Computing’s announcement that “Royal Mail seeks suppliers for £750m IT transformation plan” hints at the underlying (and increasingly important)  link between investment in IT and cash availability.

At the start of July, with Mandelson’s plans for part-privatisation abandoned, Royal Mail described its big three issues as “The need for fairer regulation, the need for a resolution to the large and growing legacy pension deficit and flexible and timely access to capital remain as urgent as before.”

Come the end of July, with the funding apparently now available, Royal Mail is looking for suppliers under three separate agreements adding up to around £750m “which will include systems design, build and implementation, as well as the support and hosting of the postal service’s softwareapplications”.

Talking previously about the transformation required at Royal Mail, postal service minister Pat McFadden had said that “given Royal Mail’s falling revenues and limited profits over the next few years, and pensions fund deficit, clearly Royal Mail will not be able to fund this investment alone. Additional capital will be required and this could be hundreds of millions of pounds, in addition to the funding we have already provided.”

The availability of capital is yet another language that marketers need to learn and bear in mind when trying to find a place in buyers’ plans.

You will often hear an IT company saying, ‘buyers don’t understand the cloud’, and using that as a justification for either (a) not saying anything about it, or (b) launching into a grand programme to define the cloud for CIOs.

But in the background, buyers are creating specific plans for the elements of the cloud they want to use now. What vendors really need are some focused examples of problems their solutions can solve, not high level positioning of where they fit amongst SaaS, IaaS, PaaS…

Perhaps more significantly, all this talk of ‘as a service’ is starting to extend to non-cloud conversations and contracts. The FT’s recent article, Outsourcing begins to blur into services, shares a range of views on providing more flexible pricing and resourcing models on wider IT Services contracts. In an interesting section 3/4 of the way through the article, there are some good CIO viewpoints:

Simon Post, CTO at Carphone Warehouse: “Flexibility is vital to us, not just in the infrastructure space, with IBM, but also for applications. Retailers have shorter buying cycles than other businesses, so we do need to gear up and gear down quickly.” According to the article, “Buying IT services on a pay-per-use basis is certainly on the agenda at Carphone Warehouse”.

Richard Boynet, CIO at Electrocomponents: “when our current data centre contract runs out, we are looking at multiple options from virtualisation, to taking some of that [capacity] as a service. We might, for example, use a vendor such as Amazon to stress-test the next release of our main IT systems.”

So to summarise, by the start of 2010, if you have a cloud offering you will need the specific examples of where people can use it (which may sound obvious, but is currently surprisingly thin on the ground). And even if you are keeping your head above the cloud (sorry), you will still be coming up against competitors for traditional services who have developed some model for ‘pay as you go’ pricing that could be opening doors for them in your client base.

Until now, there has tended to be agreement that pricing is more of a hygiene factor than a compelling component of a proposition (with clients more interested in any existing relationship, proof of past delivery, or promises of helping them to achieve large savings). But is the rise of cloud propositions making the pricing strategy of traditional services a more decisive issue? How can suppliers build more flexibility (not just performance-related elements) into their offerings?

IDC said this week that its research shows cloud providers can utilise the telecommunications world’s proven approach for charging to help “monetise” the service. The research firm also claims that certain billings software vendors are already well placed to support cloud providers through their telco billings offerings.

“Leveraging a system to put a value on the transaction – “rate” in telecom language – will be a critical first step for cloud computing infrastructure projects.” says IDC. It argues that telecom billing vendors like Amdocs, Comverse, Convergys, CSG, Intec, LHS and Oracle include rating as a core component of a holistic billing system, which also includes capabilities such as customer care, partner billing, promotions, and payments and collections. 

“The business and consumer experiences of complex bills for technology services is often tightly associated with voice and, increasingly, data services, thereby making the telecommunications example instructive. A new generation of business and consumer customers mean that cloud providers need to take a critical look at the options.”

There was much debate at last night’s S&M Forum about the increasing usage of the “participative” web by CIOs. Both our our CIO speakers (CIOs from Reuters and Wyeth) mentioned that they use Twitter, blogs, and other 2.0 type media to find information to help keep abreast of trends. They also mentioned that both had come under increasing pressure to allow the organisation as a whole to interact with the company’s brand communities via these tools – their consumers were increasingly demanding it

This chimed with a recent Harvard Business Review article entitled “Getting Brand Communities Right” which discusses the huge success of Harley-Davidson in this arena. So if Wyeth, Reuters and Harley are doing it so well, why can’t IT companies? The answer, or one of them, seems to reside in the HBR article – where the author says, “Too often, companies isolate their community-building efforts within the marketing function.” As a result, it’s not inclusive or authentic and the IT companies’ business audiences are turned off. As Wyeth’s CIO said at the event last night, ” if the blog or content sounds like a corporate push then it turns me off immediately.”

