ITSMA E-ZINE	June 2004

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Editor's Notebook: Fast Food Wisdom

Hmm, two months in a row talking about the wisdom of fast food marketing. Last month it was Burger King's subservientchicken.com initiative (remember, you heard it here first). This month it's McDonald's new push for "brand journalism."

Larry Light, McDonald's CMO, recently told the Adwatch: Outlook 2004 conference that big bang marketing campaigns with a single message are out; multiple stories that collectively chronicle the overall life of the brand are in. Brand journalism, according to Light, is a way to "record what happens to a brand in the world."

For technology and services marketers, the concept is an interesting one. Potential buyers are much more interested in stories of how solutions work rather than in technology features or services capabilities. And story telling is one of the most effective ways of educating potential buyers and articulating the thought leadership that is so essential to success in today's market.

HP's current ad campaign telling customer success stories picks up on the brand journalism idea, and that could be an important factor in the campaign's success. More generally, the brand journalism idea could spark some new life into campaigns that typically have trouble reaching busy and skeptical customers. Business technology buyers crave authenticity, credibility, and no-hype discussions about business problems. The brand journalism approach might help marketers break through the noise and create more open dialogue about potential solutions.

—Rob Leavitt

What's Hot: Marketing-Led Growth: A New Vision for Marketing Leadership

After three long years of doing more with less, technology companies are finally beginning to reinvest in marketing. The most aggressive companies in particular understand that marketing can and will play a central role in leading growth for tomorrow. But driving that growth will require new thinking and new vision.

The biggest challenge for marketing leaders is to avoid the tendency to just do more of the same. Instead, they need to focus on those key initiatives that will sustain growth in the new, buyer-driven environment.

ITSMA research with top tech firms and enterprise buyers of technology solutions from multiple industries suggests that the new vision for marketing should emphasize five new or expanded roles:

• The strategist. Marketing leaders of tomorrow will seek to influence the broader direction of the business and not just manage the function of marketing. This will require providing much deeper market, customer, and competitive insight to support fact-based decisions about business priorities and resources. Most companies are unwilling to fund the research that is necessary to provide this level of insight but a select few are and it’s paying off. Marketing typically is too little involved in corporate strategy (see "Marketing's Strategic Imperative" in this issue). As the key link between the market and the business, marketing should stand right in the middle of the strategy process.

• The portfolio manager. Offering portfolios have grown out of control at many firms, even as developing new offers quickly has become an essential tool for meeting the needs of fast-changing markets. Marketing leaders at a number of companies are taking charge of the offer development process to ensure alignment with strategic priorities and a coherent, manageable, and sales-ready portfolio. But ongoing portfolio analysis is necessary to identify problematic overlaps, investment shortfalls, and offers that should be phased out. For services and solutions, a multi-tiered approach to portfolios is necessary; companies should review their portfolios at the levels of markets, capabilities, and transaction types. The constant reshuffling of resources into custom offers for different markets and customers means that traditional product-based approaches are insufficient.

• The thought leader. The new buyer reality puts thought leadership at a premium. Buyers are not interested in new products and services per se, but they are interested in new ideas for using technology to grow their companies, enter new markets, and increase business flexibility. Demonstrating a new point of view about business and industry alternatives is appealing; for that reason, investing in thought leadership marketing is one of the most effective ways to inspire customer interest. Setting the intellectual direction for the firm and implementing companywide initiatives to promote new ideas are fast becoming top priorities for marketing leaders.

• The go-to-market guru. Winning in today's markets requires a fresh look at the entire end-to-end marketing process. Marketing today involves more resources across the organization than ever before, far beyond just marketing and sales. Top executives, board members, consultants, support staff, delivery personnel, business partners, and many others all play important parts in in successful go-to-market launches. Marketing in this context is like leading an orchestra—knowing which instruments to utilize when and conducting the overall tone and tempo. Maintaining a 360-degree view of market influencers, drilling down into micro-market segments, providing sales with the right tools and support, and managing alliance and channel relationships are all critical tasks for the new go-to-market gurus.

• The relationship manager. With declining customer loyalty and the growing imperative of working effectively with partners, managing relationships is the final pillar of the new vision for marketing. Building strong relationships with customers has always been a marketing priority, but leaders must take a more expansive view of the relationship challenge. Internally, marketing leaders need to work across the entire organization to build consensus on strategic priorities, reinforce the brand, work hand in hand with sales, and ensure the best possible customer experience at every touch point. Externally, marketing must develop and sustain relationships with key influencers, investors, and partners as well as customers and top prospects.

Never before has marketing been so critical to the future of the technology industry. For companies to generate sustained growth in the new environment, marketing must lead the way. And for marketing to succeed in stepping to the fore, its leaders must articulate, and act upon, a bold new vision of marketing's roles and priorities.

