Why and when technology vendors lose a deal - research

Exclusive in-depth research from Computing and CRN reveals that vendors are too slow to engage, and are failing to match their solution to an end users' needs

At a time when end user organisations are dealing with more and more technology vendors, it is incredibly important for these vendors to understand why it is that a customer has rejected their offering.

This has relied on a lot of guess work up until now. To shed some light on the matter Computing and sister site CRN have undertaken a comprehensive research programme with the aim of understanding the purchasing process from two perspectives - from those buying and from those selling. The results have been written up in a report entitled Buying and Selling Enterprise Technology in the era of Cloud and Digital Transformation.

For the purposes of the research, the cycle of technology procurement was broken down into four, individual stages. In chronological order, they are:

1. The identification of a need
2. Matching solution to need
3. Shortlisting vendor/channel partner
4. Final choice

The ideal scenario for both buyers and sellers is that sellers are involved in the process as early as possible. However, our research uncovered considerable disparity between what buyers want and need and what sellers are providing.

When channel respondents were asked when they were most likely to win business, the majority (61 per cent) said it happened in the second stage - ‘matching solutions to a need', followed by the first stage ‘identification of a need' (23 per cent). When we looked at VARs and MSPs only, where 72 per cent said business is won at the second stage of the buying cycle with 18 per cent selecting the first stage. That makes a total of 90 per cent of VARs and MSPs who believe that business is won in the early stages of the tendering process.

When buyers were asked at which point should vendors or resellers should become involved, their answers aligned broadly to those of sellers: the majority (53 per cent) felt that vendors should be involved in the second stage and a quarter of buyers suggested that vendors should be involved from the first stage (see below, right hand figure).

However, despite the majority of buyers and sellers agreeing that sellers should be involved at an early stage - the research found that sellers were not getting involved early enough.

Eighty-five per cent of sellers believe they were involved at the first or second stage - but only 51 per cent of buyers said that this was the case. Instead, 39 per cent of buyers claimed that sellers generally only engage with them at the shortlisting stage - a point at which only seven per cent of sellers think they win the business.

The significance of winning a deal at this stage is likely to be heavily influenced by price because most of the opportunity to add value - and earn margin - has passed.

"Deals are still winnable but are significantly less profitable, and buyers may be left wondering what exactly the seller has contributed. The long-term implication for strong relationships is negative and opportunities for the future are diminished," the report states.

One of the reasons for the discrepancy between the views of the sales cycle by buyers and sellers, is that buyers are better informed than they were ten years ago, while they are also more accountable for large-scale projects and are therefore likely to be more careful when picking a solution. Sellers clearly need to engage with buyers at an early stage or they could struggle to gain new business.

When is a deal lost and why?

The biggest proportion of channel sellers believe that they are most likely to fail to win business at the final stage. Most sellers we asked were confident in thier ability to match needs with appropriate solutions, however.

But when buyers were asked at which point a vendor or reseller was most likely to be excluded their answers suggest that sellers' confidence may be misplaced. Only 17 per cent of buyers excluded sellers at the end of the process, with the majority saying that the decision was made at the shortlisting stage. Just over a fifth (21 per cent) said that failed sellers will be most likely excluded at the second stage, meaning that they will not even get the chance to match their solution to a the buyer's need.

The top three reasons that buyers gave for rejecting a proposal were cost (52 per cent), solutions not matching need (50 per cent) and lack of understanding of customer business and needs (eight per cent). Sellers, meanwhile think they are excluded on the basis of cost (53 per cent), continued use of incumbent (46 per cent), and no perceived value (10 per cent).

There is a big discrepancy here: only seven per cent of buyers suggested that 'continued use of an incumbent' was the most likely reason that a seller would be excluded from the procurement process. This suggests that sellers are attaching too much to the significance to incumbency.

Presenting the exclusive research at Computing's Tech Marketing & Innovation Forum 2016 in London last week, Tom Wright, director of content and marketing services at Incisive Media, concluded by stating: "Sellers think loyalty exists, but in the age of digital and cloud this is being eroded".

The changing technological landscape has altered the rules of engagement, he suggested.