ITSMA E-ZINE	September 2004

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Editor's Notebook: Treadmills and Trailblazers

It seemed a lot more promising at the beginning of the year, didn't it? The economy was looking up, tech spending was on the rise, and companies were at least loosening the marketing purse strings—if not opening them altogether. Ah, the good old days. Heading toward the fourth quarter, they seem so long ago. Now we're back on the treadmill, racing as fast as possible just to stay in place.

Of course it's not that bad. Tech spending continues to rise, even if the economy is a bit wobblier and "world events" are rather more depressing. And services marketers are blazing some important new trails, even if they're doing it with still-constrained budgets. In fact, having reviewed this year's bumper crop of submissions to ITSMA's Marketing Excellence Awards, I'm increasingly confident that a great many marketers are setting the stage for a much brighter 2005.

The biggest challenge for the next quarter is finding time to get off the treadmill. The trailblazers are setting off in new directions like solutions transformation, account-based marketing, and customer experience management. But we can't get very far if we expend all our energy running in place.

—Rob Leavitt

"Marketing Matters," ITSMA's 10th Anniversary Marketing Conference in Cambridge next month, is all about new directions. If you haven't looked at the program, see the highlights below and check out the complete agenda on our Website. It's a great reason to get off the treadmill and network with the trailblazers. We'd love to see you there!

What's Hot: Marketing Leadership in a Networked World

Marketing leadership is a common aspiration among ITSMA members, but the fact is, our actual leadership role is often quite weak. This may be about to change as our markets become increasingly networked.

Very few technology companies seem to value marketing the way it should be valued. The paradox is that when you ask CEOs about their top issues, they cite challenges like competing in a world of price pressure and maintaining customer attention and loyalty. These are absolutely marketing issues, but technology marketers rarely work directly with the CEO to solve them. There is a huge gap between what we as marketers believe we should be helping our firms achieve and our actual leadership influence.

Bridging this leadership gap is not easy. There is no simple eight-step guide. As Somerset Maugham once said: "There are three rules for writing a novel. Unfortunately, no one knows what they are."

In general, though, there are two main approaches to developing a stronger leadership role for marketing. The first is functional improvement. This means doing things like improving market research, streamlining processes, and prioritizing markets and offerings. The goal is increasing the return on marketing investment and the perceived value of the marketing function.

The second approach is mindset shift—trying to get the CEO and the management team to change their perspective about what drives growth and profitability in the business. This means highlighting new market realities, changes in competitive advantage, and new business initiatives. The goal is to catalyze action across the organization with a firm-wide impact.

Both of these are important. But there are tradeoffs involved. With functional improvement, you're trying to increase the internal prominence of the marketing function. You want the CEO to say, "Great job with marketing. We've got world-class practices, and they are adding value to the business.”

With mindset shift, it's about identifying new routes to profit for the company, and the whole emphasis is on firm-wide action. You're creating a new mindset that pervades the entire enterprise. It's more analogous to setting up a movement like total quality management than to reengineering the marketing process. When you talk to the CEO, you don't talk about marketing but about how the world has changed and the new directions the firm must take.

The tradeoff is this: Functional improvement enhances marketing’s performance but keeps it in a narrow role. The better marketing performs in its limited scope, the less imperative there is to change. Mindset shift breaks out of the constraints that have held marketing back and drives toward true marketing leadership, benefiting the firm overall.

Deciding which to emphasize depends on your objective and your environment. If you're in a stable market with no big changes that might affect competitive advantage, or if your marketing organization is really broken, you need to improve the function. But if you're in a changing environment where new directions are required to drive growth and profitability, that's where you go for the mindset shift.

In today's environment, the mindset shift approach is far more relevant. We're in a world that is changing from straightforward, bilateral relationships with customers, partners, and suppliers to multiparty networks and ecosystems. The most profitable growth markets for technology firms increasingly involve not point products but more complex, business-value solutions, often incorporating capabilities from partners. Value is increasingly co-created with clients and partners. Growth used to come from maximizing the number and price of product and service transactions; more and more, growth will come from superior management of relationships and networks.

This is a huge opportunity for marketing. We've always had alliances, channel partners, and other relationships, but now managing relationships and networks must move from the periphery of firms’ strategies to the center. And it's often difficult to say who owns the task of correctly selecting and designing the firm's relationships and networks. You've got developer relations, analyst relations, channel relations, marketing, sales, communications—it's either everyone or no one. It’s time for marketing to step up to own the “relationships and networks” challenge for their firms.

