Established B2B technology vendors face many challenges in today’s post-recession environment: fierce competition, more demanding (and cash-strapped) customers, proliferation of employee choice in workplace technology, just to name a few. But of all the threats to continued prosperity within a technology company, none is so insidious or inevitable as the commoditization of the very hardware and software that has been the life’s blood of the industry since its inception.

Price points on products and even solutions that once commanded a premium as differentiators are gradually and sometimes suddenly eroded by the relentless tide of innovation and proliferation of customer choice. What’s worse is that customers are increasingly indifferent to the type or configuration of technology in a given solution: in short, they no longer care what it is, they care only what it does.

So what are leading technology companies that have spent decades and hundreds of billions of dollars developing the reputation of their brands based on the technical efficacy of their products doing to create value in a market that is increasingly immune to features and benefits selling? They are focusing with greater emphasis on services-led selling as a means to create value for customers and avoid the perils of product commoditization.

What is services-led selling and how do we differentiate it from solution or product selling? As the name implies, the vendor in a services-led sale emphasizes the service that will be delivered to the client.  The unique aspects of a services-led sale are as follows:

  • Deals are centered around managed services or outsourcing involving technology; but technology is not a critical differentiator in the sale
  • The deal usually contains multi-year service-level agreements with performance hurdles (ROI, cost-savings, etc.) that must be met in order to achieve full revenue realization over time; vendor is tied to customer’s success
  • Risk and liability mitigation is almost always a key element of the services-led sale; customer’s key benefit is migrating risk and liability to vendor

The customer will pay a premium when the vendor provides a service with embedded technology that alleviates a customer pain point or risk. Though this may seem relatively straight-forward, the changes this paradigm creates, especially in the sales organization are profound.

Increasingly, AGI sees technology clients making bets on services-led selling by creating new sales positions, hiring new sales talent, changing relationships with business partners, and adjusting management and financial thinking. In the coming months, we will begin to explore this new environment in more depth, with some our clients who are treading the delicate balance of running a legacy product-focused business while laying the groundwork for a future in services-led selling.

Learn more about Alexander Group’s services for technology companies.

Categories:

Insight type: Article

Industry: Technology

Role: C-Suite, Sales and Marketing Leadership

Topic: Coverage, Sales Productivity