Even with the hope of continued improvement in the economy in 2005, the IT industry should not expect a return of old corporate technology spending habits. While most corporate executives recognize that technology innovation is key to gaining a competitive advantage, that doesn't necessary translate into renewed spending for more technology and renewed efforts to build their own corporate IT operations. Instead, as the past year taught us, corporate executives and end-users alike are increasingly interested in pay-as-you-go, utility computing alternatives to keep operating costs down and permit them to stay focused on their core businesses.
Rather than viewing this as a threat, leading suppliers should capitalize on this growing interest by taking the following steps to broaden the demand for utility computing:
1. Focus on service solutions rather than technology products
The growth of Salesforce.com is not an anomaly. Hosted applications and managed network, security, storage and other services are all growing exponentially faster than traditional technology product sales. Enterprises -- especially SMBs -- would rather 'lease' than 'buy' and are increasingly subscribing to various on-demand services to satisfy their day-to-day computing and communications needs.
2. Emphasize business benefits, not technology features
Nicholas Carr was right, IT has become a commodity and the days of IT product marketing have passed. Corporate customers only care about business benefits, not about technical features. Therefore, suppliers must adopt business-oriented solutions and marketing messages to convince customers of the value of utility computing.
3. Promote customer success stories
When it comes to effective marketing, nothing speaks louder than compelling customer success stories. These case studies are the most powerful sales tool for convincing new customers to adopt utility computing solutions.
4. Retrain salespeople
Traditional, transaction-driven, technology-oriented salespeople are going to be ineffective selling utility computing solutions. Instead, successful salespeople will need to be more business-oriented and skilled in consultative selling techniques.
5. Restructure channel programs
Escalating demand for utility computing solutions in the SMB sector represents a tremendous opportunity for vendors and VARs alike. However, VARs must also undergo a fundamental shift from transaction-oriented product selling to service-oriented solution selling. Vendors must restructure their channel programs to properly incent and support their channel partners.
In addition to the five general guidelines given above, THINKstrategies recommends that the following five vendors adopt more specific strategies to strengthen their positions in the utility computing market and promote the overall growth of utility computing in the industry:
IBM: Now that it has sold off its PC business, IBM should refocus its popular TV advertisements and other mass-market marketing efforts on the real benefits of on-demand computing. This was the original theme of IBM's amusing and effective TV ads that were instrumental in educating corporations and consumers about the exciting potential of e-business. The ad campaign ran off course, and even became bizarre at times, as it focused more on the esoteric benefits of IBM's latest technology innovations rather than the more important business benefits of IBM's integrated service solutions.
Hewlett-Packard: HP should stop trying to differentiate its vision and branding from IBM and instead better quantify and promote the value of its innovative, on-demand collaboration with Starbucks and others through its channel partners. While HP was busy going back to the drawing-board in 2004 to simplify its Adaptive Computing architecture and messaging, it overlooked plenty of opportunities to more aggressively promote the real business benefits of its collaborative approach to utility computing and its strong channel program that could be a key mechanism for broadening its market penetration.
Oracle: Now that it has finally succeeded in acquiring PeopleSoft, Oracle has the opportunity to not only merge PeopleSoft's business applications with its database capabilities, it also has the opportunity to merge PeopleSoft's struggling hosting business with Oracle's more successful outsourcing and services business.
Sun Microsystems: With its acquisition of SevenSpace, Sun has the opportunity to continue to push the envelope with its fully managed on-demand N1 Grid technology services.
Cisco Systems: Cisco can establish itself as the leading networking solution provider for utility computing services with its acquisition of managed service provider NetSolve.
These companies aren't the only ones with work to do in 2005. Microsoft, SAP, and Siebel in the software sector, EMC and StorageTek in the storage arena, and AT&T, MCI and the regional holding companies in the carrier business, to name but a few, will all have to re-think their strategies, restructure their offerings, and rebuild their go-to-market programs to keep pace in the rapidly changing IT, utility computing marketplace.