When it comes to selling an IT project, many IT vendors and their partners have come to appreciate that the part of the budget controlled by the internal IT organization only represents a few percentage points of the total operational budget inside most organizations.
In fact, Geoffrey Moore, author of “Crossing the Chasm,” the seminal book on how to build an IT company, says there are basically three classes of IT projects that solution providers need to be able to distinguish if they're going to succeed in an age where multiple people in an organization have control over IT-related spending.
Tap into greater budget potential
Speaking at the Mendix World 2016 conference this week, Moore says IT leaders tend to have control only over products and technologies that specifically optimize IT functions, such as integrating one application with another. Line of business leaders exercise more control over the overall budget of a company than IT leaders do, and CEOs of organizations tend to drive digital business initiatives because they're usually so disruptive to the organization. Moore says without the direct intervention of the CEO most of those digital business initiatives would eventually die because of the threat they pose to the organization's existing business models.
The trouble with IT budgets, adds Moore, is that most of the money in the IT budget is highly earmarked. Unless solution providers can convince IT leader to reallocate that budget by making one IT process or another more efficient, there’s very little opportunity to tap into IT budget dollars that have been specifically set aside for new projects.
More often than not, Moore says, the bigger opportunity stems from line of business executives willing to fund new projects that optimize an existing business process or create a new stream of revenue. The challenge, Moore explains, is recognizing when an initiative is so disruptive to that business that it requires the CEO to spearhead it.
Become a business consultant
In either case if solution providers want to tap into more than the IT budget, they increasingly need to function as business consultants. Selling solutions outside of the IT department requires a deep understanding of how to optimize a business process.
As a provider of an application development platform for rapidly building those applications, Mendix obviously has a vested interest in helping its partners tap into budgets that exist outside of the direct control of the internal IT organization. That doesn’t mean that solution providers should go around the internal IT department. More often than not, the internal IT department is looking to create projects to tap into those budgets. They just don’t always have the business insights to understand where those applications could have the most impact. Any solution provider that helps them gain those insights instantly becomes their ally.
Selling beyond the internal IT department has now become a matter of survival for most IT service providers. Not only is the internal IT budget opportunity comparatively limited, the margins on products and services aimed at IT organizations is increasingly constrained. In contrast, IT projects aimed at optimizing a business process are not only more lucrative, they almost invariably lead to the discovery of even more opportunities as the IT service provider becomes more embedded inside that organization.