How software companies are responding to increased uncertainty and competition

Poor sales forecasts in the technology arena have prompted some very noisy layoffs. While the collapse of SVB and Credit Suisse, and the Deutsche Bank instability, are making companies across all industries more cash-flow and profit conscious. This is resulting in increased uncertainty and competition for any software investment.

Software company CEOs remain
upbeat even with the increased
uncertainty and competition

Despite the scaremongering, SAP CEO Christian Klein said “… actually, people still want to invest money – but they really care about where to invest”. So, buyers will be more discerning about where they put their money. Gartner has further supported this notion, stating that “almost 70% of SMBs have plans to increase spend on tech, to drive operational efficiencies. Software purchases are still very much a priority; but, as business needs transform, demands are shifting fast, and knowing where to invest isn’t always clear.” Read more about this here

Increased uncertainty and competition in software sales

Traditional approaches to tackle increasing uncertainty and competition will still work…

  • Automating sales processes

While automation may free-up sales teams to spend more time with customers, will it make enough of a difference?

  • Keeping the message clear

Right now, it’s not only about securing the software investment, but also about aligning with a company’s goals and aspirations. Provide concrete examples for what might otherwise be abstract ideas!

  • Increasing competitive intelligence

Assess what competition is doing not only feature-wise but also with regards to sales positioning and messaging.

But industry leaders are applying new approaches to face competition

With similar or smaller sales teams, in a far more competitive landscape, software companies need to play smarter and faster to appeal to customers who want to make the best software investment choice.

With the whole industry realigning, traditional approaches may not be enough.

This raises the questions:

  • How should software industry players respond to uncertainty and increased competition?
  • And what does all this mean for SMB tech companies?

More and more, leading software organisations are applying value selling. As recession chances loom and competition to win business grows, vendors are adopting value management at a much higher rate than over the past two decades. Cautious buyers really want to see what they could gain by adopting a software solution.

Vendors are competing on value

Software companies are increasingly building trust and competing based on the business value created for their customers. This is a far cry from old-school total cost of ownership (TCO) approaches, where companies made their decisions by comparing like-for-like costs throughout solution lifecycles.

How the business value added is understood varies hugely across different companies. Some will have a large assortment of KPIs to choose from, and customers will pick the ones that resonate best with their business case. Others will only offer a few KPIs and may not use very detailed or relevant benchmarks. A few may have very basic KPIs with rough calculations behind them. There will always be companies who power large amounts of internal data through automated apps; while others are investing more to build a better story around the business value they will present. The strategy for less experienced teams may just be to present the KPIs — even if it’s twenty pages of them.

System integrators and smaller vendors are facing more complex sales landscapes

System integrators and IT services companies may struggle a bit more to implement value management. With several solutions in their portfolio and the perceived high complexity of aligning value creation across a product suite, it’s a common occurrence to be holding back.

And for smaller software manufacturers, they may be too lean to have enough time and resources to get started.

Customers are demanding to see value post-deployment

No matter the level of maturity and the complexity of building a value management practice, customers will be asking companies for the business value they are adding. Increased uncertainty and competition are forcing the latecomers to value management to get started. More experienced vendors will need to increase their maturity, moving away from rough calculations, or no calculations, to more complex, use-case-led or strategy-led story telling.

As well as wanting to know the value to assist purchasing decisions, customers are questioning the realised value post-deployment. This is requiring value tracking activities to justify customer retention, and remediations when things don’t go to plan. Value tracking will soon become a once or twice-yearly task to strengthen relationships and enable long-term upsell cross-sell. Luckily, it’s still foreign to many customers today, giving software vendors time to get ahead.

Increased uncertainty and competition driving value tracking

As value selling becomes mainstream, customers will be more demanding

Even customers who have never been exposed to value tracking, will be challenged by sales proposals that include value tracking activities and one or more of the following options within their service package:

  • Risk-reward schemes to minimise deviations.
  • Professional services remediation allowances.
  • Cash-back options
  • Additional products free of charge to make up for lower-than-expected realised value.

These measures will reassure customers that the IT solution they are purchasing is worth it and the vendor is confident that they can deliver, putting those companies as front runners for winning any RFP. The more customers get to know about value selling the more they will expect it!


Why value management now?

What’s becoming clearer is that, particularly in these times of increased uncertainty and competition, companies will be spending more money and effort to position their solution in the best possible light. Most vendors will be investing in people, tools, and processes, to develop their business value management proposition.

As highlighted by the CEOs of SAP and ServiceNow: Software investments are still very much happening. Companies still want to invest money. They are, however, becoming more cautious about where they invest their funds. Competition will be fierce, and vendors are likely to apply value selling to win. At the end of the day, value calculations may be arguable, but they’re great relationship builders and will definitely get you noticed. 

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