News

Economy: Selling IT Services in Tough Times

Researchers offer insights about how to boost business even when the economy is down.

• By Anne Stuart and RCP Staff
• January 26, 2009

"Vendors in this market have spent years building up their value-added service offerings in an effort to generate higher margins and foster more strategic relationships with clients," Christopher Andrews, senior analyst at Forrester Research Inc., wrote in a November 2008 report. "Now they will face a customer base seeking to cut costs, eliminate nonessential services and reduce the risk associated with long-term contracts."

Service providers also face a difficult decision about "whether to wait for clarity about when the situation will improve or to act now without knowing what the outcome might be," Gartner Inc. noted in a December 2008 report. "The penalty for making the wrong choice will be severe, resulting in the loss of business and viability," warned Christine Adams, Gartner's managing vice president.

But both research organizations emphasized that there's still business available to companies willing to work to obtain it.

"IT services can be sold in good times and bad," Adams wrote. "Selling in bad times requires both agility and ability to sell wherever opportunity can be identified." Following are insights from analysts at both firms on how to do exactly that.

Gartner's Top Tips
According to Gartner, its analysts' advice was designed to "improve sales prospects in the short term while providing some breathing space to see how things evolve."

Specifically, Gartner recommended that service providers:

• Propose pricing options that share risk and reward. This strategy can remove purchasing barriers and requires no price-cutting.
• Express value in terms of financial-statement impact. Due to ongoing credit restrictions, Gartner called this approach "even more important than usual."
• Focus on responsible cost optimization. Demonstrate to decision makers that you understand their companies' long-term needs.
• Know client attitudes toward risk tolerance and management. "Risk is likely to be the single most influential factor driving demand for IT services during the next few years," Gartner predicted.
• Learn governments' plans for economic intervention. New policymaking should "create opportunities for service providers that help companies interpret and respond to these developments," Gartner said.
• Make it easy for clients to come back. Research shows that in tough times, customers are especially likely to return to -- or to rely more on -- providers they already know and trust.
• Accelerate migration to utility pricing (when it makes sense). In Gartner's words: "Economic and purchase risks are significantly reduced when clients can pay for use as business scales up and down."
• Reduce the pain of engagement or implementation. Obviously, any offering that customers view as risky or difficult will be much harder to sell.
• Keep up with trends. "As long as there is technology innovation, there will be service opportunity, and process improvement will always be in demand," Gartner noted.
• Create new markets. Survivors in the last downturn "were those that made their own opportunities," according to Gartner. Taking that approach requires understanding market needs, then creating new initiatives to meet them.

Forrester's Findings
Forrester's report argued that the following practices, while always valuable, are particularly important right now:

• Be opportunistic. "Service providers that can recognize the shifts in the needs of their customers -- and target their offerings accordingly -- will increase their relevance with clients, regardless of the state of the economy," Forrester's Andrews noted.
• Emphasize return on investment (ROI). If you can make a strong argument about ROI based on current market conditions, customers may be more likely to add your offerings to their battle plans, Forrester noted.
• Build a good business case. Be as comprehensive and specific as possible about scope, implementation, requirements and benefits.
• Promote customer references. "No matter how savvy your sales organization is in communicating your message, potential customers will always be skeptical of your claims about cost savings and benefits," Forrester said. They're far more likely to be impressed by customer testimonials, especially those from "brand names with smart IT representatives."

The bottom line, according to Andrews: "The companies that can identify the core needs of their customer base -- and meet those needs with targeted offerings -- will be in a stronger position to weather this economic crisis and emerge with even stronger customer relationships."