August 29, 2014

Should we stop marketing to the CIO?

Technology marketers have spent the last 25 years trying to get and keep the attention of the people with their hands on the technology tiller inside multi-billion dollar organizations, CIOs.

And for nearly that long, pundits have been predicting that the CIO role would become extinct, and that the strategic decisions about technology would be subsumed into the business.

Those pundits have always been wrong. But this time, they may finally be right—at least about certain types of CIOs. For marketers, this diminished relevance of certain CIOs means two things, I think. First, that they must know more about their CIO audiences than ever, and second, they must rethink how they market to target companies.

Cloud creates a new buying decision pattern
In our ITSMA Webinar How Cloud Computing Will Change Marketing last week, one of our guests made a bold prediction: Major IT services deals will, in the future, bypass IT.

Now, you may say that few big IT services deals ever went through IT. They are too important not to be made by the business. Perhaps, but in most cases, CIOs were crucial to making sure that the deals didn’t completely fall apart. Business people heard grand promises of business efficiency, cost savings, and competitive differentiation, while CIOs provided crucial translation that weighed those promises against the reality of 30-year-old legacy systems, dispersed business units and geographies, business process vagaries, tangled infrastructure—basically, the IT hairball that threatens to choke any deal after it is signed.

CIOs’ power is rooted in complexity
For marketers, having good relationships with CIOs was like knowing the bouncer behind the velvet rope. It got you in the door and created a crucial ally for making deals that everyone could live with.

But while CIOs may have been crucial to the deals, there was always a problem. CIOs’ power has, to a certain extent, always been rooted in something that business people hate: complexity. CIOs were the only ones who had any insight into how the individual hairs of the IT hairball were knotted together.

Trying and failing to dislodge the IT hairball
For the last ten years, providers have been trying to dislodge the hairball. It began with Application Service Providers (ASPs) that promised to surgically remove the hairball from the throat of the business. But these outfits could never remove the lump entirely and failed to run things any more efficiently than internal IT departments could.

Then came the Software as a Service (SaaS) providers, who offered certain applications and business processes through their own servers. But most of these applications were peripheral and could only shave little slices off of the hairball.

Cloud moves IT outside the company
And now comes cloud, which is basically ASP with a lot more technology power and sophistication and without the reptilian brand associations. Providers now say that through some combination of cloud technologies, they can blast the hairball to dust and let companies create services that are not hampered by underlying technology complexity. A report from the Corporate Executive Board entitled The Future of Corporate IT predicts that up to 80% of application spending will move outside the company.

What will happen to CIOs
Let’s assume they are right. It seems like a good bet—Moore’s Law doesn’t show any sign of slowing down yet. Here’s what will happen to CIOs if the cloud prognostications come true:

  • The traditional technology-focused CIO will become irrelevant. There will be an entire category of CIOs that marketers should no longer waste time and resources on: Operational CIOs. These are the CIOs who keep the lights on in the IT infrastructure. They buy the hardware and services for the data centers. These CIOs will be written out of the equation when the infrastructure moves into the cloud.
  • Internal IT projects will become external services deals. Another CIO archetype, the Transformational Leader CIOs that have been focused on using IT to improve business processes, may disappear as distinct IT leaders. Those projects will happen outside the company, in the cloud. These CIOs could move to become heads of the specific business services that run in the cloud and manage the relationships with providers, predicts the Corporate Executive Board.
  • IT departments will shrink dramatically. The Corporate Executive Board predicts that 75% of in-house IT positions will disappear in the next five years. What few positions remain will be dedicated to supporting specific business services.

What will happen to marketers
Okay, so what does all this mean for marketers? I see four key shifts:

  • The technology sale will become the business service sale. All of this could spell the end of what we have traditionally called the technology buyer. The sale will have to be made on higher level technology-based business services. Marketers will need to stop focusing on technology-based pitches.
  • The importance of audience segmentation in B2B will increase. More than ever, marketers will need to know which CIO archetype they are talking to and make sure they are not wasting time on those who can’t impact the business service sale.
  • Idea marketing will become more important. With speeds and feeds no longer relevant, marketers must get the attention of customers through ideas about how to improve business services rather than technology comparisons.
  • Relationships will matter more after the sale. The cloud means that everything becomes a service. Without the IT hairball to lock providers and customers together in a death embrace, the barriers to switching providers will come down. That means that marketers will need to devote more attention and dollars to the loyalty stage of the buying process.

What do you think? How will cloud change the CIO and marketing to the CIO?

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  • http://www.earnest-agency.com Chris Wilson

    Hi Chris,
    Great post as always. There’s a great analogy here. In the early days of the industrial revolution, there used to be senior individuals in organisations who’s role it was to ‘manage electricity’. Companies bought their own generators and then had teams of people, and a senior person in charge, to manage this owned essential resource. But, it become something you could tap into ‘as a service’ (cloud), so this role and this model disappeared. It’s an obvious analogy and one that Nicholas Carr’s made before.

    However, you’ve only got to spend some time talking to the guys working within really big operations to realise that a ‘cloud migration’ could take a decade or two. The amount of complexity there, and the fact that so much is hard wired to critical business process – suggests to me that IT departments will be smaller, CIOs’ role will adapt – but at a glacial pace. And, most CIOs I’ve met aren’t technologists – they’re as much business people as the CFO (maybe I’ve just been fortunate…!)

    I would also argue that point about ‘the relationship starts after the sale’ is not only true, but should have been true for many years. The fact that it clearly hasn’t been like this, only shows how far the IT industry has to mature. Bring on the Cloud I say – if it creates a true service culture (and a true business/relationship sale) then that’s only a good thing. And, a long overdue shift in the marketing approach of the industry in general.

    Chris.

  • http://www.christopherakoch.com/ Chris Koch

    Hi Chris,

    Great points. It could be glacial, you’re right. I can’t say one way or the other. But unlike back in 2000, the technology really is there now to do it. And I think there is tremendous pressure from the business to do it. Those huge, complex outsourcing deals of the 90s and 2000s were an expression of the desire that cloud promises to fulfill: eliminating the complexity. I guess I’m more worried about CIOs than I have been in a long time. They are now in a defensive position on two fronts: from users who can carry out nearly all their computing tasks more easily at home than they can at work, and from the business, which is desperate for more flexibility, efficiency, innovation, and responsiveness from the business services that ride on top of the IT hairball. And social media? CIOs, whether by their own decision or because the organization is pressuring them, are the ones telling employees that they can’t access these services. I see more pressure building up for change here than I’ve ever seen. But we’ll see. Meanwhile, I think marketers have to shift to a much more business oriented strategy for marketing IT so that they can stay ahead of the shift, whether it’s glacial or not. Great thoughts! Thanks for contributing.

  • http://www.earnest-agency.com Chris Wilson

    IT hairball – love it!

    At home vs. at office: One of the directors of a huge IT services company (and ITSMA member) once told me “I step back three generations of computing the moment I walk through the front door of HQ”.

    Another observation (but in the SME space) – there’s been lots of high growth start ups in the last two years (mine included). Everyone I speak to has gone for ‘as a service’ across pretty much all area of operations, especially IT. Comes from having no legacy partly, but still a trend.

    Interesting times.

  • Robert Drew

    When the marketplace evolves to this level, it will further enable companies to sell on benefits rather than features, and better take these benefits to business end users. Another thought-provoking post, Chris. Keep up the good work.

  • http://www.christopherakoch.com/ Chris Koch

    Thanks, Robert!

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