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IBM's New Way of Selling IT

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Posted January 14, 2011 By Wayne Kernochan     Feedback

IBM has gone from selling TCO to selling "outcomes." What does the change in IT sales tactics mean for enterprise applications customers?

Recently, the real news for IT, business intelligence and enterprise applications buyers has often been vendors' new selling proposition, not just the solutions offered. Examples might include new cloud pricing models, new ways of combining hosted and on-premises implementations, and new methods of fast deployment by auto-discovery of the customer's data. To these, IBM (NYSE: IBM) has just added what I call the "outcome-led sell."

As I understand it, IBM aims to change its approach from meeting customers' demands for functionality to providing solutions that achieve a desired outcome. In other words, the metric for success is less TCO or speeds and feeds, and more helping clients realize specific goals such as 5 percent reductions in operating margin or 8 percent increases in revenues year-over-year. IBM says that it perceives the outcome-driven sell as eventually their main engagement strategy with customers and prospects — whatever the final sale, IBM leads with promising an outcome.


What The Outcome-Driven Sell Means to IT Vendors

This is not necessarily a radical departure from traditional vendor approaches — after all, it is pretty similar to selling services with an SLA (service-level agreement) — but it does have a couple of interesting implications. In the first place, "outcome" is more future-oriented than "functionality," and therefore more potentially risky for any vendor. It takes an uncommon degree of confidence to commit to a customer that a particular mix of hardware, software and services will indeed provide a specific improvement in book-to-bill speed a year from now. In the case of IBM, part of that confidence is certainly justified: IBM has a highly comprehensive set of piece parts, its own and its partners, to fit together into highly customized solutions that cover an extraordinary range of customer situations. Part of the confidence, however, is yet to be proven: Whether thousands of engagements will yield enough "best practices" data to give IBM a competitive advantage by economies of scale.

In the second place, outcomes and business metrics in general are necessarily fuzzier than IT requests for proposals (RFPs). Yes, this approach lets a vendor such as IBM sell "higher up the food chain" and therefore increase revenues per project. However, there is often less direct control over the success of the project as it begins to involve higher-ups at the customer, and the risk of potential misunderstandings between the parties often grows as well. Again, even IBM must have extremely high confidence in its ability to mesh IT and business consulting in order to take this approach.

Already, IBM has noted some interesting tactics to go with this strategy. IBM is talking about a sales process that may include multiple companies in an industry — apparently, the ability to sell the same industry-specific platform or appliance to multiple CTOs or CFOs at once, not as part of "keeping up with the Joneses," but as allowing those companies to focus on their core competencies and "cloudify" the rest of their tasks. Moreover, IBM is "doubling down" on its customization of solutions, aiming to tailor each solution to a particular industry and/or company, and then collect ongoing data that will allow "best practices" patterns to emerge from the bottom up.

Wayne Kernochan of Infostructure Associates has been an IT industry analyst focused on infrastructure software for more than 20 years.



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