Winston Churchill said that “to improve is to change.” This is advice today’s technology vendors should take to heart. Corporations are now witnessing an internal transformation in the information technology world, where IT-related decisions in organizations once handled by its traditional center, the Chief Information Officer, has moved to the Chief Marketing Officer and Chief Financial Officer.
The internal shift in technological responsibility from the Information Officer to the Chief Marketing Officer and Chief Financial Officer was signaled recently by the Gartner Group, which found that CFOs alone authorized a whopping 26% of all IT spending decisions at their organizations, as opposed to just five percent by CIOs. And a related Gartner study predicted that by 2017, CMOs will outspend CIOs on information technology.
These watershed changes pose both opportunities and threats to those who sell enterprise technology. At a minimum, it means that they must re-evaluate the very premises of their customer interactions in order to stay relevant to the new sources of decision-making. As a result, we must ask why the shift, and what are the implications for Enterprise IT in this brave, new world.
Why the shift?
The internal shift in control over IT responsibility is occurring for a couple of reasons.
One has to do with the growing importance of e-commerce in any company’s financial outlook, and the increasing role of social and mobile media in that equation. Today, the big money in IT spending increasingly lies in tools to mine social media for product ideas, in mobile applications to enhance products, and in creating social interactions with customers to build brand loyalty. CMOs have justly claimed all these responsibilities as strategic marketing/communications imperatives; they are driving the technology decisions to make these tasks possible, often leaving the CIO in the back seat.
Second, an expense-conscious, global marketplace has rendered IT even more of a cost center, inviting closer financial oversight. Enter the CFO. As American Banker stated in July 2011, “with limited funds available for investment ... CFOs are inserting themselves into the [procurement] process to make sure each IT project provides value.” Not surprisingly in this climate of tight ROI accountability, Gartner noted that at roughly half of mid-sized to big corporations, CIOs report directly to the CFO. It’s a trend that will increase over time.
The implications for technology suppliers
For technology manufacturers and consultants, this shift is not unlike the challenge of adapting to a foreign culture, with the need to master the values, preconceptions and language. How should suppliers move forward in this crucial task?
The concerns and challenges of a senior finance and marketing executive are usually of a different and higher level than those of an IT department head, and it is essential to understand and address those perspectives.
That means less “bits and bytes” and more business “big picture.” It means understanding the organization’s business model, its competitive opportunities and threats, and fitting technical solutions into that larger context.
Recent studies suggest that this is not happening — meaning that those who can address technology from a strategic business perspective have a true opportunity for differentiation and success. CFOs, for example, generally misperceive IT as a commodity — even while they are desperate for it to serve that role. Seventy percent, according to Gartner, do not think technology is providing business benefits. Only a little more than one-third see it as a strategic driver of business performance, and only eight percent view IT as a key contributor to the enterprise’s competitive position.
Another challenge facing suppliers in this new environment is shifting from features and functions to financial metrics. Both CFOs and CMOs speak the language of Return on Investment. They want to know not only how the performance of your solution will be measured over the lifespan of this project, but what assumptions you are using to make that evaluation.
It is important to note that quantification is as important in the marketing C-suite as the finance department; one of the biggest pressures facing CMOs today is to demonstrate and deliver tangible value on IT. They will embrace partners in this endeavor.
The strategic grounding at the highest levels of the finance and marketing departments often means a smarter customer. Harvard Business Review recently found that nearly 60% of a typical purchasing decision — researching solutions, ranking options, setting requirements, benchmarking pricing — is now completed before the organization even has a conversation with a supplier. This means that sales people can no longer be strictly product pitchmen, but must don the mantle of consultants who can help clients navigate the remaining 40% of the RFP process.
We are not suggesting that IT sales representatives must magically morph into IT consultants. But providers must be able to engage a CMO or CFO at the place where consultants operate: strategy. And that means being armed with some degree of insight into a customer’s larger business challenges. The strict, historical distinction is blurring between vendors/contractors and consultants. Put differently, the closer a provider can come to thinking and sounding like a consultant, the better he or she will likely connect with the new decision-maker.
Finally, despite their new responsibilities overseeing technology decision-making, few CMOs and CFOs are tech experts. They need guidance, and here suppliers can fill an important role. Furthermore, the CIO’s role in this regard should not be ignored or discounted. Although at most organizations the CMO/CFO relationship with the CIO is less than ideal, the reality is that each needs the other to make the IT process work. Technology suppliers can not only lend their expertise themselves, but serve a role building bridges between these departments.
Taking a new step is often what people fear most. But for those who can address the needs of a newly empowered CMO and CFO through marketing and sales strategies, a world of opportunity awaits.
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Article by Konajilo Luseni Barrasso, Group Vice President of Makovsky’s Technology Practice.