The same goes for any really successful marketing initiative – the thing that’s remarkable is that it’s so rarely anything to do with pure marketing, it’s something that comes out of the business that marketing can build on. If marketing isn’t playing a role to spot (or create) these opportunities and react to them, then it’s always likely to be hamstrung. However many communities it tries to build, it’ll never be the B2B Harley-Davidson.

This ties in with HBR’s interview with Fiat’s CEO, who says: “There was also a lot of young talent locked up in marketing and other functions that historically were not considered high-potential career paths. The guy who runs the Alfa division now is 40 years old. The guy running the Fiat division is 42. Neither has an engineering background, but both were first-rate consumer-products marketers, and the company sorely needed their talents.” Based on what our CIOs were saying last night – that their successors are the 20-somethings with the mix of marketing savvy and technical wizardry – it won’t be at all long before an interview with an IT CEO says the same thing.

Research out late last week highlighted that 25% of companies were increasing their IT investment, despite the economic volatility. The survey of US IT professionals by ISACA also found that only 16% of companies were making across the board cuts in IT, with 14% freezing them at current levels.

“Many organisations are trying to avoid making widespread cuts in IT because of growing awareness that IT, when implemented strategically, has the potential to deliver tremendous business value.” said Robert Stroud, International VP of ISACA.

The full research release is here.

We’ve been tracking for a few weeks now the growing opportunity for propositions related to e-commerce.

The last time there was such a flurry of interest in online retailing was probably nearly ten years ago. The pace of change in e-commerce adoption seems to have been accelerated by the recession, with new research showing that 65% of UK spenders are planning on increasing the amount they spend online in order to save money.

Here are a few choice articles… highlighting e-commerce growth at many large and high profile retailers:

CIO Magazine says French Connection is losing money but the e-commerce side of the busines is growing

M&S’s results highlight an online rise in sales in their recent, better than expected, results

John Lewis to launch designer fashion web store in response to sales increase of more than 24% at John Lewis Direct

Dominos Pizza sees 74% increase in web revenue in 2008

Tesco looks to web to revive sales

…and it isn’t only e-commerce: the trouble for retailers is creating outsourcing opportunities too.

Iceland signs outsourcing services deal

For the second quarter in a row, McKinsey’s economic snapshot survey shows senior execs saying that things haven’t got worse, but they don’t expect an improvement any time soon. This chimes with what you hear out and about; business isn’t brilliant, but it isn’t bad either - a lot of people are waiting it out, to “see what happens”. McKinsey’s report calls it “a gloomy economic stasis”.

But short of gagging Robert Peston to increase the country’s optimism levels, how to beat the economic stasis, and keep the leads coming in and converting?

It’s interesting to note that whilst the McKinsey report points to continued cost reduction, it also highlights a heavy focus on operational efficiency and improving productivity. Plus, when executives were asked whether they were seeking external funding, most said they were not, but that the bulk of those who were, were using it for investment, geographic expansion and innovation. Additonally, half of all companies surveyed expected to shed staff in 2009.

So the drivers are there for spend on IT, outsourcing and services. But how to get those leads and convert them? Here are some points to consider:

-How about offering access to great content and ready-made, industry specific business cases? (doing more with less, how to maintain customer service levels after cutting staff, building remote workforces…) Go further than traditional marketing content and sales support tools – get in touch with project teams and ask for their solution-based content to give real war stories and meat to campaigning materials.

-Perhaps provocation marketing would bear fruit with some targets. (see the earlier article “Lead gen in a downturn: is provocation the answer?”) This involves going beyond solution selling and provoking the customer to buy through a series of highly-researched and targeted joint sales and marketing campaigns.

-Gather like-minded people together from different target industries to learn from each other. Develop the content of the workshop from new, fascinating and fast research and get a facilitator who’s been through the mill to ensure that a genuine and honest exchange of issues and ideas happens. Feed this content back to delegates with a detailed description of how you can help, with tools and documents downloadable/available to help them sell it within their own businesses.

-It follows from the above that supporting sales teams through account-based and narrow-cast marketing activity will bear fruit. By researching specific account needs in detail and building a plan of attack with sales (from lead to win) you stand a much better chance of shaping leads before they get to RFI stage. You can download our free ABM planner here.

The McKinsey survey results are available here, but please note it is premium content.

Just spotted this in Holway’s TechMarketView bulletin, “In our just-released MarketViews report, we forecast that the UK BPO market will grow 8% this year, the fastest growing segment in the UK software and IT services marketplace.”

