The good and bad of selling to global IT: a primer.
Posted by Gia Lyons on March 28, 2008
Global IT shops – IBM CIO’s office included – have a finite bucket of money to spend. They don’t generate a profit for their company. They are a cost-of-doing-business division. Some, however, have figured out how to operate as an in-house services organization that generates departmental “revenue”, which funds their annual spend, and in a few cases, generates an internal “profit” for their department. But, that’s another discussion.
Gimme payback, and make it snappy.
As a result of their no-revenue-all-cost nature, global IT shops look for a payback period of one year or less for many of their technology spends. That not only includes software licenses, but any required services to deploy it, plus infrastructure, first-year maintenance, and administrator, developer, and help desk employee costs (partial or fully-loaded FTE), plus I don’t know what else.
Now, in many cases, vendors ask customers to spend a crapload of money just for software licenses. And in the case of social networking software licenses, this is a huge spend that WILL NOT pay back within a year in most organizations’ current cultures. It might not even pay back within two years. And even if it did, how do they measure their return?
This is why our corporate IT customers need ROI statements, regardless of whether we think it’s ridiculous or not to try to establish ROI statements for social software. For the record, I think it’s ridiculous, but hey, I’m not spending the money.
Is that a hard ROI, or are you just happy to see me?
You can measure social networking software ROI with before and after surveys, for example. You could measure:
- increased organizational effectiveness – “I spent one hour less time each week searching for an answer because of user-tagged content in Dogear,” then multiply that by your employee population;
- enhanced innovation – “I developed a new product idea faster because I read a colleague’s blog and asked her to connect me to the right engineers,” then calculate the potential revenue of that new product getting to market faster;
But, it’s a laborious effort to gather these anecdotal results, and somehow apply them to the rest of your organization. Just because Jeannie in customer service found answers faster doesn’t mean everyone else will. It only works if people contribute content you care about, after all.
Plus, with social networking software, you can’t predict these magical ROI numbers beforehand, which is what global IT people are really asking for. Only by using the software in your culture, will you learn of its potential return.
Ooo, that bears repeating: Only by using the software in your culture, will you learn of its potential return.
Screw it, then. Let’s just ditch global IT and go after the business units!
Interestingly, if a vendor instead sells to lines of business (LOBs), they don’t have to do the full ROI musical – just one or two songs. Why? Because most LOBs have a budget AND generate revenue for their company. They don’t have to prove ROI in many cases, because their projected revenues for a given quarter or year will cover the cost, and by and large, they see the potential benefits immediately without requesting proof. Plus, they’re not buying for the whole company. Smaller spend plus real revenue generation elsewhere in the department equals, “what the hell, let’s try it!”
So, why don’t sellers target LOBs instead of IT, you ask? Because vendors would only sell licenses for that department or division – they wouldn’t get the whole global enchilada, which is the potential when selling to global IT shops.
Also, by selling to LOBs, you’d have to sell to several of them (or one with lots of organizational power) so that they exert pressure on their global IT folks to deploy the solution globally. Assuming they care that the rest of the organization would benefit from it, that is. Speaking from experience, that really pisses global IT off, let me tell you. That’s why they don’t want vendors talking to their LOBs in many cases.
And really, an experienced seller doesn’t want to have to sell the same solution more than once to the same customer. It might take longer to sell to global IT, but once you’re done, you’re done.
Me? I personally prefer selling to one or more LOBs, and working in parallel with global IT to support them, since LOBs usually end up wanting IT to foot the bill anyway.
How it really works today
Today, our global IT customers are conducting free proofs-of-concept with a few users. If they get the response they were looking for, they buy “starter packs” of IBM Lotus Connections licenses and conduct official pilots. Some are doing before and after surveys, educating their pilot users, and addressing corporate culture obstacles as they go. Based on the results, they’ll either buy more in six to twelve months, buy a competitor’s solution, or do nothing.
That’s how it works in emerging enterprise markets. But, when we reach a critical mass of customers using social networking software, who are willing to talk about what it did for their company, then we can go in to global IT shops with blazing ROI statements that will knock their booties off.
So, did I get this right? Did I miss anything? Tell me.