January 13, 2009

Key Sales Related Challenges in the IT Services Marketplace

We have spent a lot of time over the past two years talking to buyers, as well as sales people and their mangers in the IT services industry in the UK and Ireland..   Here is what we see as the Key Sales Related Challenges in the IT Services Marketplace:

1.  1. The global downturn adds to the attractiveness of the offering to the market place, and there are few organizations that don't believe that they could get more from IT for less.  Most suppliers are not selling high enough in their target organisations to take advantage of this.

2.  2. There is a race to the bottom, with increasing price pressure and erosion of margins.  The bottom end of the market is the most competitive and margins are very tight.  Average order values are low.   In our view the sales strategies and processes being adopted by most companies are not enough to develop the top end of the market.

3.  3. The message from many suppliers is very similar, making it hard to stand out.   It is hard for buyers to distinguish between those suppliers offering higher levels of service (and with correspondingly higher prices) and those with low prices and a basic service.  Cheapest is not best, not by a long shot, but how to educate buyers?  How to quantify and communicate the value?

4.  4. Allied to the challenges of standing apart from competitors, there appears to be little segmentation, or specialization by vertical.   For example, are the needs of a large law practice different to those of an engineering company?  In reality, maybe they are, maybe they are not.  However, each buyer likes to think the needs of his business and industry are special.

5.  5. The search for 'a product' is on – a productized follow-on sale to the customer that can increase the average value of the sale, or deepen the customer relationship.  The move from day rates to value based pricing has been slow.

6.  6. Many organizations are focused on selling products and services, as opposed to solutions.  In particular, suppliers are not helping managers build the business case for out-sourcing, but seem to be focused on selling point solutions, such as remote monitoring, remote back up, etc.  Cross selling and up selling are key opportunities.

     7. For most, their relationships with big vendors (e.g. HP, IBM, etc.) don't in isolation generate very many leads, or enquiries.  Building and maintaining a healthy pipeline is the Number One challenge for most in the industry, particular those with customer retention issues and low order values.

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