To Drive IT Spending, Target The Business!

Last week, Forrester hosted a breakfast roundtable in Sydney for approximately 20 tech vendors seeking to capitalize on current IT spending trends in Australia and New Zealand. With expected IT spending growth of nearly 4% in 2013, the A/NZ market is still going strong. However, this good health hides major shifts, including the increased role that business decision-makers (BDMs) are taking in direct IT purchasing in areas like staff, products, and services. As a matter of fact, Forrester expects the percentage of IT budgets that IT directly owns or controls to decrease by 2% to 5% between 2012 and 2014 in most A/NZ organizations.

Why are BDMs controlling more and more IT purchases? Firstly, because the pervasive nature of IT in running the business means that it is simply too important to be left to IT organizations alone. Second, with consumers dictating the pace of innovation, businesses are struggling to keep up; many BDMs believe that it’s faster to source technology themselves than to wait for IT. Now, this does not mean that IT organizations are going away anytime soon, and their role as an enabler of business value will be critical going forward. Instead, Forrester expects the “owner” of IT purchases to vary, depending on the objective. We have identified six domains — organized into three categories — where IT and business stakeholders in A/NZ will invest strongly in 2013 in order to improve their organizations’ business results.

Each one of these domains represents significant growth opportunities for tech vendors in A/NZ. But each category is owned by a different stakeholder group, forcing vendors to adapt their product and services value proposition to be successful:

  • The IT organization wants the technology foundations to be cheaper. These technologies will form the base for improving business results, but IT decision-makers need to provide cost-effective, reliable services to their internal clients. Here, vendors need to align the value proposition of their offering to focus on reducing operational costs while leveraging a prescriptive approach with proven concepts and functionalities.
  • Line-of-business management cares about the performance of their operating models. Forrester expects increased business-led investments in technologies such as collaboration, mobility, social computing, and business process management solutions throughout 2013. Their objective? They want to make the business better for their employees, partners, and customers. Vendors in these areas therefore need to clearly explain how their solutions help deliver better workforce performance, enable faster business innovation, and enhance targeted business processes.
  • Executive management leverages digital engagement systems to deliver more value. A/NZ organizations have entered the age of the customer and will invest significantly in systems of engagement in 2013 — including social computing, analytics, mobile applications, and customer relationship management solutions. Their objective is to grow revenues and gain market share via better customer engagement and improved customer loyalty. The strong business value focus of this stakeholder group means that vendors must take a consultative approach to creating new business capabilities — not just selling solutions. Forrester also sees an increasing interest for engagement models business outcomes, where the client shares the risk of building these capabilities.

Bottom line: Tech vendors need to change the way they sell, stop focusing on short-term profit realization, and start focusing on delivering long-term business value to their clients. As always, I am interested in hearing your thoughts on this major shift.

Comments

Fred, when you say BDM

Fred, when you say BDM believe that sourcing technology themselves is faster, what do you mean by that? I mean what would someone say in marketing do by sourcing technology? He does not have technology skill. If he wants an analytics product, he can at best buy it, but what to do afterwards? He must ask IT to make that analytics product workable right? In any case business always sponsored tech budgets (e.g., analytics), what has changed now? One thing is for sure, a marketer has no use for software product after buying, he needs to ask IT to deploy and manage before it can be used.