IT budget projections from McKinsey

According to McKinsey’s survey (results available here), while operating budgets are largely expected to continue at the reduced levels of 2009, the story for new investments tells a more cautiously optimistic story. More than 45 percent of respondents expect to increase investments, while about 20 percent see them holding steady. Of course, we shouldn’t get carried away (back in 2007, 69 percent were predicting increased investments for 2008), but it does point to a return to more strategic considerations for IT.

There are some interesting industry variations – with Financial Services leading the pack in making investments (61 percent expecting to increase new investments, up from 40 percent last year).

Reasons why from Gartner

Gartner’s recent CIO research paints a similar picture (”2010 IT budgets are projected to be flat increasing by a weighted global average of 1.3 percent in nominal terms, compared with 2009 levels where IT budgets declined 8.1 percent”). The main thrust of Gartner’s opinion seems to be that we’re moving from cost-cutting priorities to a drive for productivity gains. These gains are about opening up to fresh thinking, smart innovations – but not massive costs…

“These productivity gains will come from collaborative and innovative solutions that take advantage of the new “lighter-weight” services-based and social media technologies, including virtualization, cloud computing and Web 2.0 social computing.”

If we thought that IT decision-makers were open to outside ideas when it came to making massive cost reductions in the IT budget, that may pale to insignificance compared to their thirst for insight around these ‘lighter-weight’ smarter-thinking options.

Change in action at the BBC, Deutsche Bank and Barclays

Three big changes in technology strategy in January seem to support the argument that 2009 was a year of significant strategic thinking going on in the background, and that this year we will see investments begin to catch-up.

First, Computing reports on the BBC’s strategy roadmap for technology over the next two to five years. The BBC’s CTO John Linwood supports Gartner’s recommendation of lighter-weight technology: “broadcast systems need to be increasingly agile, flexible and able to adapt quickly to new demands.” As we’ve seen several times already, standardisation will be one of the buzzwords of 2010, and the BBC report continues this theme: “The BBC must strive for further standardisation in the technology solutions it employs to minimise the overall costs and maximise re-use. The use of commercial off the shelf (COTS) technologies and solutions should be the preferred option. Whilst specific customisation is necessary it must be done consciously and when commercial off the shelf offerings have been evaluated.” 

Next, we have the New Statesman’s coverage of Deutsche Bank’s plans to replace various solutions with a single new core banking system from SAP: “The SAP implementation shall underpin the bank’s strategy to push for a high degree of industrialization and standardization of processes. The bank is also looking to achieve flexibility in its IT infrastructure, building on standardized, modular SAP software functions within a SOA.”

Finally, an interesting report on Barclays from Computer Weekly describes how the bank is taking a number of outsourced contracts back in house. Following the decision in December to bring the management of desktop systems back in house, last week saw the decision not to renew the application development contract with Accenture. It’s open to speculation on which factors were most important of cost, flexibility, business alignment, control…

So three very different stories to start the year – all the combination of a long time thinking and justifying investments that are now coming on-line. We can expect to see more changes in direction as other businesses follow suit and place their bets for the recovery – and by 2011 we may well be sick of the words standardisation, flexibility and productivity…

The 2009 B2B Barometer report, from the IDM, ABBA and Circle Research has just been released. It’s been designed to give an insight into the goals, trends, channel preferences, areas of budget allocation and investment priorities of B2B marketers.

A specific section of the report focuses on what the 100 B2B marketers interviewed for the study are working on right now, and has uncovered 5 major areas, based on an entirely open questions. I’ll go on to cover these 5 in detail at the end of the post – but first some thoughts on the study’s broad findings. 

My major conclusion is that marketers appear to be attempting to demonstrate ever-more rapid and cheaper results (especially around lead generation) without claiming the time and investment they need up front to support the delivery of those results in the first place. For example, the study shows that long term programmes such as research, marketing strategy and brand identity are losing favour in the face of competition for budget from social media, email campaigns and website development.

Whilst it’s true that online is cheaper, faster and one of the first places that prospects will go to look for something, B2B marketers must be cautious to keep the baby in its bathwater. In this digital rush, we mustn’t forget that we still need to say something compelling over these channels (that’s where market research comes in, even if we need to use new channels to conduct that research)… and that we need to be saying it to the right people (clean and accurate database with agreed sales interaction processes). Without the right platforms in place – data, propositions, mechanisms – marketing programmes are doomed to failure, be they online, offline or a blend.