What's your vision for marketing leadership? How is your organization doing in these five areas?

—Dave Munn, dmunn@itsma.com

This article is adapted from Dave's kickoff presentation at ITSMA's recent Chief Marketer's Conference in Washington, DC. ITSMA will provide more coverage of conference highlights in the July E-ZINE.

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Features

Marketing's Strategic Imperative

In recent years, there has been a shift to make marketing more accountable and to improve results with fewer resources. The predominant response from marketing has been to focus more aggressively on generating near-term sales. This reaction is not surprising, but it does raise questions about the longer-term prospects for marketing itself and for the companies that keep marketing so focused on immediate results.

Marketing activities can be divided roughly into two categories: front end (research and strategy-focused) and back end (demand and sales-focused). Front-end activities include market and competitive intelligence gathering and analysis as well as participation in the strategy process based on the resulting insights. Portfolio analysis and management also benefit substantially from these insights. Back-end activities include external communications, lead generation, and sales support and enablement.

In the majority of technology and consulting companies, marketing has been boxed into a back-end function. Valuable though this position is, it denies a substantial part of the real value that marketing can bring to an organization. Indeed, marketing can and should set a significant part of the change agenda for any successful firm. Getting marketing involved with strategy not only adds value to the firm at the strategic level—it adds more value to the downstream marketing activities through a better understanding of both the market and the firm's direction.

According to recent ITSMA research with leading technology and consulting firms, however, few marketing organizations play a central role in strategy. And few of these firms have enough of a well-developed strategy process to identify and respond quickly to new opportunities, refine business models when necessary, and abandon markets when they no longer see acceptable returns.

Nevertheless, ITSMA has identified five characteristics that typify strategy at best-practice companies:

• Continuously review strategy to quickly identify necessary modifications.
• Link strategy to day-to-day operations so strategy truly drives most of the firm's activities.
• Set the change agenda internally, for clients, and even for whole industries and markets.
• Understand and anticipate the actions of key competitors.
• Creatively adapt business models.

Executives across a range of technology and consulting firms agree that services markets move and change with greater speed and frequency than product markets. For that reason, strategies, to be effective, must be dynamic and continuously reviewed. At the same time, it is easier to experiment and change direction in services markets. Consequently, there are fabulous opportunities for marketing to step up and take a greater leadership role in influencing and setting business strategy.

For marketing to embrace its own strategic role and potential, marketing executives should consider six specific initiatives:

1. Differentiate between strategy and planning, and make planning follow strategy, not, as is common, the reverse.
2. Manage and direct a continuous strategy process.
3. Gain a deeper understanding of current and potential future markets.
4. Gain a deeper understanding of key competitors.
5. Build a stronger relationship with the finance department, which typically plays a central role in strategy and planning.
6. Take a deeper look at the services portfolio.

Taking a more central role in strategy may not come easy for many marketing organizations. Yet doing it successfully will give marketers a chance to exert real leadership—not just in their firms but in the industry as a whole.

—Philip Oliver, poliver@itsma.com

For more insight into marketing's strategic imperative, see ITSMA's recent Update, Realigning Marketing and Strategy, at http://www.itsma.com/research/abstracts/u0046.htm. See also ITSMA's recent briefing on Marketing's Role in Strategy, Planning, and Intelligence, at http://www.itsma.com/research/abstracts/olb052504.htm. Both are available at no charge to members and for sale to all others.

Value Selling at Cisco: Six Steps to Success

Like many IT and networking firms, Cisco Systems has invested substantial resources in recent years to build its services business. Along with traditional support services, Cisco has emphasized the development of Advanced Services, a suite of consultative services for complex networks. With Advanced Services, Cisco can now offer services that span the full life cycle of network planning, design, implementation, operation, and optimization.

As Cisco prepared to launch the Advanced Services portfolio, however, the services marketing organization identified an important skills gap within the sales organization. Traditionally, the services sales force sold transactional maintenance services with a fairly simple approach dubbed "spray and pray." When meeting with clients, the sales team would describe the features of all Cisco's services offerings and wait to see which one hit home. With a new need to sell more value-added services and the likelihood of longer sales cycles, the sales organization needed to shift to a more consultative, value-based approach.

Working closely with the sales organization, Cisco's services marketing team developed a six-step process that focuses on the value and return on investment (ROI) of the advanced services offerings. Importantly, the process encompasses the entire sales cycle and is flexible enough to support a wide range of selling opportunities. The six steps are as follows:

1. Diagnose. Develop a thorough understanding of the customer's business, network, and financial pain points and objectives.
2. Prescribe. Map the customer's pain points and objectives directly to a specific Cisco solution.
3. Calculate. Utilize a proprietary ROI tool to quantify the monetary value of the proposed solution, based on the customer's own data, metrics, and priorities.
4. Communicate. Create customized messaging, content, and collateral for each customer based on the customer's specific objectives and solutions.
5. Collaborate. Maximize teamwork between marketing and sales, and between sales and prospective customers, to identify customer needs, issues, and strategies and develop the most appropriate networking solutions.
6. Report value after the sale. Conduct quarterly reviews after the sale to quantify and communicate the value delivered.

