Outsourcing: Why CIOs Hate How You Sell IT Services

IT vendors spend $25 billion a year on lead generation, while CIOs have become skilled at the art of evasion. CIO.com talked to xPeerient CEO Mark Hall about why the IT marketplace is broken and what he thinks could fix it.

By Stephanie Overby
Thu, March 10, 2011

CIO — Ask CIOs what their biggest professional frustration is and the answer might surprise you, says former CIO Mark Hall. It's not rogue systems, shrinking budgets or network outages, says the now CEO of xPeerient, provider of an online community for CIOs. "The repeated issue every year—what keeps CIOs up at night—is the sales and marketing practices of technology vendors. It's a cat and mouse game. It's not efficient for buyers; it's not efficient for sellers. The whole relationship is problematic."

Hall recounts the story of the pharmaceutical company CIO—a marquee customer of a major software and services vendor. The CIO was holding two days of strategy meetings attended by the vendor's very famous president. On day two, the CIO's administrative assistant messages him that someone from the vendor company is on the phone and transfers the call to the CIO's cell. "Hello, sir. I'm so-and-so in corporate sales," says the voice on the line. "And I'd like to find out if you have any software needs." The cold caller was employed by the very IT vendor whose president was sitting across the table from the CIO. "That's the kind of disjointed approach to relationships that vendors have," says Hall. "You'd think the vendor would have a better CRM system than that, but the right hand doesnt know what the left hand is doing. That kind of bungling happens every day."

Hall says he wants to level the playing field between IT buyers and sellers and xPeerient has introduced a platform for CIOs to anonymously initiate the buying process with vendors. But his own sales pitch aside, Hall says somethings got to give—particularly in outsourcing, a relationship business where starting off on the right foot is critical. "The core problem is how buyers and sellers are introduced," Halls says. "It's fraught with friction."

CIO.com talked to Hall about how much money technology vendors waste on lead generation, the trickiest techniques IT leaders have developed for evading dogged salespeople, and how to fix the broken tech services marketplace.

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CIO.com: IT spending around the globe continues to grow. IT organizations spent more than $3 trillion in 2010, more than $800 million of that on outsourcing. But you say vendor sales tactics are stuck in the dark ages.

Mark Hall, CEO of xPeerient: The core problem is the way buyers and sellers are introduced. It's inefficient. It's built around the language of war, with sales teams talking about campaigns and ground fire. There's friction and distrust. IT vendors spend $25 billion a year doing lead generation for internal sales, according to IDC.

I know of one tier one software and service provider whose lead generation starts in a call center in Bangalore—3,000 full-time employees with its own physical and management infrastructure. Those employees come in at night and start calling U.S. and European companies to verify contact information [for corporate IT leaders]. Once they validate the lead, it's sent to the inside sales organization where someone else makes a follow up call to determine interest. Then it goes to the channel manager who conducts an interview with the lead. Then it goes to the channel partner for that region. The ratio they're looking at is 1,000 to 1: 1,000 phone calls for one opportunity. And the IT buyer community is doing a better and better job of disguising themselves to avoid the whole process.

It's all based on consumer advertising models originally conceived in the 19th century. It's the demand generation model. You put juicy hamburger on the TV screen and you load it up with cheese and bacon. You make it look really good, and put a lot of sex behind it, and people will say, 'Wow, I want that!' and go to Burger King and buy it. But that doesn't work in corporate IT. You don't have a CIO in the enterprise saying, 'I didn't think I needed storage. But, wow; now I do!'

CIO.com: The process, you note, breeds discontent and distrust. Can that work its way into the day-to-day outsourcing relationship that results?

Hall: I think that everyone knows to differentiate between sales and the ongoing relationship. Salespeople are their own breed.

One thing I think it does make a difference in is the outsourcing decision. A good salesperson—one that's good at building relationships—can sell you a bad service. And a bad salesperson may actually have the better service. What wins the day is the best salesperson rather than the best outsourcer. If you're looking for better outcomes, you have to cut through the noise and make a decision based on rational assessment.

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