It makes sense, based on our own observations in the article “Outsourcing thriving in recession“ which highlights what’s happening with revenue announcements from the big outsourcing players. As the main UK vertical markets start to streamline, outsourcing is well placed to take up the slack.  Good news if you’re an outsourcer. And if you’re not, it’s worth reflecting on what this means for where your next big sales might come from…

Just published by the McKinsey Quarterly, its views on the 5 trends that will shape technology for business in 2009.

The article suggests that this year will see IT and corporate finance converge (CFOs using IT assets to leverage cash); tension around IT budgets increases (CIOs with newly limited budgets will need to be honest brokers between different departments demanding IT resource and spend); the “last” IT project (companies are shutting down discretionary spend); regulators demand more from IT (IT systems will need to gather more and better data to manage risks); offshoring and outsourcing landscape shift (vendors are in for big change, there’s a need for CIOs to manage their vendors carefully).

Last night saw the Prince’s Trust Technology Leadership group’s Big Debate on Supplying Global IT Services & Technology in the Next Decade, between the President of Fujitsu’s Global Business Group, Richard Christou and IT analyst and guru Richard Holway. First, a summary of the debaters’ respective positions:

Richard Holway

• The IT industry will never again see such staggering growth as it did during the 90s. We will roughly track GDP from now on (as a broad IT industry trend)
• Within this broad trend there will be significant winners and losers; the hardware industry is already being dented by the downturn whereas applications services and outsourcing will remain stronger
• At present, BRICs countries do not have strong enough economies within themselves to support strong IT growth, they are still heavily reliant on servicing the western world, either directly, or servicing local companies who themselves service the west
• Cloud will be THE driving force in IT for the next decade. Thomas Watson’s famous quote that there will only be a market for 5 computers worldwide may still come true in a sense – as people and companies increasing don’t want to own and service IT, they just want to use it. Perhaps the big 5 ‘computers’ will be cloud owners like Microsoft, Google, Amazon, the US government etc 
• Challenges for the next decade: changing to a service/SaaS approach may ruin many companies’ revenue model, it will be an expensive and disruptive time (cashflow and revenue models), the downturn has accelerated change in our industry and the leader is now the most threatened.

Richard Christou

• Not sure it’s quite so bad as RH makes out. Agree that BRICs countries won’t replace revenues for now. Downturns throw up discontinuities – you can plot new entrants against downturns in the market. Plus downturns provide the opportunity to look at what you’re doing and how you’re doing it. A period to invest.
• The new technology always takes longer to come through than expected. Supplier models such as SaaS can be seen as us coming full circle (ie. back to bureau model of old). Netbook/cloud can be seen as mainframe/dumb terminal. Revenue models for SaaS are highly relevant – who’s going to pay for the next generation of IT development if such businesses are so hard to run profitably?
• Cloud’s impact on business as opposed to consumers isn’t entirely as clear. There will be clouds, many owned by large real estate companies. Google/Amazon etc exploit the IT infrastructure that makes up the cloud but that leaves an opportunity for outsourcers to manage the them.
• Christou draws a distinction between Google/Amazon and enterprise needs. There are data ownership, confidentiality and cross-border information flow issues. There will be a cloud within the enterprise and IT companies will get a  lot of business here, as you will interface through many devices to your corporate cloud
• Managing a company supplying global IT services and technology will need close attention to local cultural alignment from a sales perspective. For example, outsourcing not really undertaken beyond US and fringes of Europe. Vision for the global IT company has to be locally strong operations which operate to standards/best practice but have ability to operate in local cultures highly effectively
• Managed services and outsourcing is not a bad place to be right now

Useful points made from the floor, and in response by the debaters:

• If IT becomes more of a utility, then in the future there will only be room for a few very large players. Similarly to Apple iPhone and its downloadable apps, will this happen in enterprise IT? Huge vendors becoming the channel for mini “widget” vendors?
• IT as a term is becoming a hindrance – we are an industry supplying business support and organisational outsourcing that is technology enabled
• Focus on investing in applications and outsourcing. No-one can do without IT these days – companies cannot manage without it, even in the downturn banks, travel companies, airlines, are all still spending
• Our mindset in IT should be about change, not recovery – it will never be the way it was. We will not go back to the industry we left, but the future is exciting and full of opportunity.

My top 3 summary for IT marketers is:

1) it’s going to be easy to jump on cloud/SaaS/virtualised bandwagons but much harder to carve out a decent and defendable position.

2) as IT expands from “IT” to “business support” you’ll need to understand your key accounts and segments better than ever to keep relevant. If you’re not looking to rearrange your marketing along these lines, then get started.

3) If you’re not one of the IT giants then keep an eye on them and get aligned. There was a strong feeling that the really big companies will become even more critical as a channel to market for everyone else.

The entire management team of The Marketing Practice attended the event. To see all of their conclusions on it, take a look at the comments fields of this post.