The IT business is about to go through a major transformation that will change the types of software IT managers will be looking to buy, thereby creating a new set of winners in the software market.
First, here’s some background. According the market research firm Gartner, trillions of dollars have been spent on computer systems over the past 35 years to improve the productivity of administrative processes. While the development of this infrastructure was important and necessary, it is no longer sufficient to establish IT as a strategic resource. The problem lies in the fact that most IT projects take time – sometimes years – to move from concept to prototype to production.
Today top managers are looking at ever-shorter windows for achieving ROI and thus are demanding that IT managers provide rapid results. This skeptical attitude toward long-term IT investment is driving IT managers to focus on software and hardware technology that have the potential to deliver an immediate ROI, such as:
IT managers also are trying to achieve a quick departmental ROI by throwing out projects that aren’t on schedule or producing as promised and consolidating and simplifying infrastructure and applications to focus on projects – or even one project – that will have a measurable impact on the company’s business. This shift in software buying patterns has enormous implications for the software industry at large. Gartner sees four major trends emerging.
Consolidation. The current spate of mergers and acquisitions will continue. The result will be the creation of super-ecosystem vendors, such as Oracle, CA and Microsoft, that will provide a wide range of integrated applications.
New vendors. While the super-ecosystem vendors will cover most traditional application areas, there will be a mushrooming of small, nimble, nonconformist vendors that will provide new software and services that promise a rapid ROI.
Nonlinear acquisitions. Gartner believes there will be an increase in nonlinear acquisitions such as eBay’s purchase of the VOIP vendor, Skype. The consolidation will occur not only as a concentration within market segments of the IT industry, but also increasingly in consumer electronics firms.
Software as a service. Services will wrap around and define not just software, but all aspects of IT and telecommunications. Vendors will be judged on how they support a services concept and how they financially manage the impact on margins by delivering those services.
The implications for software sales efforts are threefold. First, reps should work with their IT contacts to revisit existing applications and to build or re-build the case for a rapid ROI. Second, software reps should work with IT to ensure that all proposals for new projects have a short ROI window, preferably not more than two quarters. Note that this might involve calculating an ROI based on the prototype implementation rather than the product system. Finally, software sales reps should begin emphasizing their firms’ participation in technologies, such as IM, that have the potential for a quick ROI. This will help position their firms for future sales.