Buyers’ Preferences for Sales Tools

A recent ITSMA survey of 200 senior-level business and IT executives from Fortune 1000 and government entities in the U.S. reveals clear patterns of preferences and confirms the growing use of these tools.

According to the survey findings, almost two-thirds of decision makers now require an ROI analysis, and 60% require a TCO analysis. The ROI analysis is generally preferred for professional services, while TCO analysis is preferred for maintenance and support services. This is not surprising given the nature of the different analyses (ROI is the ratio of the net gain from a proposed project, divided by its total cost, while TCO is the total cost of procuring, using, managing and disposing of an asset over its life).

ITSMA found similar percentages of companies requiring ROI or TCO analysis across hardware maintenance and technical support, software maintenance and technical support, and professional services. This requirement for ROI or TCO analysis also holds true across buyers from different vertical industries, including financial services, government, manufacturing and life sciences.

With decision makers scrutinizing investments more closely than ever, technology vendors are creating more tools that demonstrate or validate the value of their solutions or services. However, it appears that buyers may not be directly using vendors’ sales tools. A key finding of this survey is that a majority of decision makers conduct their analysis independent of the vendors involved. Of the decision makers that require it, 74% prepare an ROI analysis, and 65% prepare a TCO analysis using internal resources. Most of the remaining decision makers conducting ROI and TCO analyses do so either with the vendor, with a third party, or with some combination of their own resources and those of a vendor and a third party (Figure 1).

Large majorities across all verticals prefer to keep the analysis independent of vendors involved. This is especially relevant for hardware maintenance, technical support and government decision makers. Eighty-seven percent of hardware maintenance and technical support decision makers prefer to conduct the ROI analysis independently, and 77% prefer to conduct the TCO analysis independently. Perhaps not surprisingly, government decision makers are the most emphatic on this point. A full 91% of the government participants in the study prefer their own independent ROI analysis, and 82% prefer their own independent TCO analysis.

The results imply that vendors can best position and gain credibility for their solutions by providing justification models that are both transparent and flexible. This can be very effective when key assumptions are backed by real-life examples of expected results. ITSMA has seen effective models that present straightforward analysis that can be “peeled back” through several levels to show each of the different assumptions and calculations at each level. A transparent model clearly identifies and accounts for particular metrics, states assumptions used, identifies beneficiaries and their expected benefits over a specific time frame and costs. This enables prospective buyers to develop and support their own analysis effectively.

Many decision makers are also becoming more diligent about proving the value of their IT investment after the fact. According to the ITSMA study, over 80% of decision makers that require an ROI or TCO analysis go back to validate at least some of the projects following delivery. IT vendors are well advised to invest more heavily in post-delivery validation themselves. The effort certainly pays off in data that may be shared with potential buyers.

Vendors are on the right track with the push to develop tools, but they must design them to help decision makers run the numbers themselves. Since decision makers prefer to keep the analysis in-house, vendors need to make sure they can provide extensive, compelling and bulletproof data that support their case. A focus on helping decision makers develop their own analysis to justify purchases will have better and quicker results than developing glitzy standalone tools.

This article is based on an ITSMA research study entitled, How Customers Choose IT Vendors. Insights Into Winning More Deals, conducted in March 2002, available at www.itsma.com.

Anna Rodgers is Research Manager and Rob Leavitt is Director Member Advocacy for ITSMA (www.itsma.com), the leading advisor on services marketing, branding, and sales practices in the information technology industry. Anna and Rob can be reached at arodgers@itsma.com,
rleavitt@itsma.com or at 781-862-8500.