Lessons learnt

The purse strings may be a little looser than 12 months ago but the economic downturn mindset will continue to inform a lot of sales strategies. TREVOR CLARKE reports.

“Batten down the hatches, put the kids and pets out of harm’s way, cork the wine and make sure you’ve got the resources to get through the bitter economic winter about to freeze the life out of businesses across the country. Actually, you might need that wine…”

Twelve months ago, that kind of sentiment was not uncommon. We didn’t have a recession technically, but we sure as hell had a downturn. The first quarter of the 2009 calendar year in particular, took a hefty bite out of many a budget and revenue stream.

In short, the devastating financial mess that poisoned much of the developed world finally slipped into Australia’s economic blood stream.

“First was the availability of funding – a lot of businesses got a lot tighter. I would say they were a lot more frugal in the way they would review an opportunity and made decisions about spending their dollar. Obviously, assets got sweated a lot more. That was the first thing,” Fujitsu group executive sales director, Mike Foster, said.

“The second was a look at the return on investment. The expected return got a lot shorter. A couple of years ago, people could turn around and justify something over a three- or four-year period. But all of a sudden, I had one particular client say to me in March last year – when things were the tightest – that if it doesn’t justify itself within nine months, we just can’t do it. People actually turned off projects even though they might have been already well invested.”

Thankfully, and as we all now know, the domestic economy was made of a tougher constitution and supported by other stronger economies – like China – Australia stepped out of the gloom to become one of the best performing nations in the world. We did so well that many now question whether we really faced a crisis at all. We were they now say, led on by many a pundit and talking our way into misfortune.

The point is moot now but the effects continue to be felt. Budgets have increased and the purse strings are loosening, but the mindset remains one focused on a hard return on investment, sweating assets to the full and risk management, particularly when it comes to IT projects.

Positively productive

Tough? Of course, but when isn’t business in the IT world a challenge? Some in fact see this kind of scenario as an opportunity to zoom in on the business efficiencies that IT solutions can generate when making that sales pitch. Telstra in the last couple of years, for example, has made a big deal out of what it calls the Telstra Productivity Indicator (TPI) – an annual report into the productivity of large organisations through Information Communication Technology (ICT) investments.

As far as marketing and sales tools go, this has to be one of the most elaborate ever created in Australia. By commissioning Sweeney Research to survey 300 government and large enterprise leaders across Australia, the project has the aim of investigating "the strong linkage between investment in ICT and improving productivity".

The survey was conducted through phone interviews with organisation leaders that had over 200 staff. The main findings were that a "productivity gap" had widened in Australian organisations with many prioritising productivity but being unable to "accurately measure and manage productivity improvements".

In this year's survey, only 42 per cent of organisations "can articulate their specific productivity measures and targets" compared to 49 per cent last year. In other words, our ability to manage productivity is slipping.

In the forward to the report, Telstra CEO, David Thodey, also noted "the report finds that while most organisations place a high priority on investment in ICT to drive productivity, only about a third believe that their ICT deployment is greatly aligned with the needs of worker groups".

Additionally, the survey found the top two priorities for organisations were improving customer service (78 per cent) and productivity (76 per cent).

There are criticisms the TPI doesn't contribute to our understanding of how to improve productivity through ICT investments, because it looks at components of productive work in a workplace (such as efficiency and working smarter, good service and satisfaction, increased profits, lowering costs, meeting targets and improving market share) instead of actually measuring productivity itself as expressed by the result of output divided by input. But it is supported by other research.

A 2001 project run by the Organisation for Economic Development (OECD), called the Growth Project, found productivity in the ICT sector can improve an economy's overall productivity.

However, measurement of the linkage between ICT and productivity is a challenge for economists and statisticians. The OECD noted that on the whole, ICT does have a positive impact on organisational performance and productivity, yet "uptake and impact of ICT differ across firms, varying according to size of firm, age of the firm and activity".

In its submission to the Senate committee on the National Broadband Network, the Australian Productivity Commission noted an "important contributor to Australia’s improved productivity performance in the 1990s was a competitively driven acceleration in ICT use across many industries including in the wholesale trade, finance and insurance sectors".