As I said in the intro to this post, the ”Key marketing priorities” section of the report is one of the most interesting – focusing as it does on the 5 big things your B2B peers are struggling with right now.

These 5 biggest priorities cited by the study are reproduced in bold below, grouped into 3 major areas (data, online and ROI). I’ve interwoven these with suggestions on how to get tackle each priority:

 -Strengthening online presence through improved website content, visibility and interaction and enhancing the effectiveness of email marketing

-Obtaining a better understanding of new media and how best to integrate this with more traditional forms of communication

Enough of the new/social media black magic! Surely the most useful understanding of new media any of us can possibly gain comes from truly getting under the skin of how our clients and potential clients are using it now and will use it in the future. Your time to engage new prospects is short enough without demanding that they use an unfamiliar site or technology to boot. We need to think through the lifecycle of interaction during the go-to-market process and build online and offline tools to support that.

Speak to customers and prospects face to face about the way they’re really using the web. Whilst they are unlikely to blog or contribute to websites, but that doesn’t mean they aren’t reading them. They are still highly likely to be searching for articles and downloads to help them create a presentation or research a new tool or service. Ask what is meaningful and useful to the prospect, what will support the campaign’s goals and what makes the prospect’s life easier.

Don’t get hung up on generating an online debate or getting oodles of feedback – Jakob Nielsen highlights that only 1% of any online community actively contribute and the rest effectively “lurk”. The goal with online is ultimately the same as online - position the offer and attract people to it in the first instance, then support the building of a relationship, the sale, and the growth of that relationship going forward. Do this through the provision of great content and fantastic service.  Also, what about the prospects and customers of the future? Having grown up in the web generation, you need to keep an eye on what they’ll want in the future too.

-Cleansing and maintaining accurate and up-to-date customer and prospect details

Data is the foundation of any great marketing programme, and an essential nut to crack for both customer and prospect programmes. Most programmes fall down when they say “we must sort the data issue” and then acse investment immediately once it’s been cleansed. It’s something you should budget to make a never-ending investment in. Brian Carroll makes the point that “the quality the marketing database can influence your lead generation or nurturing program’s success by a factor of 50 percent.” Keep it current through continuous campaigning and a good information sharing process. Data is also one of the ultimate crossover points between Sales and Marketing, so it’s critical to put good people on data projects and commit to them in the longest term.

 -Deriving the maximum value from marketing budgets – making them work to the fullest extent- at a time of budget cuts. 

-Measuring the return on marketing investment – but in reality often the return on sales investment – at a time when budgets are tight and marketers are being asked to justify and substantiate marketing spend.

Consider allocating budget by priority rather than channel or activity (I saw data from AMR Research recently that showed “lead generation” as the primary marketing objective of 70% of B2B marketers, but it was rated third in the list of activities by spend allocation). Also, ensure that you’re budgeting from scratch for this quarter’s or year’s programmes and ask hard questions about everything on there (the old adage, do what you’ve always done, get the same results).

Don’t fight against programmes measured by sales-driven metrics, in a recession they’re here to stay. Instead be sure that you don’t sign up to a lead target in the absence of solid knowledge. Look at the sales cycle, the buying patterns, the previous history of the prospect or customer group the programme is targeted at before committing.

We are pleased to be able to offer clients of The Marketing Practice a free copy of the B2B Barometer report, normally £100. Please speak to Paul Everett on +44 (0) 1235 833233 to obtain your copy.

More than 90 percent of UK finance directors in the B2B sector support the idea that companies should ‘market’ their way out of the recession, according to new research by WPP Lightspeed reported by B2B Marketing magazine.

When surveyed, most finance bosses said they believed undertaking such action would help their company to gain market share as the economy recovered. 84% of FDs favoured the idea of further investment in marketing and customer analysis as a way of countering the downturn.

Sectors that exceeded this national average included; banking, insurance and finance at 89 percent, travel and transport at 90 percent, utilities and telecommunications at 91 percent and, crucially, IT communications and hi-tech at 93 percent. Respondents from larger businesses were significantly more supportive of investment than their smaller business counterparts.

So it appears the potential for maintaining and even increasing marketing budget remains. But marketers will need to demonstrate prudent choices, healthy pipeline and ultimately a superb return on investment.