Marketing's opportunity is to change management teams’ mindset by demonstrating how relationships and networks drive growth and advantage. Show them how growth will be achieved, not by inventing a new offering for a new market but by co-creating solutions with customers. Tell the CEO that the company will minimize pricing pressure, not by being a provider of, but a partner in, a customer transformation. Demonstrate how you can marginalize competitors long before they reach the clients by inhibiting their access to capability networks. Describe how the firm will engineer its brand reputation through a network of influencers.

Right now, a dramatic shift is under way in the nature of competitive advantage for technology firms, from a product transaction model to a relationships and networks approach. How firms analyze, select, design, and manage strategic relationships will drive their businesses. Marketing can continue to focus on incremental improvements in the marketing function, desperately trying to maintain our budgets for our current activities—or we can seize the moment.

—Paul Magill, paul_magill@yahoo.com

Paul Magill, an ITSMA Senior Partner, is former Vice President of Marketing, IBM Global Services.

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Feature: Lucent's Reference Program Pays Off

When the marketing leadership at Lucent's Worldwide Services organization reviewed opportunities to boost performance last year, reference management moved quickly to the top of the list. For one thing, according to Barbara Khait, director of Lucent's client reference program, "You always need better proof points. References help close deals, create up-sell opportunities, and differentiate you in the marketplace."

For another, references seemed even more important as Lucent moved into newer markets, such as managed services. As Khait explains, "Having customers make the case for you is huge in a new area where the industry hasn't really decided and you need to convince prospects of the value."

Moving from concept to launch, however, required a highly disciplined, six-month program development initiative. This pre-launch phase emphasized five specific activities:

• Define clear program objectives in areas such as types of reference accounts, reference formats, potential uses, and overall management.
• Identify all stakeholders and their potential roles, responsibilities, and concerns.
• Obtain buy-in from sales and delivery leadership to ensure program support from those two critical, customer-facing functions.
• Work with IT to build the right tools for acquiring, maintaining, and using references.
• Develop appropriate training for sales, delivery, and business development staff.

To keep the program on track, the services organization set up two governance mechanisms. Stef van Aarle, Vice President for Strategy & Marketing at Lucent Worldwide Services, heads a Reference Management Council with senior services executives to set program objectives, review progress, and ensure global participation and support. As program director, Barbara Khait also manages a broader Client Reference Community of Interest that regularly brings together representatives from all the lines of business, regions, sales, delivery, and other functions to maintain organizational momentum.

By the time the program launched in May 2004, it included a broad and sophisticated approach to capturing, utilizing, and tracking references across the full range of marketing and selling activities.

The program is designed specifically to create reference materials and activities for every stage of the sales cycle. Static formats like press releases, case studies, and videos support efforts to build awareness and interest. More active formats like reference phone calls, presentations, and site visits are more useful for instilling confidence with prospects. Special events and advisory councils help increase loyalty with existing clients.

Beyond the specific activities, the existence of the program itself has begun to improve the sales process. "Sales obviously needs and uses references to help close deals," says Khait, "but they're now beginning to position the goal of referenceability up front to show a commitment to success. It's a great pre-sales discussion and it fits with our corporate priority of creating referenceable clients."

Khait and her colleagues have also worked hard to create multiple options for customers to provide references at different levels. "We give them no reason to say no," says Khait. "If they don't want to be named, that's okay. We might ask them just to talk with analysts but not do any co-marketing. Or we can just put them on a sales list. You have to have multiple options."

Within three months of the launch, the reference program had blown past a number of key metrics for the year, and reference usage was beginning to expand into areas well beyond initial plans. Indeed, the early success of the program convinced top Lucent executives to expand it from the services organization to a corporate-wide initiative.

Reviewing the early success, Khait points to six critical success factors:

1. Always think client-first. Use different approaches to potential reference accounts, give them multiple options, start small, and approach clients holistically.
2. Take a systematic approach to program infrastructure. Engage all stakeholders and build an integrated approach to reference development, maintenance, and use.
3. Create advocates across the company. Celebrate program heroes and continuously thank program contributors.
4. Get direct access to clients. Outsource where necessary, but ensure hands-on relationships with reference accounts.
5. Link into client satisfaction surveys. Use the surveys as a source of potential references and analyze responses for referenceability enhancers and detractors.
6. Turn reference involvement into loyalty. Ensure regular executive-level appreciation for referencees and create a community of interest to sustain program support.

