Take a look at a lot of the sales material provided by IT vendors and you would think the only criterion used by businesses for buying products is cost, and that unless a return on investment (ROI) can be shown in a matter of months, customers will not be interested in a proposition, whatever it is.
Quocirca research shows that ROI is not the primary driver for most IT purchases, but that businesses consider a number of factors. These range from hard-edged financial objectives, such as revenue generation and cost reduction, to softer ones such as reliability and customer satisfaction.
Regardless of what material they are fed by vendors, resellers can differentiate themselves by aligning their own propositions more closely with the commercial aspirations of the businesses they are selling to.
The evidence is consistent. Even for purchases such as servers, businesses rate reliability, performance and security feature more highly than costs of acquisition and operation (see related charts, figure 1).
For a more glamorous purchase, such as a CRM application, customer satisfaction and retention rate more highly than direct financial drivers such as growing sales revenues and reducing operating costs (see figure 2).
So forget the ROI models that pop up in vendor presentations and collateral, and focus on what customers want: a total value proposition (TVP). There is a problem with this, however. TVP is harder to quantify than ROI.
This is not surprising, because TVP reflects the real value a business gets from a particular purchase, but it is a much better way of justifying IT investments.
TVP takes into account three categories of business benefit: the creation of business value, the reduction of business risk and the saving of business cost. For example, the implementation of a good CRM system creates business value by increasing customer retention.
Deploying it on a reliable server reduces business risk by ensuring the system does not crash. Over time, both will reduce business costs. The CRM system should lead to better customer retention, so less money needs to be spent on gaining new customers, and if the server is reliable, service costs are less.
But how can resellers usefully translate this for their own propositions? Take the proposition you are making and for each category of business benefit, and list the positive and negative aspects of implementing it.
A CRM system is expected to create business value by increasing customer retention, but there will be a negative impact as staff get used to using a new system. It will decrease business risk because information is less likely to get lost if it is stored in one place.
But putting all information in one place also creates a business risk: a single point of failure. It will cut business cost because customer communications will be more efficient, but it will create business cost because the new system will have to be paid for.
For each positive and negative item listed, consider its importance to the business and rate the impact on the business of not deploying the proposition. With the CRM example, it is important to retain customers and the impact of not doing so on the business is high.
Sure, there will be negative impact while staff are trained to use the new system, but this is only short-term. The value of having customer information stored in one central place will be high, leading to better communications and improved customer satisfaction.
The risk of having customer information all in one place is quite low; the danger of system failure can be mitigated cheaply with a good backup strategy.
Costs will be reduced by making customer communications more efficient. Making fewer and shorter telephone calls will save a bit, but not that much, and certainly not enough to pay for a good CRM system and its annual maintenance.
Only when all the business benefits have been taking into account can the full benefit to the business be seen and the investment justified, or in some cases not.
This is a simple example and for any proposition there will be many more business benefits to take into consideration than the few used here. But using TVP is worth it. It allows a realistic justification to be made for pricey IT investments based on the actual requirements of the business.To see the illustrations associated with this report please click here.
Bob Tarzey is service director at Quocirca.
Quocirca (01753) 855 794
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