As value selling has evolved over the past few years at Cisco, services marketing has emphasized the automation of key program components to provide the field sales teams with increased flexibility and efficiency. Automation also helps ensure that marketing messages are delivered consistently.

In particular, the services marketing team has developed three critical tools to facilitate the process:

• Advanced Services Configuration Tool. Helps sales teams diagnose the customer's business and networking problems and produce a list of customer-specific solutions that correspond with the customer's pain points.
• Sales Messaging Tool. Enables sales people to produce customized marketing collateral mapped to customer needs and consistent with Cisco's overall marketing approach.
• ROI Tool. Uses customer data to quantify business benefits and impact of proposed solutions.

Cisco estimates the three tools can save at least 15 to 20 hours per selling engagement. For example, sales people can generate proposals in about an hour, compared with six hours without the tools.

In all, Cisco's Value Selling program has generated substantial results in support of the new portfolio of Advanced Services, including increased revenue, 100% customer renewal rates, greater services differentiation, selling opportunities higher up in customer organizations, and greater alignment and collaboration among marketing, sales, and delivery.

Along with supporting a significant change in the sales process, Value Selling also reflects the leadership role that services marketing leaders can and should take in moving their entire organization toward the strategies and programs required to meet customers' solutions demands in today's marketplace.

—Naomi Steinberg, nsteinberg@itsma.com

This article is excerpted and adapted from Services Marketing Ignites a Change in Worldwide Sales Strategy: Cisco's Value Selling Initiative. This ITSMA Case Study is available at no charge to members and for sale to all others. For more information, visit: http://www.itsma.com/research/abstracts/cs0009.htm.

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Research Desk

Slow Movement Offshore Undercuts the Hype

Despite the substantial growth of Indian and other offshore providers, most large American companies remain cautious about tapping offshore resources for higher-end IT services such as consulting, systems integration, or business process outsourcing. Amid all the hype about offshore competition, new ITSMA research suggests that only about 20% of large U.S.-based companies have experimented with going offshore for IT professional services.

The data from the ITSMA study, based on a survey of 400 decision makers from large companies in eight different industries, should provide a bit of comfort for North American and European professional services providers trying to figure out their own offshore strategy. Although customers are clearly interested in the benefits of offshore resources, they are not moving that quickly.

The slow movement offshore cuts across all the industries included in the ITSMA study, although there is some variance. Government and public sector organizations, not surprisingly, have done the least with offshore resources. Fewer than 10% of the survey respondents from that sector have gone offshore at all for IT professional services. The other industries in the study, including financial services, manufacturing, and retail, among others, all ranged between 15% and 25%.

The study also showed some variance between companies based on size. About 15% of survey respondents from companies with $200—999 million in annual revenue had offshore experience, compared with almost 25% of the respondents from companies with more than $1 billion annual revenue.

Some of the caution may reflect the power of past experience and word of mouth among buyers looking for professional services providers. Because these factors are so important for IT professional services buyers, it is difficult for the movement offshore to happen too quickly. The offshore providers face something like the classic dilemma of the first-time job seeker who can't be hired because he has no experience.

Further, the less-than-perfect experience of the early adopters puts more brakes on the movement. Among the companies that have taken advantage of offshore resources, experiences have been mixed, according to the ITSMA study. Using a scale of 1 to 5 to rate their experience, where 1 is very negative and 5 is very positive, respondents to the ITSMA survey provided a mean rating of 3.2. That's certainly not terrible, but neither does it lead to an avalanche of positive word of mouth.

In all, about 36% of the buyers with offshore experience provided positive ratings of 4 or 5. Given that less than 20% of companies have any offshore experience at all, that means that only 7% of all companies are in a position to give an enthusiastic thumbs-up.

None of this should suggest that IT professional services providers without offshore resources or partners should rest easy, or that the growth prospects of offshore providers are necessarily limited. The logic of globalization in this sector appears to be as strong as in dozens of other industries where "offshore" is now completely integrated into the business way of life. And the fact that more of the largest companies have already gone offshore suggests that many of the rest will eventually follow. But the pace of transition might not be as quick as many commentators believe.

And one more bit of good news for the U.S.-based providers: According to the ITSMA study, customers who are interested in tapping offshore resources more strongly prefer to work with U.S.-based providers that have offshore capabilities rather than directly with offshore-based providers.

