TSIA Research Indicates a major shift in IT to a Services Landscape
IT companies are experiencing dramatic transition and transformation as sales departments are going through a great period of change. This change is all set within a broader context that is impacting the whole industry. The world we grew up in was one where the IT department in every organization was responsible for buying highly complex hardware and software solutions and then managing this complexity using a combination of internal and external services capabilities.
The role of the IT department now is to enable the business users who use the technology to achieve their desired business outcomes. This puts far less focus on the features and functions of a particular technology set, and far more attention on the ability to improve the efficiency and effectiveness of business processes that contribute to the achievement of the organization’s goals and objectives.
It is, without doubt, a challenging time to lead a technology sales organization. The average tenure of a vice president of sales is 19 months, which is down from 23 months over the last five years.
In our discussions with the senior sales leaders we spoke to, there were three consistent themes that came up in most of the interviews that we conducted:
- Revenue growth. Revenue growth was not living up to expectations. Whether or not that was new logo wins or growth from existing accounts, generally sales performance was not where it needed to be.
- Moving from CapEx to OpEx. The move to the as-a-service economy and the delivery of technology that had previously been provided on a CapEx basis to a subscription OpEx basis was having a massive impact on income statements. It was also changing the way the sales organization has to engage with customers.
- Outcome-based selling. All of the organizations we spoke with recognized that they need to have more outcome-based sales conversations with prospective customers, but they don’t know how. They also struggle with finding the best way to help their salespeople move away from feature/function-based solution selling to proactive outcome-based selling.
The role of the IT department now is to enable the business users who use the technology to achieve their desired business outcomes This puts far less focus on the features and functions of a particular technology set, and far more attention on the ability to improve the efficiency and effectiveness of business processes that contribute to the achievement of the organization’s goals and objectives.
The bottom line is that services are now more important than products for the technology industry.
Most companies that either manufacture or supply technology to customers view services as “attach” offers. You may have heard this question from your CEO or CFO before: “What is the attach rate for this service?” That question makes sense for product support offers or professional services.
But if all services were “attach” services, shouldn’t services revenues be shrinking in line with product revenue declines, not growing? This is because the market has made a major shift toward services-led solutions. These are managed and XaaS solutions—and there is a major overlap occurring between the two. Customers have voted with their wallets. They want to subscribe to their technology, and they want you, the supplier, to operate it.
TSIA calls this the Managed XaaS model, and it is disrupting traditional P&Ls of all technology companies. We have helped companies around the world develop new Managed Services and transition to reoccurring revenue models, subscriptions and everything as a service – ask us how!
Technology Services Industry Association
The Technology Services Industry Association (TSIA) is dedicated to helping technology and services organizations large and small grow and advance in the technology industry