"We're extremely pleased at the success we've had in such a short time," says Khait. "The program has just mushroomed once people have gotten to know about it. We're now using it for all sorts of pre-sales activity, promotion, messaging, events, and more because now we have the proof points, and they're real."

—Rob Leavitt

For more information on reference management, see ITSMA's new briefing, Building an Effective Client Reference Program. The briefing reviews the key challenges and obstacles to successful reference management, and provides a detailed five-stage framework for building an effective program. This briefing is available at no charge to ITSMA members and for sale to all others. Learn more at http://www.itsma.com/research/abstracts/olb081704.htm

Research Desk

Thought Leadership Marketing: Not Just for the Big Boys

Thought leadership marketing has clearly emerged as a priority for tech firms trying to grow their high-end services and solutions businesses. Yet even as more marketers appreciate the value of investing in thought leadership, there remains a widespread presumption that it's largely a tool for the big boys; smaller and mid size firms don't have the resources to make a serious thought leadership play.

ITSMA begs to differ. Market clutter and buyer skepticism make it imperative that firms articulate some unique expertise that stands out from the crowd. Thought leadership is a shortcut to awareness and credibility, and we all need shortcuts in these days of endless sales cycles.

As important, a carefully designed approach to thought leadership marketing can be successful at almost any level. The key is focus. Pick an area where you have legitimate expertise and build a systematic initiative around it. Tap existing resources around the company and get a few champions on board early to lead the way. Leverage a white paper or two to create follow-on tools and initiatives, such as Webcasts, bylined articles, and client briefings. Stop accepting any old speaking invitation and target the few venues that provide the best showcase for your priority issue with the right prospects. Concentrate on delivering your ideas to key customers and prospects in ways most useful and effective from their perspective. It ain't free, but it's much more about time than money.

And once you've taken the plunge with one issue, just do it again.

—Rob Leavitt

For more information on thought leadership marketing, see Designing Effective Thought Leadership Programs to Engage Buyers in Europe. This ITSMA Europe Update is available at no charge to ITSMA Europe members and for sale to all others. Learn more at http://www.itsma.com/research/abstracts/euu005.htm.

See also Six Steps Toward Effective Thought Leadership in the ITSMA Marketing Toolbox (password required): http://www.itsma.com/research/toolkit/6steps_tl.htm.

Tech Spending Projections at Highest Level Since March 2001

CIO Magazine's August Tech Poll showed the highest projected increases in IT spending since March 2001, with a broad cross-section of CIOs predicting almost 9% increases over the next 12 months. The projections continue the upward trend that began early this year and suggest a further strengthening of the IT sector. According to publisher Gary Beach, "We may be seeing more tech sectors join in the recovery and thereby make it a broad and comprehensive one."

The survey does show a continued divergence between larger and smaller firms, however. CIOs from firms with fewer than 1,000 employees predicted spending increases of more than 12% over the next year, while CIOs from larger firms expect increases of only 4.6%.

In all, however, almost three-quarters of firms expect to increase spending on IT, and more than one-third of firms to increase spending by more than 10%.

The strongest areas of growth continue to be security software and storage. Predictions for storage spending, in fact, reached their highest level ever in the poll's history.

The survey also showed a sharp increase in projected spending for infrastructure software, reflecting a growing understanding that aging IT infrastructures must be refreshed.

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 August 5-12, 2004, included 252 respondents. Large firms with more than 5,000 employees represent 19% 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 Studies: Software, Managed Services, and Telecom Services

ITSMA's brand tracking studies provide a highly affordable complement and/or alternative to high-priced custom research projects. As multiclient sponsored programs, the studies pool resources to generate detailed data in key market segments at a fraction the cost of going it alone.

Upcoming sponsorship opportunities include:

2004 Brand Tracking Study: Customer Priorities, Competitive Positioning, and Brand Preferences for Software Applications and Services
http://www.itsma.com/research/prospectus/mk0448_sw04.htm

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 Software Applications and Services Study will provide critical insight into the emerging buying reality for the market generally and for specific applications, based on interviews with 500 senior decision makers.

2005 Brand Tracking Study: Identifying Leaders in Managed Services
http://www.itsma.com/research/prospectus/mk0467_ms05.htm

The recent upswing in technology investment, combined with a continued search by buyers for outsourcing and managed services options, suggests a significant opportunity for providers of managed services. ITSMA's second annual Managed Services Study will provide a detailed analysis of how network, IT, and business executives assess individual providers and the market as a whole.

