IT Sales & Marketing: Trends, Priorities, and Best Practices for 2006 Executive Advisory Services IT Sales & Marketing: Trends, Priorities, and Best Practices for 2006 IDC Client Telebriefing September 8, 2005

Agenda 12:00 (EDT) Presentation 12:45 Q&A 1:00 Adjourn Rich Vancil Vice President CMO Advisory Service Donald MacDonald Vice President Sales Executive Service 12:45 Q&A 1:00 Adjourn

“Issues” Identification IDC Invests in Significant Research Foundation for Executive Advisory Services Peer Networking and “Issues” Identification Executive Benchmarking Database Unique Access Unique Methodology normalizes activities 100 + Vendors $400 B Revenue $60 B Sales & Marketing Spend Vendor Surveys on Sales & Marketing Expenses and Practices Benchmarking Database User Surveys on the Buy Cycle Experience Buyer Experience Database IDC Panel of 1500+ users Supplemental surveys Awareness/ consideration Consideration/ purchase Application/ leverage TDM’s & BDM’s Buyer Experience Database IDC analyzes and advises on: Benchmarking & Metrics Best Practices Customer Influence

The Sea Change in Tech Marketing & Sales Double Digit Growth Single Digit Growth IT Past IT Present Selling Product to Early Adopters Selling Solutions to Sophisticated Users Bargaining Power Held by Vendor Held by Buyers Limited Marketing Required Sophisticated Marketing Required Sales = Demand Management Sales = Demand Creation $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 1960–1999 $ Billions Worldwide IT Spending (1960–1999) (1999–2008) ~15% CAGR ~4% CAGR 1999–2008

Executive Advisory Services Trends in Tech Sales Donald MacDonald

Donald MacDonald: IT Sales Trends, Priorities, and Challenges for 2006 In a word—complexity Solution selling is ubiquitous and remains the major focus in IT sales IT vendors continue to expand vertical offerings and routes to market Need for increased demand creation has led to channel rationalization Priorities Creating new business opportunities Maintaining profitability Better sales planning & budgeting More effective and efficient resource allocation Challenges Alignment remains the top challenge

The Customer Experience: What Do Customers Look for in an IT Vendor? Respondent’s Opinion of the Importance of Vendor Alignment * No influence Don't know (1.1%) (7.6%) Figure 40 Moderate influence (26.1%) Significant Influence (65.2%) Total = 92 Source: IDC Solutions Selling Paradox Study, 2005

Sales Alignment Challenges Alignment with the customer Too short sighted Focus on “C” level somewhat misguided Solutions have marginalized the role of the sales rep Alignment within the company Financial metrics inadequate Non-sales resources critical to sale’s success Cultural challenges of solution selling Alignment with the market SMB space attractive but getting crowded Channel conflicts need constant attention Future challenges from unlikely competitors

Product Selling Productivity IT Sales Challenge: The Recent Past Product selling drives productivity but does not address increasing customer demand for solutions Product Selling High Made for markets Repetitive activity Done quickly Cost effective Features-selling Low content Highly controlled Productivity Low N= 26 executive interviews

The Solution Selling Challenge “ When talking about solutions, the old adage seems to fit in that the whole is greater than the sum of the parts.” SVP, IT The inability for the industry to neatly define a solution is, in part, due to the fact that a solution is ultimately defined by a customer. Customers we talked to describe a solution as an intangible. They expressed its meaning in terms of knowledge, expertise, and experience. Customers define solutions in terms of the impact it has on their employees, the cost involved, the risk it represents to their company, the difference makes to their customers, and the potential to make money or save money—each of which is unique to that customer and no one else.

IT Sales Challenge: The Present Solution Selling Customer Centric Managed process Done right Resource Intensive Consultative-selling High Context Highly collaborative High Low Solution selling diminishes productivity but responds to increasing customer demand for solutions Productivity N= 26 executive interviews

Sales Performance Last year only one out of every ten IT sales organizations met or exceeded their annual revenue plan During the same period, only one in three sales representatives made quota Source: IDC Solutions Selling Paradox Study, 2005

The Buyer Experience: The Solution Fulfillment Cycle IT vendor sales teams that recognize the customer’s solution fulfillment cycle will be more productive and successful then those more short-sighted teams, that only focus on their own selling efforts Decision-Making Cycle Implementation Cycle The Solution Fulfillment Cycle

The Buyer Experience: Vendor Interaction that Customers Value Most Demonstrations 33.0% Proof of Concept 29.9% RFP Response 27.8% Attentive to Client Needs 26.8% References/Client Visits 19.6% Technical Briefings 17.5% Honesty/Integrity/Communication 17.5% Follow Through/Support 15.5% Knowledgeable People 13.4% 0% 5% 10% 15% 20% 25% 30% 35% 40% Source: IDC Solutions Selling Paradox Study, 2005

The Buyer Experience: What Do Customers Look for in an IT Vendor? Respondent’s Opinion of Vendor’s Alignment Less aligned Don't know (5.3%) (7.4%) No change (6.3%) Figure 39 More aligned (81.1%) n = 95 Source: IDC Solutions Selling Paradox Study, 2005