—Rob Leavitt

ITSMA's new report, Competing for Position in Professional Services and Solutions: 2004 Brand Tracking Study, provides a detailed analysis of how IT and business executives from large enterprises and government agencies assess leading providers of IT professional services and the market as a whole. The report includes data on brand awareness, favorability, market positioning, preferred attributes, and market drivers. The report is available for purchase at member and nonmember prices. For more information, visit: http://www.itsma.com/research/abstracts/bps005.htm.

Small and Medium-Sized Firms Continue to Lead Tech Recovery (Tech Poll)

CIO Magazine's May Tech Poll showed IT spending projections at their second highest level in three years, led especially by strong growth forecasts from CIOs at small and medium-sized firms. Plans for increased IT spending among firms of all sizes and across multiple industries represent the fifth straight month of solid growth projections.

Key findings include:

• Overall, CIOs project spending increases of 7.8% over the next 12 months, up from a 6.6% projection in April and the highest projection since 8.2% in January 2004.
• CIOs from the smallest companies in the survey, those with fewer than 100 employees, expect to increase IT spending 16% over the next year. Companies with 100—500 employees project increases of about 9%.
• When CIOs were asked about spending in eight specific IT categories, almost 44% said they plan to increase spending, down slightly from 45% in April. Only about 12% plan to decrease spending, compared with 13.2% who were planning reductions in April.
• Almost one-third of CIOs plan to increase spending on outsourced IT services during the next 12 months, the largest number since November 2003. Only about 18% plan to decrease spending on such services, the smallest number planning cuts in more than three years.

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 May 6—13, 2004, included 315 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.

Sponsorship Opportunities: Sales Practices and Software Brand Studies

2004 Sales Practices Study: Best Practices and Benchmarks from IT Services Leaders
(No charge for ITSMA members who sign up by June 25)

• A new buyer reality has forced IT services leaders to rethink their sales strategies, organizations, and processes. ITSMA’s upcoming 2004 Sales Practices Study: Best Practices and Benchmarks from IT Services Leaders, will explore how companies are meeting the sales challenge in response to changing buyer behavior. ITSMA's unique study will highlight benchmark data, case study examples, and best practices specifically for selling IT services and solutions.
• ITSMA's Sales Practices Study is a give-to-get benefit of corporate membership. Members who sign up by June 25 and provide data for the study receive a full report, customized briefing, and more at no charge. Members who sign up after June 25 and nonmembers can also participate for a fee.
• An optional add-on to the study will enable participants to survey their own sales force regarding support, tools, and training for services and solutions and compare their own sales force’s responses with those from other companies and from the industry as a whole.

  Learn more about sponsorship: http://www.itsma.com/research/prospectus/mk0463_sp04.htm

2004 Brand Tracking Study: Customer Priorities, Competitive Positioning, and Brand Preferences for Software Applications and Services

• The reinvention of the business software market requires vendors, integrators, and consultants to rethink the way they develop offers and work with customers. ITSMA's new multiclient Brand Tracking Study: Customer Priorities, Competitive Positioning, and Brand Preferences for Software Applications and Services will provide critical insight into the emerging buying reality for the market generally and for specific applications.
• The study, based on interviews with 500 senior decision makers at large and medium-sized companies, government agencies, and other large institutions will give sponsoring companies detailed data, analysis, and recommendations surrounding the buying process, competitive positioning across different market segments, and the most effective marketing investments.

  Learn more about sponsorship: http://www.itsma.com/research/prospectus/mk0448_sw04.htm.

EuroNotes: Breaking with Tradition in the Quest for Clients

Maybe you’ve noticed—there’s a quiet revolution going on in European marketing. Innovative and creative marketers are breaking from tradition and challenging the assumptions about "the way we do things around here" across our industry. Signs of the revolution were evident at ITSMA’s recent 2004 European Forum, where challenges to ingrained thinking and presentation of new ways of going to market pervaded the discussions among forum speakers and delegates. Among other issues, discussions focused on new approaches to marketing intelligence, offer development, business principles, and the roles and responsibilities of marketers themselves.

Read the full story

More EuroNotes

Upcoming Events

Growing Your Solutions Business
June 23-24 Workshop (Babson College, Wellesley, MA)
http://www.itsma.com/Events/event_desc/04WS06N10.htm

Marketing to the Public Sector
July 6 Marketing Roundtable (London; no charge for ITSMA Europe members)
http://www.itsma.com/Events/event_desc/04RT07E08.htm

Closing the Deal: Marketing's Role in Demonstrating Superior Value
July 13 Breakfast Briefing (Newton, MA; no charge for members)
http://www.itsma.com/Events/event_desc/04BB07N12.htm

Rebalancing Push and Pull: Best Practices in Demand Generation
July 20 Online Briefing (no charge for members)
http://www.itsma.com/Events/event_desc/04OB07N13.htm

Complete 2004 Events Calendar

Event Sponsorship Opportunities

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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.