IT Sales & Marketing: Trends, Priorities, and Best Practices for 2006

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

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

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

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

5. Executive Advisory Services Trends in Tech Sales Donald MacDonald

6. Donald MacDonald:IT Sales Trends, Priorities, and Challenges for 2006 • Trends • 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

7. 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

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

9. 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

10. The Solution Selling Challenge • 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. “ When talking about solutions, the old adage seems to fit in that the whole is greater than the sum of the parts.” SVP, IT

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

12. 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

13. 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

14. 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

15. 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

16. 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

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

18. 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)

19. 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

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

21. Marketing Function Region Product/LOB #2: Marketing Organization Charts – A Work in Process #2 Marketing Function • By Marketing Function + Optimizes marketing expertise - Fosters empire building 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

22. #3: Building Skill Sets and Staff: Expected Staff Allocation Levels #3 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

23. #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

24. # 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

25. #6: Marketing Performance Measurement is on the “To Do” List of Virtually Every Tech CMO #6 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

26. 2005 Key Performance Indicators for Tech Marketers All data is for the current fiscal year unless stated otherwise. Source: IDC’s 2004 and 2005 CMO Tech Marketing Benchmarks Database

27. 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

28. 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

29. 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