The Sales Executive: Challenges for 2006 Managing sales expenses Selling, General, & Administrative costs Better expense tracking and reporting Selling Expense (the “S” in the SG&A line) Benchmarking your sales expense ratio Go-to-market planning (GTM) Benchmarking sales resource and program expenses Maintaining sales performance Driving revenue by creating new business opportunities Sales training and upscaling sales teams More effective solution selling Measuring Customer Fulfillment Profitability Alignment Deploying the right sales & marketing resources at the right time

Tech Marketing Trends: Inside the Successful Marketing Organization Executive Advisory Services Tech Marketing Trends: Inside the Successful Marketing Organization Rich Vancil

Marketing & Sales Alignment Continues to be an Area for Significant Improvement Q. Please explain any planned initiatives in the upcoming year for improving marketing and sales alignment Source: IDC’s 2005 CMO Tech Marketing Benchmarks Study (n=92)

Inside the Successful Marketing Organization Alignment with a more complex IT marketplace will require a more highly functional marketing organization. “Six for ‘06” Increase Overall Investment Develop the Organization Chart Improve Skill Sets Focus on Global Alignment Invest in the Marketing Operations Role Invest in Marketing Performance Measurement

#1: Tech Marketing Investment Climbs to the Highest Growth Rate in 4 Years, Outpacing IT Spending Avg. % Services(8.9%) Hardware(5.3%) Software(7.0%) 6.0% 6.4% -1.7% Source: IDC’s 2003, 2004 and 2005 CMO Tech Marketing Benchmarks Study

#2: Marketing Organization Charts – A Work in Process Marketing Function By Marketing Function + Optimizes marketing expertise - Fosters empire building Marketing Function Product/LOB Region Marketing Function Region Region By Region + Optimizes local touch and sales interaction - Increases potential for redundancies and inconsistencies Product/LOB Customer The 4th Dimension: Market-Driven Structure Optimizes solution and vertical marketing Improves marketing & sales alignment Optimizes Voice of Customer Product/LOB By Product or LOB + Optimizes product knowledge and interaction with product management - Increases alignment challenges

#3: Building Skill Sets and Staff: Expected Staff Allocation Levels Driving a market-driven strategy Increasing marketing and sales alignment New Role: Improve marketing’s efficiency and effectiveness Source: IDC’s 2005 CMO Tech Marketing Benchmarks Database

#4: Achieving Internal Marketing Alignment: A Special Challenge for Fast-Growth Vendors IDC asked CMOs to indicate their level of alignment within marketing: 6 Marketing staff & strategies are fully aligned globally[6] 5 4.5 4 3 2 Regional/BU mktg. operate independently of corp. mktg.[1] 1 Average Rank Source: IDC’s 2005 CMO Tech Marketing Benchmarks Database

# 5: Invest in Marketing Operations #5 Q. What marketing roles/programs do you intend to deploy in the next 12 months to increase your efficiency and effectiveness? Source: IDC’s 2005 CMO Tech Marketing Benchmarks Database

#6: Marketing Performance Measurement is on the “To Do” List of Virtually Every Tech CMO IDC asked CMOs to indicate the maturity of their marketing performance measurement program. . . A comprehensive marketing performance measurement program is in use. 6 IDC Analysis: Hardware sector is higher than software and services (3.9 vs. 3.4) Services is low due to its higher Awareness-Demand ratio(64%)  measurement is a greater challenge Mid-range software companies are struggling with MPM development Essential Guidance: Culture of measurement Process development is first, technology is second MPM should expand using a step-wise process – no big bang strategy 5 4 3.6 3 2 Marketing provides limited or no performance metrics. 1 Average Rank Source: IDC’s 2005 CMO Tech Marketing Benchmarks Database

2005 Key Performance Indicators for Tech Marketers KPI 2005 2004 Marketing Investment Change (most recently closed fiscal year to current fiscal year) 6.4% 6.0% Marketing budget ratio (marketing spending per revenue for the most recently closed FY) 3.1% 3.2% Program-to-People (P-to-P) ratio 63.5% 66.1% Marketing Centralization Ratio 62.9% 59.6% Awareness-Demand Ratio 49.4% 55.6% Marketing Throughput (program spend/staff) $288K $336K Outsourcing Ratio 55.3% 60.5% All data is for the current fiscal year unless stated otherwise. Source: IDC’s 2004 and 2005 CMO Tech Marketing Benchmarks Database

Essential Guidance: Get Aligned for Success in 2006 Mis-Alignment is Expensive !! Get Aligned Inside the Organization Sales with Marketing Operations Get Aligned with your Customers How and why they buy How they are Influenced by your marketing messages What they think of your sales team Better Alignment Means Better Results

Additional Resources from IDC’s Executive Advisory Services (sample deliverables) #1 Benchmarking Studies for Budgeting and Planning Marketing Budget Planner: 2006 Program & Staffing Benchmarks, August 2005 Sales Performance and Solution Selling Metrics and Benchmarks, Fall 2005 Management Best Practices Marketing Programs that Drive Revenue Growth, Fall 2005 Solution Selling Effectiveness, Fall 2005 Customer Program Alignment, March 2006 Events and Peer-to Peer Forums Marketing Performance Measurement Forum, East and West Coast locations, Winter 2006 Executive Roundtables and Breakfast Briefings, quarterly, East and West Coast locations Consulting Resources Analyst inquiry

For more information . . . Rich Vancil VP, CMO Advisory Research rvancil@idc.com Phone: 508-935-4327 Donald MacDonald VP, Sales Executive Service dmacdonald@idc.com Phone: 508-988-6794