of trying a new firm. This is a double-edged sword. On one hand, there are new opportunities to win new business. On the other hand, there are more opportunities to lose existing business! Services firms must analyze how to realign their business models and marketing strategies to address current market conditions and desired market positioning: cost leader vs. brand leader.

—Julie Schwartz, jschwartz@itsma.com

Research Desk

A Technology Rebound Is Still on Hold (Tech Poll)

CIO Magazine's Tech Poll provides a monthly assessment of technology buying trends from a broad cross-section of chief information officers (CIOs), mostly from North America. The latest survey, conducted July 10-17, 2003, shows that we might be experiencing the summer doldrums.

Key findings:

• CIOs plan to increase technology spending 4.5% over the next 12 months (down from 5.6% last month).
• The outlook for computer hardware spending improved month-to-month: 44.3% plan to spend more, up from 40.8% in June.
• Weak profits continue to have an adverse effect on technology spending. Nearly 40% of respondents pointed to weak profits as the primary factor impacting IT spending plans in 2003. Only 21% speculated that spending may be weak due to sufficient IT capacity.
• When asked how they would characterize their visibility on technology spending for the next three months, 24.1% indicated that they saw no pickup in sight. Another 37.5% reported that they see a modest pickup ahead, while 20.2% indicated a cloudy outlook due to heightened political and financial risk. Encouragingly, 16.2% of the respondents reported that the future looks bright.

July Tech Poll figures are based on 253 survey responses, with 94% from North America. CIOs made up 87% of the total respondents. Large firms with more than 5,000 employees represent 18% of the results. The respondents represent a wide range of industries, including technology services, manufacturing, finance, state and local government, health care, and wholesale and retail distribution.

For complete survey results, visit http://www.cio.com/techpoll.

ITSMA Brand Tracking Research: New Studies to Evaluate Your Competitive Positioning in Telecom Services, Managed Services, and Professional Services and Solutions

ITSMA's brand tracking research provides critical market data and recommendations at extremely reasonable rates. Each multiclient study enables study sponsors to analyze unaided and aided awareness of top providers, knowledge and preference of different firms, competitive positioning, desired attributes, and much more. Upcoming studies include the following:

2003 Telecom Services—Service Provider Market
http://www.itsma.com/Research/prospectus/mk0399_bnwsp03.htm

2003 Managed Services—Europe
http://www.itsma.com/research/prospectus/mk0398_eums03.htm

2003/2004 Professional Services and Solutions
http://www.itsma.com/research/prospectus/mk0402_ps04.htm

A Call for Sponsors: ITSMA's Third Annual Sales Performance Study: Benchmarks and Best Practices from Industry Leaders

Improving sales force productivity, enhancing sales coverage models, and adopting sales best practices are essential given today's economic climate. To help services providers achieve these goals, ITSMA is launching its third annual Sales Performance Study. The 2003 Sales Performance Study will explore how companies are managing their sales organizations and provide industry benchmarks to gauge performance. Participation is free to members that sign up by August 22, 2003.

To find out more: http://www.itsma.com/research/prospectus/mk0403_sps03.htm

EuroNotes: Marketing's Role in Business Strategy: Five Keys to Success

It seems obvious that marketing would have a central role in creating and deploying business strategy. After all, marketing is the voice of the customer inside the company as well as the leader in communicating business vision and priorities internally and externally. Yet too often the reality is that marketing is marginalised from the strategy process. In a time when companies need a compelling vision, clear priorities, and highly focused communications, the lack of alignment between marketing and strategy is a serious problem indeed, according to participants at ITSMA's Inner Circle Dinner in London last month.

Looking to remedy the situation, participants from companies such as IBM, Xerox, and SchlumbergerSema focused on five keys to success in bringing marketing into the centre of business strategy:

1. Identify fundamental market trends for strategic review. Spotting the difference between short-term waves (e.g., Year 2000 and Euro implementation) and more lasting 'value migrations' that are often driven by the maturity of the industry (e.g., business process outsourcing) is crucial. One trend all marketers are watching is the shift to cheaper, offshore services. The strategic question here is whether to partner with offshore providers or build or strengthen in-house capabilities. Another trend, somewhat less talked about, is the shift in buying behaviour away from the CIO and out to the business functions. On-demand computing may be another strategic value migration. Further out, some European marketers believe the next 'big thing' has to do with optimising the use of people's brains for better decision making!