But what if you’re not sure you’ve got a strong case to start with? Here’s a checklist to make sure you’ve thought through all the angles before you go in for the meeting with the CFO. (If you didn’t get it yesterday, here’s a download summarising other useful stats and links to online B2B marketing budget resources. Marketing Investment – Resources Sheet)

1. Have you started with a clean sheet of paper? Have you questioned old or inherited assumptions? Don’t use last year’s budget as a starting point, it will often lead you to make the same mistakes.
2. Have you budgeted on the basis of what you are paying now? Can you get things cheaper through better buying practices? Manage costs through prudent buying, investigate alternatives for spend rather than assuming it will cost the same this year as it did last year.
3. Have you looked hard enough at the people and skills side? Do you have what you need, or are you living with what you have? Have you considered outsourcing rather than increasing headcount or replacing leavers?
4. Have you budgeted programmes rather than lines? Line-based thinking can lead you from where the real issues are with marketing programmes. Sometimes changing creative or changing tactic masks a fundamental problem with the marketing strategy itself. You can also make a much more effective business case for a programme than a single line.
5. Have you cut out costs by standardising production? Adopt marketing agency type-approaches to numbers of authors’ amends you will allow internally. Impose SLAs on yourself and your team to uphold and improve the services you provide to the business.
6. Have you looked at where you can adopt new purchasing and manufacturing techniques within your job or team? Consider a “just in time” approach to content generation for example. Review your processes and look to minimise waste wherever possible?
7. Ask yourself a lot of tough questions – do you absolutely have to do things? Have you challenged received wisdom that certain activities work – are you sure they don’t just make people feel good? Do you have measures from previous years that can back you up?
8. Have you focused your spend on improving what really matters to the business? (Leads generated, a better conversion rate, customer loyalty increase?, larger average £ sale per customer, increased profitability per customer?)
9. Have you projected the revenue stream from your activity forward rather than looking back? Different activity, in a different market or at a different time will give different results. Look forward over the coming year with your assumptions, don’t base this year’s marketing on last year’s revenues.
10. If you have multiple products or services, have you budgeted differently for them depending upon the corporate objectives, aspirations and markets for each?
11. Are you being asked to do too much with too little? Avoid the “marketing always wants more budget” accusation. Be clear and realistic – don’t be pressured into agreeing to achieve myriad objectives with insufficient resources. You will fail to achieve your objectives and undermine the reputation of marketing.
12. Are there other areas of the business that will impact your success? Should you make a case for the marketing spend in these areas too? (Customer care, sales and bid support, internal communications.)
13. Have you pre-identified points throughout the year when you are willing to sit back down the CFO and review your progress and the returns you are generating?

Plus – struggling with where to start or how to put the budget together in the first place? We’ve collated the most useful starting points from our own desk research. Download it here – Marketing Investment – Resources Sheet.

1. Start by completely aligning your proposed marketing plan with the business plan – draw a straight line between what the company wants to achieve and what you are planning to do. Explain in detail exactly how it will contribute. Have the company’s stated strategic plan with you on the day.
2. Measure what matters, not what’s easy – use metrics that the CEO and CFO will genuinely care about. Pipeline, lead generation, increased revenue from existing accounts and new business. You will be measuring a lot of other things too, but these are the numbers they want to understand your contribution to.
3. Use the right language – talk about investment rather than spend. Argue a solid business case. Focus on short term ROMI (sales leads for today) and longer term ROMI (an easier selling environment for tomorrow). Explain for each budget line what you are targeting the return on investment to be and why.
4. Help the CFO achieve his/her ends – suggest that the marketing spend be amortised as the benefit is realised. We’ve also seen a number of companies who account for their marketing spend only when they see the actual benefit from the campaign (typically when the deliverables hit).
5. Use standard sales terminology – map your programmes against the sales funnel, visually if possible, showing how your plans will contribute to driving prospects through that funnel.
6. Get the sales director behind you – if you’re already delivering leads, use this to support your case. If not, make a start on sales-approved programmes and use the sales director to support your case before the meeting.
7. Don’t forget to map against profitability targets as well as revenue targets. Demonstrate how your programmes will increase average sale per customer, keep customers loyal for longer or retain more of them.
8. The CFO can’t argue with what the customer is saying. Poll your customer and prospect base about what they want and expect from you marketing-wise. Take visuals in with you to demonstrate what is needed. See my recent post on how CIOs like to be marketed to as an example of the kind of first-hand information you can use to back up your case.
9. Remember to sell the plan just as hard as you explain it. Enthusiasm is infectious.