The main point is, however, that Telstra undertakes an expensive and extensive effort every year creating a report to help convince clients invest in ICT to help improve productivity. It speaks volumes to the difficulty in articulating the benefits of IT (or ICT) solutions to a business when you have one of the country’s largest corporations going to this extent to validate its sales message.

Yet, it also indicates the approach has merit and presents an example of the opportunity for other companies to help clients better understand the business benefits to be had from prudent IT projects.

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Smart sales

Those that can use this kind of research as leverage in sales discussions to help organisations get better business outcomes out of IT will, in the long term, arguably be more successful in this rebounding economy.

“Our customers consistently tell us that the ability to gather insights into their business including profitability, customer understanding and their suppliers makes the biggest difference to their business,” Microsoft director of information worker, Oscar Trimboli, said. “Business intelligence helps Microsoft customers grow revenues profitability, understand how to expand into an adjacent market or expand geographically.” Trimboli agreed the Australian economy was experiencing strong employment growth, especially in the services sector. He said the software giant’s customers are tending to have conversations about improving efficiency rather than cost cutting.

“As the economy strengthens, we expect this trend to continue,” he said. “Making the right decisions about the right investments in order to capture growth and efficiency means our customers want to make more use of the software they have purchased.

“Technology, which helps staff be more productive when they are on the road, or increases their reach and the ability to share information with their customers and suppliers through extranet-enabled technology, further maximises their efficiencies.”

Fujitsu’s Foster takes a similar and logical line – get to know your customer and how you can help them, not just what you can sell to them.

“I generally thinking the best way for anyone to work with a client is to understand their true business problem and the pressures they are under, whether that is growth, cost management or efficiencies you need to understand it,” he said.

Doubly diligent

While most of this message is familiar – taking time to understand your customer and trying to open their eyes to the potential business benefits of IT solutions is far from ground breaking advice after all – there are some differences in the prevailing economic climate from the past that should be factored into sales strategies.

“One of the big things to come up is your pre-sales costs,” Foster noted. “From our perspective, we would have to qualify them so much harder internally. We undergo even more rigorous reviews. In the old days, you would go off chasing rainbows because there might have been business in it. Then all of a sudden you are going, ‘is this core to us and can we deliver on it? Can we make a margin?’ So there are two things: One is understanding your client; the other is making sure it was something we could do and deliver profitably.”

It’s fairly certain many organisations will retain the lean and cautious business practices they picked up during the height of the economic downturn. One of the lessons learnt is don’t stray too far from your core.

“Even though there is more and we are looking at where there are new business opportunities, it doesn’t mean we go running off and doing something that is completely at odds with what we have been doing in the past year or two,” Foster said.

Comprehensive coverage

But when you do decide to chase that pot of gold, who should you be talking to? The IT manager? The CIO? The CFO? The CEO? The C-whatever-letter-you-like?

Ever since the hatches were battened down, IT departments have become more and more accountable to senior management, in particular the CFO, for their expenses. As the beans were counted and recounted, final approval for any kind of spend was more often than not left to those holding the purse strings the tightest.

As a result, many argued it was the CFO that should be hit up for a meeting to discuss why any one particular solution was in the organisation’s best interests. Yet people make decisions in different ways and if you don’t spread your coverage, the resulting message of how your IT solution can help the business will be diluted.

In other words, you have to cover the financial side with the CFO, the architecture and infrastructure with IT or the CIO, and then negotiate with other key stakeholders, which could be a CEO or a board, committee or others.

“We’ve looked at where we haven’t won business and in the majority of cases we have been single point sensitive; the decision maker in a large organisation usually isn’t one individual,” Foster said.

All in all, there is little dispute the ongoing influence of the economic downturn on business leaders’ thinking will continue to be felt. It may mean sales staff have to articulate the IT proposition in much clearer and compelling business language to more people, but if it’s aligned to achieving productivity, boosting optimisation and encouraging risk management the chances of success will be that much higher. And as time goes by the hatches will start to open and the wine raised in celebration more frequently.