2. Give executive management the straight story. Clearly, marketers need to help executive management choose what issues to address. The best way to do this is to give it to them straight—'This is dying, this is growing, and we're back here—what do you want to do?'—supported by credible information and analysis. Highlighting past trends where opportunities were missed is also useful. What aren't we paying attention to today?

3. Provide a realistic sense of competitive positioning. Deep knowledge of your company's strengths and weaknesses vis à vis the competition is essential to strategy. Asking 'Can we really buy the cheapest supplier or do we have a genuine source of differentiation?' may be uncomfortable, but it's absolutely necessary. To paraphrase Michael Porter, betting your business on the incompetence of your competitors is not the way to provide long-term shareholder value.

4. Know when to move on. Pulling out of anything is perhaps the hardest choice to make because it requires significant culture change. Refocusing can be tough too, as any service marketer that has pushed their firm away from a product orientation knows. But past success is no indication of future prospects, and it is much harder to win in promising new areas if you continue to pour time and money into the old just because they were once successful or managers and others are most comfortable with the status quo.

5. Drive strategic decisions throughout the organisation. If strategic planning has no impact on the front line, it is a useless exercise. Ensuring that strategic decisions are not only communicated but also acted on should be a core responsibility for marketing but one that seems less fulfilled. One of the biggest challenges here is that strategic change often means organisational change, and this is not something that marketers often have the authority, skills, or inclination to address. One key here, according to participants at the ITSMA dinner, might be improving the relationships between marketing and finance, since finance is always central to strategic planning.

As globalisation and consolidation continue to pervade the technology industry, the alignment of marketing and strategy become ever more important to business success. It's certainly possible that executive management will simply wake up to the need for marketers to take a more central role in strategy. More likely, though, it is up to marketers themselves to take the initiative on the five points outlined here.

—Bev Burgess, info@itsma.com

More EuroNotes

ITSMA Vice President Philip Oliver, former vice president of worldwide strategy, IBM Global Services, will discuss realigning marketing and strategy at ITSMA's Annual MarketingServices/2003 Conference, October 20-22, in Berkeley, California. View conference information at http://www.itsma.com/events/event_desc/03AC10N13.htm.

Marketing Toolbox: A Framework for Measuring and Promoting Client Satisfaction

In a world where even complex IT services are being commoditized, client satisfaction is central to business success. Indeed, client satisfaction is today a primary driver for brand image, supplier selection, and repeat business in IT services.

In this context, demonstrating to clients and prospects alike that your organization has a well-developed system in place to document satisfaction can be a key contributor to business success. Best-practice marketing organizations therefore treat client satisfaction programs like any other critical communications effort where messages, means of communications, and target segments are clearly defined and creatively executed.

ITSMA's Framework for Measuring and Promoting Client Satisfaction highlights the seven essential steps to foster broad organizational cooperation and a clear plan.

Download the Tool: http://www.itsma.com/research/current_tool_eu.htm.

More Marketing Tools (membership online access required)

This tool is based on ITSMA Europe's new Update: Measuring and Promoting Client Satisfaction to Improve Business Results. The full report is available without charge to ITSMA Europe members and for sale to others. View details at http://www.itsma.com/research/abstracts/euu003.htm.

Upcoming Events

Understanding and Engaging Buyers in Financial Services
September 4 European Online Briefing
http://www.itsma.com/Events/event_desc/03OB09E09.htm

The financial services sector provides one of the most lucrative yet challenging markets for IT services providers in Europe. Join ITSMA Europe's Managing Director, Bev Burgess, for a review of ITSMA research with senior decision makers in financial services companies across the UK, France, and Germany.

Despite possible overuse of the word "solutions," there seems to be evidence that firms that take a "solutions" approach to technology and business problems can deliver genuine results. But what do customers think? What do customers want? Join Dave Munn, ITSMA's president and CEO, and Julie Schwartz, ITSMA's vice president of research, as they provide insight into customers' wants and needs for technology solutions.

