The Gantry Group Building Business Through Research

Gantry Group Newsletter Issue No. 12, May 2002

Many of these investments were made without financial justification showing how the value created exceeded the total cost of ownership. In many cases not enough value was created to offset - or even rationalize -- the expenditure. CRM implementations bear the burden as the poster child for buyer's remorse. Gartner Group estimates that over half of $22 billion invested in CRM in 2001, failed. That's a lot of wasted IT time, effort, and resources, especially priced at several million dollars per project plus annual operating costs in the several hundreds of thousands. With "results" like these, no wonder buyers felt let down, abandoned, and in some cases mislead by technology vendors. 

To make matters worse, when the economy soured, cash flow issues became paramount - resulting in little to no IT investment as budgets were pared down aggressively. Even those corporate buyers who hadn't been jaded could no longer afford IT improvements. Those companies who were disappointed buyers had more reason to regret previous purchases with uncertain payback. 

But technology providers have a new chance to get back in the game - if they heed current market temperament. The process is simple and not new: Give prospects a good reason to buy your product.  A good reason is one that quantifies: 1) how the offering will positively impact a set of business metrics that are essential to prospects in judging the performance of their own companies; and,  2) how long after purchasing your offering will prospects recoup their investment. The High Tech sector is getting the message. Gantry Group recently conducted an online study to benchmark the state of the Massachusetts High Tech Economy. Click here to download Gantry Group Report: State of the Economy: MA High Tech Report.

Since Massachusetts is a leading U.S. High Tech center, the study is particularly important as one of the bellwethers for High Tech throughout the country. The study reached over 250 Massachusetts Service and Technology Providers at the executive level, to understand the scope of economic impacts on businesses, and to identify the methods being deployed to cope with the changing business environment in this sector.

Nearly 60% of respondents indicated that selling products/services based on ROI is the most important step they are taking to combat the effects of the economic downturn on their business. A majority of companies are also looking to re-evaluate their customers' needs, seeking to expand sales channels, and planning to adjust their marketing strategy to focus on narrower vertical and geographic market segments with a clearer quantified value proposition. 

The emphasis on ROI is a phenomenon born of necessity. Buyers must cost justify their budgetary outlays based on expected return on investment. Sales cycles have decidedly lengthened and many companies in the study reported increased difficulty closing deals, requiring them to respond to prospective customers with quantifiable benefits, in the hope that proof of ROI will loosen the purse strings. Prospects have adopted a "Prove it!" posture when justifying any purchasing transaction. Technology providers are betting, that by putting their strategic marketing messages into the context of how their technology can positively impact the very business metrics their prospects use to judge the performance of their own companies, frozen budgets can be thawed. Of the business metrics being implemented by buyers to evaluate purchases, ROI and payback time figure prominently.

A recent survey conducted by the Standish Group further illustrates this ROI trend, showing that over half (52%) of the enterprise respondent expect a payback for their technology investment between 1 and 2 years.
	A study of 200 IT and Business Professionals conducted by InformationWeek Research shows that a formal ROI measurement process for technology investments is becoming institutionalized as a best practice.
InformationWeek's survey of IT and Business Professionals suggests that ROI, followed by payback analysis are key profitability metrics currently in use.

With lots of negativity floating around the marketplace, making sales has never been more challenging. 

Enterprise infrastructure investments are, at best, a disappointment for most companies - many of which made expensive technology purchases based on unproven vendor promises and/or initiative plans that were either ill conceived or not fully flushed out.

Market analysts are fanning the flames with staggeringly gloomy projections. For example, Gartner Group forecasts that at least 55% of all CRM projects will fail during the next five years. The Standish Group reports that almost 75% of all software development in the Internet era suffers from one or more of the following: 

• Total failure

• Cost overruns

• Schedule overruns

• Product rollout with reduced feature/functionality

And, for those projects valued over $10M, the Standish Group expects the failure statistic is closer to 100%.

The combination of poor first-hand experience and omens of failure from the media and analysts, have made companies skitterish and tentative about new technology purchases. Reduced budgets, further exacerbating the situation, must be spent wisely and carefully, with clear predictability of outcome and success. Unless a technology firm can address this new buyer profile head-on, the sales team will experience abnormally lengthy sales cycles and low close rates. The Gantry Group study speaks directly to these market trends.

Technology Providers	Service Providers

For both product and service providers alike, the top challenges high tech companies face are changing priorities due to continually increasing budget constraints and longer sales cycles - both of which combine to create greater difficult in closing sales.

The take away message is that the same business needs exist, now highly intensified, both for revenue generation and operating efficiency, but new hurdles must be cleared to effect a sale. Demonstrated ROI has become the mantra, and buyer mistrust drives the bar even higher. "Some companies considering investment" translates to "many companies still riding it out" so customer targeting and marketing messages must be precisely on point - particularly with regard to expected ROI benefits.

About Gantry Group: The Gantry Group, founded in 1997 and headquartered in Concord MA, is a strategic advisory and custom marketing intelligence firm.

The Gantry Group creates business success through research, identifying and applying critical relevant data that leads to strong, actionable strategies. The Gantry Group delivers to corporate marketers the tools and predictive measurement capabilities that allow them to make informed decisions as they plan ahead and prepare for the market to come.

Gantry Group uses primary market research as its "toolbox" for helping companies cost-effectively accelerate the successful market adoption of their products and services - online and offline. Through Gantry Group's market analysis, marketing testing, and ROI/TCO benchmarking service suites, Gantry Group has helped over 160 client companies drive sales, acquire new customers, increase brand equity, improve customer satisfaction and increase customer lifetime value by better understanding and meeting customers' needs. Gantry Group creates customized market research studies using qualitative and quantitative techniques, including online and traditional surveys, focus groups, and one-on-one interviews. Gantry Group benchmarks a client company's opportunity, competitive landscape and ROI impact of the client's offering on its target market to distill a quantified value proposition that is crisply differentiated within a receptive market. The executive team of seasoned business executives combines deep operations experience with proven strategic planning, research methodology and market intelligence to grapple with the most challenging business goals and problems. Gantry Group works with CEOs and senior marketing and sales executives in technology, financial services, health care and retail sectors. 

The Gantry Group has been helping companies design winning strategic marketing packages through the application of its proven ROI profiling methodology. Contact us today to see how we can assist your firm to give your target market a good reason to buy your offering!

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