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04/12/03
Connecting with Customers is Biggest Challenge for UK Software and Services firms, says Intellect
Intellect's 2003 Commercial Benchmarking Study 'Tough Times Forcing Healthy Changes', has found that it is a failure to focus on customer needs, rather than an inability to respond to economic challenges, that is the biggest factor inhibiting the success of the UK's software and services (SITS) sector.
According to the study, conducted in association with Contact to ContRact and Harvey Nash, there has been a continued toughening of the market and UK SITS firms still have to work extremely hard in order to win business. In the past year the amount of business gained from new customers has dropped by 13% to a four year low of 22%. Fruitless sales enquiries have risen by 21% and the average manpower investment required by firms to secure business has increased from 48 days to 117 man days per £million.
Surprisingly the toughening market has not been matched by improved sales, delivery and marketing performance. Whilst 84% of respondents believe that strategic marketing is either imperative or very important to the future of their businesses, SITS spending on marketing has in fact more than halved from 6.5% of revenue to 3% in the past year, with only 5% of overall marketing budgets being spent on market research. In addition, only 7% of companies incorporate a customer satisfaction metric within sales goals.
"Tough market conditions emphasise the need to understand customers and to differentiate products and services," said Ian Henley, Chairman of Contact to ContRact.
Henley continued, "The industry must begin to recognise the importance of strategic marketing and the need to ensure high customer satisfaction levels. The bulk of discretionary spend is still used for "look at me" tactical marketing rather than market research designed to understand the needs of the end user. Because of this the industry is in danger of failing to connect properly with its existing customer base, and runs the risk of missing new business opportunities."
It is undeniable that professional standards in the IT industry lag behind more mature industries such as construction or engineering, where formal accreditation is taken for granted and complex projects are managed using well established methodologies. More positively, the survey did highlight some improvements within the SITS sector. Training levels, particularly in medium sizes businesses, have dramatically increased since the 2002 survey. Commenting on this Paul Smith, Director of Harvey Nash said, "the industry has seen a major change in management and sales recruitment strategy from appointing the best "order takers" to isolating people who really know how to value sell. Training has also come back into fashion as market conditions have exposed weaknesses in real management and sales skills. Tough markets have forced UK SITS companies to focus on building and retaining long term client relationships."
In addition, guarantee periods have made a welcome return and the over-sized on target earnings (OTE), designed to attract top sales professionals, have reduced to saner levels. Intellect considers these findings to be evidence that the tough times are forcing a healthy change, and a real sign that the SITS industry is gradually maturing.
Charles Ward, Marketing and Services Director of Intellect agrees. "We have heard a lot about the IT industry maturing but it really is only just starting to grow up. Recessions are good for us. They are forcing overdue management focus on market propositions, customer ROI, effective delivery and customer satisfaction management. It is reassuring too that UK SITS firms are now recognising the need to improve their own businesses and those of their customers."
About the Study In 1999 Intellect (then called CSSA), together with Contact to ContRact, conducted a survey into the commercial performance of the UK software and services sector. An enhanced and more in-depth study was then conducted in 2002, resulting in the publication of 'Software and Services in Focus; an insight into the industry'.
Following the success of the 2002 study Intellect, Contact to ContRact and Harvey Nash decided to repeat the research in 2003. 'Tough Times Forcing Healthy Changes' contains the data collected from interviews between April and September 2003, and was taken from face-to-face interviews with managing/divisional directors or other senior managers within the sales/marketing functions.
About Contact to Contract Contact to ContRact helps IT software and services companies transform and improve their businesses. The company provides people with real-life, board level leadership experience in IT companies, equipped with Contact to ContRact’s proven methodology supported by unique and comprehensive tools. These tools are used to analyse the effectiveness of IT companies and define and execute transformation and improvement programmes that deliver measurable and enduring business benefits. Contact to ContRact's customers describe the company as professional, pragmatic and action oriented. For further information call 07000 78 5211 or visit www.contacttocontract.co.uk
About Harvey Nash Group Plc The Harvey Nash Group is a leading global recruitment company with a track record in placing quality professionals into an international blue chip client base. Its International Executive Search & Selection division provides senior management and interim executive solutions across a broad range of industry sectors including technology companies, telecommunications, media, FMCG, retail, health care, financial services, legal, manufacturing, Government and Not for Profit organisations. Established in 1988, operating in Europe, the USA, Australia and Asia, Harvey Nash employs 400 staff worldwide. For further information call 0207 333 8799 or visit www.harveynash.com
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