Finding the Opportunity to Justify Agility

In recent blogs I’ve been arguing that we’re focusing too much on the technology of new services and not about the actual opportunity.  There are scads of technological suggestions on where new revenue can be located, but where do you find opportunity?  That’s a question that’s always being asked by anyone who sells anything, including network and cloud providers and vendors.  The only sure way to find out whether someone is a prospect is to present them with an optimum value proposition and see if it resonates, but that’s obviously not a scalable scenario.  There are better approaches, and that’s the topic for today.

I’ve studied buyer behavior since 1982 in a survey sense, and in 1989 I built a decision model that uses survey data to forecast stuff.  The model was designed to incorporate what I learned about how decisions are made, and a high-level view of that process is essential as the opening round of any opportunity targeting approach.

The process of turning random humans or companies floating in space into committed customers is what I call trajectory management.  All these things are jumping around in Brownian Movement, with no structure or organization, no cohesion, no way to target with sales efforts efficiently.  What you have to do is to get them in sync, or at least get a useful community of them in sync.  You want them moving toward your marketing/sales funnel in an orderly way, so they intersect it, are guided into a common mindset, and turned over to the sales process.

In modern times, trajectory management is based on a progression:  editorial mentions sell website visits, website visits sell sales calls, sales calls sell products.  Buyers become “suspects” when they see your name in the media, they become prospects when you engage them on your website and with “anonymous collateral”, and they become customers through a personal contact.  You can’t jump over steps in this progression, so you have to be very wary of presenting too much information in the early part of the progression.  You will never sell a product because it’s mentioned in Light Reading or Network World, and trying to get enough into a story for that to happen will cause the story and your effort to fail.  Get the story, get the website visit, get the sales call.

Where does “targeting” come in, then?  Everywhere, largely for a combination of collateralization and prioritization.  You need to understand the messages that resonate most and most quickly, and you need to understand who will likely pull the trigger on a deal fastest given a particular value proposition.  All of this is like jury selection; it’s not an exact science but people still pay a lot of money to find stuff that could help.

Most countries have economic resources available online, and that’s true of the US of course.  The combination of tools that works the best is economic information by industry, particularly on employees and capital spending, and distribution of industries geographically.  With this combination you can do a lot to improve your chances of making the right statements, building the right products, targeting the right prospects with the right message.  You can also learn a lot about business behavior.

A logical question to ask when you’re talking about the opportunity for a product or service is the size of the market the new thing fits in, preferably by industry and geography.  Government data offers this in those two phases I mentioned, but running through a complete example would take too much time, so let me look only at the first phase in detail and describe the second in general.

If you think that cloud computing is the transfer of current data center apps to public cloud services, you could presume the biggest spenders on centralized IT would be the best targets.  The US market data says that North American Industry Classification System (NAICS, the new version of Standard Industrial Classification or SIC) 552, which is credit intermediation and related activities, has the highest central IT spending of all sectors.  Wholesale trade, renting/leasing, and retail trade follow (excluding the IT industry itself).  Many of these wouldn’t be considered cloud prospects, so an analysis like this could open up some new possibilities.

Suppose you think that the real opportunity factor is prospects for SaaS?  Obviously the government isn’t going to survey on that topic, but what they do survey on is the spending on integration services.  If you’re a company who relies on integrators you may well be unable to acquire and sustain an IT organization of your own, so you’re a great prospect for a cloud service that gives you the applications you want in an as-a-service package.  Top industry there is retail trade, which is interesting because they’re also high on the ranking in terms of central spending.

For doubters, let me point out that the retail industry has been a big consumer of architected services for electronic data interchange—EDI, the stuff that transfers purchase orders and payments and so forth.  Data on current SaaS spending is hard to break out from company sources, but my surveys have shown retail firms to be early adopters of SaaS as well.

How about opportunities for network services and NFV-based services?  These are likely tied pretty closely to what companies are spending on network equipment.  The industries leading that category are (again omitting IT and networking companies themselves) our old friend credit intermediation followed by miscellaneous scientific and technical services.  This last category also ranks high in use of integration services, which would suggest it’s a good target for network-as-a-service.

Or perhaps you see network and cloud opportunities arising where companies have a very large investment in personal computers and distributed elements?  Two old friends here, retail trade and miscellaneous scientific and technical services.  So the same top industries show up using this metric as well.

This total-spending measurement is a good opportunity gauge, but it may not reflect the level of acceptance.  We can also look at firms by how much of their IT budget is spend on centralized IT, distributed IT, networking, and integration.  In terms of percent spent on central IT the banks and credit firms top the list and retail is down in the standings quite a bit.  The industries with the largest percentage of budget spent on distributed IT are petroleum and coal products and printing and related activities.  Networking as a percent of total spending is highest for machinery firms, food-beverage-tobacco, and our miscellaneous scientific and technical services.  Integration spending is highest as a percentage in construction, ambulatory health care, and apparel.

Whatever measure you use to rank industries, the next step is to get a density map of that particular NAICS across your prospecting geography.  If you know you want to target our favorite “miscellaneous scientific and technical services” you look for metro areas or other points where that NAICS is found most often.  If you have access to more refined data (typically from commercial rather than government sources) you may be able to get the density plot for headquarters locations only, which is better since in most cases technology buying is done from the company HQ.

With knowledge of NAICS and some further insight on things like how much the NAICS outsources and how its budgets are spent overall, it’s possible to determine what messages would likely resonate.  My surveys show that companies with very centralized IT have strong CIO organizations and are less likely to favor things like SaaS, where companies with more distributed IT are the opposite.  That helps not only in generating collateral for sales use, but also in deciding the kind of reference accounts that would be considered most valuable.

The point of this is that NFV and SDN and the cloud are all selling into a world where IT is the rule and not the exception, and by understanding how IT dollars are currently spent, you can optimize getting some of those dollars for your early SDN or NFV services.