The Purchase Process Will Get More ComplexThe Purchase Process Will Get More Complex
Line-of-business technology spending has been growing at a faster rate than IT spending for a number of years.
April 10, 2018
In just a few years, the cloud empowered the lines of business (LOBs) with business decision-making capability, forever changing the IT buying process that channel partners lived by. Well, there’s no letup in sight to SMB and midmarket technology purchase process complexity.
That’s according to channel-research firm Techaisle, which says, in fact, you should expect to see more complexity rather than less.
“Today, an average of 5.2 people are involved in decision-making units in midmarket firms and 2.1 people are involved in decision-making units in small businesses — creating complications,” Anurag Agrawal, CEO of Techaisle, tells us. Those “people” he refers to might also represent groups.
We’re in the midst of a transition from an IT industry shaped by small decision-making units (DMUs) comprised of IT professionals to an industry that must respond to the varied needs of business decision-makers (BDM) and IT decision-makers (ITDMs), Agrawal writes. The latest findings are based on Techaisle’s SMB and midmarket buyers journey and decision-making research.
DMUs used to be the IT department. Then, the DMU expanded to include the IT department and line-of-business (LOB) decision-makers. More recently, the DMU includes embedded IT staff.
“The embedded IT staff are IT people who have transitioned themselves to becoming more of a business manager,” Agrawal explains.
So, for example, an SMB is using a CRM solution with analytics, but the business users know that they’re not optimizing the solution – maybe they need more analytics, a dashboard, reports – so they hire an IT conversion person (embedded IT staff) who sits within the business organization and reports to the business unit, rather than IT.
“When enhancements need to be made to the business applications or solutions need to be deployed – such as the need to add marketing automation or more analytics or to create a new solution that needs to be deployed on public cloud – the go-to person is this embedded functional manager,” says Agrawal.
Some recent Techaisle findings:
Business management has seized a much greater role in technology acquisition, deployment and management than IT management — varying from 3.4 times in “needs identification” to two times in “solution evaluation and selection.”
Within small businesses, business management plays a more influential role than IT in five out of nine stages of technology solution adoption.
Within midmarket businesses, the role of business management is predominant in the first three stages of decision making (needs identification to solution options), equal to IT in the next two (solution evaluation and selection) and substantially higher than IT in the last two stages (determining solution effectiveness and optimization).
In nearly one-quarter of small businesses and slightly more than one-third of medium businesses, technology specialists (embedded IT staff) are employed within business units and are not reporting to IT management. Nearly half of midmarket firms have IT specialists who are the primary decision makers.
Determining the need for new cloud business applications is the prerogative of business management. The balance of authority within SMBs is nearly seven to one in favor of business management, except in the case of midmarket businesses, where it is nearly two to one.
Ad-hoc purchase and deployment of new cloud business applications is prevalent within 22 percent of midmarket businesses.
In 15 percent of SMBs, budget for new business applications is usually created at the time of ad hoc decisions for purchase to meet business needs.
What these recent findings suggest is that partners, as well as the vendors they do business with, need to rethink their marketing strategies as well as how to do business with these SMB and midmarket companies.
There’s no time like the present. Technology spending by LOB decision-makers will overtake technology spending by the IT department in 2019, according to IDC.
Businesses are forecast to spend $1.67 trillion on technology (hardware, software, and services) in 2018. Roughly half of that spending will come from the IT budget while the other half will come from the budgets of technology buyers outside of IT. The former includes IT-funded purchases as well as joint projects funded by IT. The latter includes business-funded purchases as well as joint projects paid for by line-of-business buyers and “shadow IT” projects funded by the LOB without IT involvement, IDC notes.
Furthermore, LOB technology spending has been growing at a faster rate than IT spending for a number of years. The compound annual growth rate (CAGR) for LOB spending between 2016 and 2021 is forecast to be approximately 7 percent, compared to 3.3 percent for IT spending.
“As business functions worldwide embrace third-platform technologies to accelerate time to market, enable new business models and increase revenue, leaders within these functions are looking to drive decision-making and manage the budget of these investments,” said Eileen Smith, program director, Customer Insights & Analysis. “On average, worldwide line-of-business functions will fund 50 percent of their total technology purchases in 2018, but with the ease of cloud software, business functions on average will fund an astounding 70 percent of application investments this year.”
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