2005 Brand Tracking Study: Telecom Services—Services Provider Market
http://www.itsma.com/research/prospectus/mk0475_sv05.htm

After a long downturn, major communications suppliers are reaping the benefits of growing and thriving services and consulting offers. ITSMA's fourth annual Service Provider Study will assess how network and business executives at telecom services providers view the leading vendors of telecom services and solutions.

For more information on sponsoring any of these studies, or on ITSMA's brand research capabilities more generally, contact ITSMA at +1-781-862-8500 or info@itsma.com.

Gray Matters and ITSMA Launch Benchmarking Study for Business and Professional Services

ITSMA has partnered with Gray Matters, a Chicago-based management consulting firm, to launch a new market research study on best practices and benchmarks for business development in business and professional services.

Designed to include a wide range of services firms, including accounting, management and strategy consulting, IT services, outsourcing, staffing, and law, the study will identify key metrics and best practices in areas such as selling models and effectiveness, cost of sales, sales support practices, strategic alliances, marketing, and personnel management. Study results will support improved planning and decision making for business development among leading, mid market, and smaller firms.

For more information, visit http://www.itsma.com/News/newsfromitsma/083004pr.htm.

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EuroNotes: Surviving the Future

“Somehow it just doesn’t seem to be as much fun as it used to be. Back in the old days, the company was smaller, finance and ROI seemed less important, and we just got on with making things that seemed to sell themselves. When you met others in the same business, you talked like colleagues rather than competitors. Sometimes I wonder where all those interesting companies went.”

Back in the 1950s, we overheard these words from soap factory workers. In the 1960s, we heard them from car manufacturers; in the 1970s from steel makers; in the 1980s from bankers; and in the 1990s from hotel managers. Today, we’re hearing them from the IT sector.

In fact, the IT sector is probably coming a little late to dealing with its current woes. They should have arrived in the 1990s but were postponed by the dot-com boom. But the industry life cycle is hard to avoid, and the question now is how to survive the future as the IT sector moves from growth to maturity.

- Read the full story
- More EuroNotes

Voice of the Customer: Buying Behavior for Professional Services

Customers in Europe have taken firm control over the buying process for technology-based professional services and solutions. Rather than sitting back and waiting for providers to approach them, they are actively researching solutions and seeking out peer recommendations. Provider claims have less impact while third party experts are even more influential than in years past.

ITSMA's new briefing on professional services buying behavior in France, Germany, and the United Kingdom reviews buyer preferences and priorities, and outlines strategies for more sophisticated market segmentation and value propositions. The briefing also provides a longer term view of the potential of new approaches to relationship marketing.

Voice Of The Customer: Understanding Professional Services Buying Behaviour in Europe is available at no charge to ITSMA Europe members and for sale to all others. Learn more at http://www.itsma.com/research/abstracts/olbeu090904.htm.

Marketing Toolbox: ITSMA's Strategy Health Check

Strategy in many IT services organizations can be summed up crudely as "doing what we did before, but better." Finance drives an annual planning process designed to increase revenue and profit in pretty much the same areas as the year before.

A bit harsh? Perhaps, but ITSMA research suggests that marketing typically takes a back seat in the strategy process; competitive and opportunity analysis is generally quite thin; and a negotiated aggregation of business unit financial goals serves as the foundation of most organizations' "strategies."

How effectively does your strategy process anticipate and respond to market and competitive change? Take ITSMA's Strategy Health Check for a quick review of your company's approach.

- Take me to the Strategy Health Check
- More Marketing Tools (membership online access required)

Upcoming Events

Taking Solutions to Market: Marketing and Selling Integrated Solutions

Winning in the solutions world requires a fundamental shift from pitching products and services to collaborating with customers to create genuine business solutions. "Taking Solutions to Market," a half-day workshop jointly sponsored by ITSMA and ITAA, provides a hands-on immersion in the research, tools, and best practice examples that marketers need to succeed.

Learn more and register now for the nearest workshop location:

Marketing on the Horizon: Managing Relationship Networks to Create Value
October 5 Inner Circle Meeting (Invitation only)
http://www.itsma.com/Events/event_desc/04RT10E09.htm

Managing Partner and Channel Dynamics: An Updated Look at Best Practices
October 14 Online Briefing (no charge for ITSMA Europe members)
http://www.itsma.com/Events/event_desc/04OB06E06.htm

- Complete 2004 Events Calendar
- Event Sponsorship Opportunities

Ask ITSMA!

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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.