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Market Transitions 2008

Michael O’Neil

CEO and CCO, IT in Canada

www.itincanada.ca

The IT/Business Landscape, and its Impact on Your Business Success

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Agenda

• Technology

• Landscape

• Opportunity

• IT/business landscape• IT business landscape• Business landscape

• What distinguishes “free is fine” from “it’s okay to pay”?

• What the non-technical senior manager needs to see• What this means for CRM/”xRM”

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How the Market is Changing

“The most powerful force in the universe is compound interest”

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Demographic Milestones

6010 20 30 40 50

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Incoming and Outgoing CEOs: Fortune 500 Organizations, 2005

6010 20 30 40 50

Average AgeAge at Time of PC Introduction

25% of incoming

CEOs

8% of outgoing

CEOs

Total Change: 12% of organizations

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Other Management Data Points: Average Age at Time of PC Introduction

10

Spe

ncer

Stu

art

CE

O s

urve

y 6020 30 40 50U

K s

urve

y of

chi

ef e

xecs

Spe

ncer

Stu

art

New

CE

OF

orbe

s C

-leve

l exe

c su

rvey

TD

Mad

ison

VP

pla

cem

ents

TD

Mad

ison

dire

ctor

s/m

grs

Exe

c M

BA

stu

dent

s

New executives are much more likely to be “tech savvy”

than their predecessors

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What Does This Mean to You? (1)

• More non-IT executive involvement in IT purchasing likely results in:– Larger decision making groups

– Longer sales cycles

– More need to describe technology benefits in non-technical terms

– More emphasis on products focused on addressing identifiable business issues – less on infrastructure for infrastructure’s sake

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The Way of All Solutions(or, what happens when you go looking for a silver bullet)

Alignment with Business Requirements

Cap

abili

ty o

f U

nder

lyin

g T

echn

olog

y

Field of Dreams

Madly off in all directions

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How the IT Business Landscape is Changing

“Give me a place to stand and I will move the earth”

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Leverage Through Partnerships

Product VendorSolution

ImplementationPartner

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Leverage Through Partnerships

Vendor

Resale partners

Implementation partners

ISV partners

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Leverage Through Partnerships

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Another Source of Leverage

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Another Source of Leverage

• Cloud-delivered services are changing the definition of leverage for IT suppliers of all sizes and business models– Remote provision of applications, remote user support, remote

infrastructure management, remote processing and data storage…

• No longer a “specialist” offering – important to all suppliers

• Organizations that do not currentlyhave a cloud offering will need tobuild one – or more likely, partner to acquire one

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Recent SP Survey Results

0% 10% 20% 30% 40% 50%

Resell hostingand/or

communicationsservices

Provide first-party hosting

Services-centric (27)

VARs (23)

All SPs (68)

Source: Amazon Consulting/Ziff Davis “Who Owns the Customer?” survey, May 2008

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What Does This Mean to You? (2)

• More non-IT executive involvement in IT purchasing• More breadth of opportunity for firms who…

– Are effective at establishing and managing partnerships

– Are effective in using the web to establish leverage for their businesses

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The Broader Economic Environment

"I don't think we're headed into a recession, but there is no question we are in a slowdown."

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Key Industry Markets: 2007 and 2008

Source: IT in Canada study of SPs; n=56

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Sharply decreased spending

Eroding spending, following a downward trend

Stable spending, mostly focused on existingproducts/projects

Selective new spending on high-priority businessapplications projects

Selective new spending on high-priority infrastructureprojects

Strong spending increases

2007 2008

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Another View of 2008

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Substantial decline Slight decline Slight growth Substantial growth

Most Important Customer Size Segment

Source: IT in Canada study of SPs; n=56

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Another View of 2008

0%5%

10%15%20%25%30%35%40%45%

Customers arepulling back

from thissolution

There ismaintenancespending inthis solution,

but no/few newopportunities

Currentcustomers areexpanding, butthere are few

newopportunities

Newopportunities

are notplentiful, but wehave a steady

stream ofprospects

We are seeingstrong growthin this area

Most Important Solution Area

Source: IT in Canada study of SPs; n=56

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What Does This Mean to You? (3)

• More non-IT executive involvement in IT purchasing• More breadth of opportunity for firms who…

– Are effective at establishing and managing partnerships

– Are effective in using the web to establish leverage for their businesses

• The current market environment is difficult…– Key industries, geographies, and size-defined target segments are more

likely to show contraction than expansion in 2008. However…

• Solution-defined segments show continued opportunity for growth– Consistent with increased involvement of non-IT executive buyers

– But – what about the “madly off in all directions” issue?

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The Current Technology Environment

• The architectural inconsistency that underlies the “madly off in all directions” syndrome is becoming less likely – because there is less scope for architectural inconsistency in the current technology environment

• From a software perspective, 4-5 ecosystems dominate the market

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What Separates Free from Okay to Pay?

• The sense that the data is privileged and important– Helps define some application areas as “likely to gravitate to freeware”

and others as “likely to be in the paid application domain”

• The value of the business process attached to the application– Defining “payback”: the benefit of application vs. cost

• More revenue• Increased employee productivity

– In a services environment, this latter factor is especially important – and services environments account for roughly 70% of Canadian GDP

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What Does the Non-Technical Executive Need to See?• Solutions focused on tangible, immediate business

issues– References that demonstrate the ability to solve my problem, not a

problem

• Sales/marketing language that provides clear links to business objectives– Benefits defined in terms of business problems rather than technological

issues

• Evolutionary capabilities as a primary function of the ongoing relationship– Calls are triggered by business events, not technological domains– Customer is more interested in “your ability to solve this problem” than

how you solve it• A partner-driven approach is far better than no approach!

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What Does this Mean for CRM/”xRM”?

• The sales function – and its associated cost – is an enormous issue in services-oriented environments– Customer value is seen in terms of ongoing interaction, not individual

transactions– Differentiation and positioning is often based as much on relationship as

offering attributes– “Corporate memory” and a thorough understanding of the “whole

customer” are crucial to successful interactions/relationships

• Front office functions have historically been poorly automated

• Therefore…– There is relatively more scope for new technology approaches– There is a real opportunity to “connect the dots” of business benefit

addressing high-priority management issues for the non-IT executive buyer

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What Does This Mean to You? (4)

• More non-IT executive involvement in IT purchasing• More breadth of opportunity for firms who…

– Are effective at establishing and managing partnerships

– Are effective in using the web to establish leverage for their businesses

• Solution-defined segments show continued opportunity for growth

• Applications that address high-priority management objectives – increasing revenue, and/or increasing the benefit derived from high-cost resources – are most likely to resonate with non-IT executives

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Thank You!

Michael O’Neil

michael.oneil@itincanada.ca