Zero One: How Companies Buy Tech
As the cliché goes, things were so much simpler in the good ole’ days.
When selling technology and services, you mostly needed to convince the CIO in the corner cubicle. It wasn’t easy, because the CIO didn’t suffer fools nor fall for vaporware. There were RFPs, RFQs, SLAs, proof-of-concepts and a myriad of other technical hoops to jump through. Sales cycles stretched for months.
But it was a process that made sense – dependable and linear.
If a CIO caught a tech vendor or channel partner doing an end-run around the process, such as selling to the line-of-business executive (LOB) directly and implementing “shadow” tech, then it was the end of the road for the provider. In the late 2000s, CIOs told me they would rip out shadow tech and blackball the provider.
For many CIOs, this model still dominates. CIOs have full control of about half of U.S. new project spending, according to a recent Forrester study. They identify needs and potential solutions, choose the vendor and service provider, and implement and optimize the solution.
Then something changed. Tech-savvy startups began wielding social, mobile, analytics and cloud, or SMAC, to digitally disrupt giant companies practically overnight. Soon, companies of all sizes and industries realized they weren’t immune.
Fearing their businesses at risk, LOBs seized the reins of digital business tech buying. They did this partly because the CIO’s vetting process took too long, partly because the CIO didn’t really understand what the business needed. The LOB needed the latest business tech to ward off disruption or become disrupters themselves.
This led to a cascading shakeup of the tech buying process. Vendors and channel partners responded by wooing the LOB directly. The CIO’s tune changed, too, as they pleaded with tech startups to involve them in the sales process. In the age of digital business, the LOB has emerged as the new tech shot-caller, or at least major influencer.
According to Forrester, there are now five scenarios for new tech decisions today:
- LOB controls the entire process, from identifying the need to choosing the vendor to optimizing the solution. Still in its infancy but growing fast, the business-only scenario will reach 10 percent of all new project spending by 2018, up from 6 percent in 2012. Hot spot: CMO buying marketing automation.
- LOB starts the process, then involves the CIO. The business-initiated scenario will reach 17 percent of all new project spending by 2018. Hot spot: Head of HR buying talent management.
- LOB and CIO are partners at every stage of the process. The partnership scenario will reach 31 percent of all new project spending by 2018. Hot spot: CFO replacing core systems.
- CIO starts the process, then involves the business. This scenario will shrink to 25 percent of all new project spending by 2018. Hot spot: Head of supply chain buying supply chain management.
- CIO controls the entire process, from identifying the need to choosing the vendor to optimizing the solution. While this scenario is still common, it will shrink to 17 percent of all new project spending by 2018. Hot spot: CIO buying security.
Based in Silicon Valley, Tom Kaneshige writes the Zero One blog covering digital transformation, AI, marketing tech and the Internet of Things for line-of-business executives. He is eager to hear how digital transformation is impacting your business. You can reach him at email@example.com.