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Tech companies combat commoditization by selling 'solutions'

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Steve Hurley is VP-learning and performance excellence at the Information Technology Services Marketing Association. Founded in 1994, ITSMA specializes in helping companies market and sell services and solutions. Hurley is responsible for all ITSMA's consulting and training activities, developing and managing programs with member companies. BtoB recently asked Hurley about trends in technology marketing.

BtoB: Is there a single, significant challenge for tech marketers in 2005?

Hurley: Here's one: differentiation. The industry has seen a commoditization of products. Now we're seeing, increasingly, the commoditization of services. It's harder and harder for our member companies to get the attention of their prospects.

BtoB: Why are so many companies now talking about "solutions" and positioning themselves as solutions providers?

Hurley: We've done significant research to understand buyer behavior, and we've documented a significant shift. [They] are much less tolerant than in the past for ineffective technology or risk, and they are much more demanding in terms of early outputs and [seeing] benefits of what they buy. That segues to solutions. The best way out of that is not to sell things or point-services, but sell value. Based on many, many [ITSMA] surveys-interviews with CXOs and CIOs, significant influencers of IT purchases-we call this "the new buyer reality."

BtoB: Should all companies be moving to a solutions orientation, or is it more appropriate for certain types of companies?

Hurley: The basic definition of "solutions" is being able to mobilize all the appropriate resources to address a client's problem and exhibit value. The quick answer is everyone should be solutions-driven. But with software companies, typically they look for gross margins of 50% to 80%. Services [margins] are 15% to 35%. So [software companies] are careful to balance their portfolio because, if they get too services heavy, they may be penalized by Wall Street. For hardware companies there's not as much pressure as on the software guys. Nevertheless, they take a risk of not satisfying the buyer by not going in a solutions direction.

BtoB: What are the major challenges companies face in marketing and selling solutions?

Hurley: Typically, we advise members to, No. 1, address business issues and No. 2, provide "proof points," references. So there's a huge growth in reference management. The way in, increasingly, is demonstrating knowledge and expertise around business issues rather than product capabilities.

BtoB: What are some of the common pitfalls in the move to solutions?

Hurley: Generically, we see a lot of companies out in front of their capability with their marketing messages around solutions. If you scratch the surface, what they are really trying to sell is a piece of hardware. Also, there's no consistency or alignment in what they mean by "solution." So in one business unit, perceptions differ. An HP best practice has been to establish a taxonomy driving across the organization, so whenever they say "deliver a solution," everyone has the same, basic understanding.

BtoB: What are some first steps?

Hurley: Alignment is the place to start. Educate everyone [in the company about] what's going on in the company, the industry, the trends. Sprint has done this (see Sprint case study, p. 35). Sprint said, "We are becoming commoditized and squeezed, and have to look at a different set of values to our customer base, make a clear shift to a solutions model." They literally did an RFP to bring in a major consulting house to make this transformation-from change management to sales force and messaging. This whole initiative was driven out of marketing.

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