As is the case with selling McMansions, Mercedes SUVs and 63-inch HDTVs, pushing expensive technology products and services during a global recession isn’t an enviable task. Late last year, when the economic meltdown began and corporate IT budgets went under the CFO’s knife, tech vendors had to hastily reevaluate their marketing messages and overhaul their sales tactics.
In turn, during the first months of 2009, “many technology companies operated in a general state of confusion,” notes Forrester Research analyst Chris Andrews, in a new report. “As the credit crunch of late 2008 took its toll on spending, technology vendors were adapting their strategy on the fly—trying to quickly align their long-term growth objectives with the new economic realities.”
Read Enterprise Software Licensing Negotiations: Insider Tips and Five Tips to Create a Recession-Proof ERP Vendor Strategy
Of course, just like those pristine and empty 4,500-square-foot estates languishing under the Nevada sun, nothing in the CRM application’s code, BlackBerry smartphone, Cisco router or outsourcing deal had actually changed since the disastrous fall.
It’s just that what tech customers felt was absolutely necessary or of immediate value had shifted dramatically.
Price, conventional wisdom held, would now be king, as companies would cut back on non-essential IT spending and drive licensing, service and related tech costs down. And the vendors would have to adapt their messaging to appeal to the needs of their cash-strapped clientele. “Price Wars” were at the gates!
It turns out, however, that that hasn’t exactly been the case.
The Price Isn’t Right
For sure, technology buyers have cut back on any non-core spending. But in the Forrester report, “How The Recession Is Affecting Tech Vendors,” which includes data culled from a May 2009 survey of 110 senior-level professionals from a mix of hardware, software, services and telecommunications companies, Andrews writes that despite the macroeconomic challenges, “technology vendors remain aggressive about innovation, growth and their ability to provide new solutions to the market.”
“Furthermore,” he continues, “they are less focused on using price as a lever to address changing customer needs.”
The Forrester survey probed the survey base about the specific marketing and sales tactics that vendors use today. Their responses showed that vendors weren’t simply cutting prices to win business, or using price as a main component of their marketing and sales strategies. “Given that price sensitivity among IT and business buyers has increased as a result of the economic conditions,” Andrews writes, “we find it very interesting that using price as a marketing message or as a way to generate new sales is a very unpopular tactic for technology vendors.”
So, instead, technology vendors appeared more wedded to pushing tech jargon and buzzwords: The data indicates that vendors “are far more interested in providing complete solutions and value-add capabilities than they are in generating price wars,” notes the Forrester report, and “are getting more tactical with existing accounts and using value propositions based on flexibility and return on investment (ROI) to justify their marketing and sales tactics.”
It’s important to note the motivations of the survey base: Some tech vendors would rather kill their mothers than talk up price concessions or discounts. Pushing “value propositions” and “flexibility” and “innovation” (even when customers don’t actually need it) are much more attractive to them.
Still, the Forrester report calls out two other noteworthy trends for IT decision makers: Projects that have strong business cases—such as virtualization projects or software-as-a-service rollouts—are still getting the green light; and IT is requiring much more business stakeholder input and responsibility than in the past, which is key to improving any business and IT disconnects.
“The data indicates that influence from business stakeholders has become even more important in the current economic climate,” writes Andrews. “This may be because IT is becoming more risk-averse in purchasing decisions and wants more input from diverse stakeholders, but it more likely relates to the fact that technology spending in the current environment is driven primarily by business needs.”
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