What Do Customers Want? Buying Priorities for IT Services and Solutions
September 23 Online Briefing
http://www.itsma.com/Events/event_desc/03OB09N12.htm

Customers today want it all: high value and low price, immediate delivery and a year to decide, trusted advisors and flexibility to jump ship for a better deal. Join Julie Schwartz, ITSMA's vice president of research, to analyze ITSMA's latest data on what customers today value most.

Best Practices in Services Marketing in Europe
September 25 Marketing Roundtable (Frankfurt or Munich, Germany)
http://www.itsma.com/Events/event_desc/03RT09E10.htm

ITSMA's invitation-only roundtables provide senior marketing executives and other marketing leaders with the opportunity to discuss urgent issues in services marketing with peers from other companies. Key topics for the roundtable will include thought leadership marketing, relationship marketing, market segmentation, and marketing-sales alignment.

Marketing Returns: Leadership, Innovation, and Results MarketingServices/2003: ITSMA's Annual Conference—October 20-22, Berkeley, CA Register now for early-bird discount: http://www.itsma.com/events/event_desc/03AC10N13.htm Marketing is back! As tech spending begins to grow again, marketing is exerting greater leadership in defining new opportunities, refining the customer experience, and measuring the business return on marketing investment. ITSMA's annual conference is the premier event for marketers interested in the latest strategies and tactics for generating growth in technology services and solutions. This year's conference will emphasize emerging opportunities for growth, new approaches to marketing and selling solutions, best-practice peer sharing and networking, and presentation of the 2003 Services Marketing Excellence Awards—all inspired by the great food and surroundings at the Claremont Resort and Spa in Berkeley, CA. In addition to Rainmaker Systems (http://www.rmkr.com), ITSMA welcomes its newest conference sponsor, Encover (http://www.encover.com), a provider of applications that help manufacturers collaborate with their channel partners to manage the installed base and sell more service contracts. Encover's founders designed and built Cisco's award-winning Service Contract Center. Featured speakers include: Howard Rheingold (keynote speaker), author of Smart Mobs, The Virtual Community, Virtual Reality, and other books; founding Executive Editor of HotWired Michael Winkler, Executive Vice President and Chief Marketing Officer, Hewlett-Packard Brian Fugere, Partner and Chief Marketing Officer, Deloitte Consulting Chelsea Hardaway, Global Director, Brand Communications, Deloitte Consulting Leigh Alexander, Vice President and Chief Marketing Officer, Unisys Sangita Singh, Chief Marketing Officer, Wipro Technologies Brian Eckert, Executive Vice President, Marketing, Dimension Data Cary Fulbright, Senior Vice President, Marketing, salesforce.com Shahla Aly, General Manager, Services Strategy, Microsoft Larry DeBoever, Chief Research Officer and Executive Vice President, Hitachi Consulting Peter Solvik, Managing Director, Sigma Partners, and former CIO of Cisco Systems Philip Oliver, Vice President, ITSMA; former Vice President, Worldwide Strategy, IBM Global Services Dave Munn, President and CEO, ITSMA Julie Schwartz, Vice President, Research, ITSMA And there's more! Pre-conference workshops on October 20 highlight new tools and techniques for marketing solutions, selling solutions, and managing channels. Conference details: http://www.itsma.com/events/event_desc/03AC10N13.htm Conference sponsored by: Rainmaker Systems is a leading outsource provider of sales and marketing programs for service contracts. Rainmaker's cost-effective programs generate new service revenues and promote customer retention for its clients. Visit us at http://www.rmkr.com. High-tech manufacturers such as Juniper Networks use Encover's applications to increase renewal revenue, reduce the cost of sales, and increase visibility into their installed base. Visit us at http://www.encover.com.

Complete 2003 Events Calendar
http://www.itsma.com/aspfiles/Events/calendar.asp

Event Sponsorship Opportunities
http://www.itsma.com/Events/other_desc/sponsorprg.htm

Do you have a services marketing question?
Visit Ask ITSMA to access our experience, insight, and research results.

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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.