lustratus REPAMA

Posts Tagged ‘dmu’

I’ve been working on a way of categorising value propositions for some time. I’ve arrived at something I refer to as MITICOR which I believe represents the atomic value proposition elements.

By this I mean that all business to business value propositions can be broken down into these 7 base elements. I’m sure I will refine this over time but for our purposes these elements allow us to analyse and categorise the different value propositions that vendors use in their go-to-market efforts.

So what do these categories refer to?

Market

Elements categorised as “Market” include value propositions that relate to the organisation’s market or competitive situation, new product or service introduction as well as the organisation’s marketing efforts such as awareness, public relations or image.

Income

“Income” includes any offer that proposes to increase or sustain existing revenue. In addition new revenue streams fall into this category.

Time

“Time” relates to any value proposition that reduces the time it takes to achieve some organisational objective. Importantly this does not refer to reducing the time to achieve a tactical objective as this would likely be categorised under Operational below.

Institutional

Institutional value propositions relate to the organisation as an entity. Chief amongst these are value propositions that deliver value to shareholders. Taxational or political issues such as “green” policies also come under this heading.

Cost

Reduction in costs, offsetting costs and cost restructuring all fit under this value proposition category.

Operational

Propositions that deliver positive changes to the operational efficiency of the organisation come under this classification. Included in here would be propositions that provide visibility into the current operational effectiveness of the organisation.

Risk

The removal or mitigation of risk at a corporate, personal or project level falls under this value proposition classification.

Multiple Categories

Specific value propositions that vendors create will break down into one or more MITICOR category. It may be that a value proposition from a vendor relates to only one MITICOR category but it is likely that it will break down into more than one MITICOR category.

Examples

I’ve listed below some examples of vendor value propositions and the MITICOR categories that they break down into.

I wanted to document this classification in this blog because I will refer to them in future REPAMA research. I’ve also noticed during the course of my research that there are some very predictable value propositions/MITICOR element combinations. In a later blog I will try to document these MITICOR “chains” and specifically how they relate to the members of the decision making unit (DMU).

Danny Goodall.

I’m kicking off some research into the Decision Making Unit (DMU) for Cloud Computing services and software.

I’m interested to see how much, if at all, the cloud computing decision making unit differs from that of tradition data centre or infrastructure software sales. And if it does differ (as I suspect it does) then what is the impact on traditional marketing elements like audience, message, value propositions, supporting materials, etc.

I want to examine the decision making units for each of the different high-level segments in the Lustratus REPAMA market landscape / taxonomy / segmentation model for cloud computing.

For each of these segments, the basic question I want to answer is:

Within a B2B Cloud Computing transaction, what job roles are involved in the decision making process, what do these individuals need in order to arrive at a decision and how does this differ from traditional enterprise software sales?

It’s important to first stress that “marketing”, in the sense of the departmental responsibilities of the marketing team within a vendor or service provider, can only achieve certain things with respect of the decision making unit. Much of the responsibility for managing the technical and commercial sale obviously lies with the “sales” team. So in my analysis I will limit myself at the moment to exploring the influence that the marketing discipline can bring on the decision making unit.

First some terminology. We think about the roles of the DMU in the decision making process in the following way and refer to it using the acronym – IGIDBU (because the world needed another acronym).

IGIDBU – Initiator, Gatekeeper, Influencer, Decider, Buyer, User. I recognise that it isn’t the most simple or memorable acronym or mnemonic to remember, but saying it that way preserves some of the implied “chronology of contact” in the sales process. First we meet the initiator, then we deal with gatekeepers, etc. until the user “uses” the software or services.

This categorisation of the roles in the decision making process is quite common and is documented in many places – a good piece of background can be found in Strategic Marketing Planning and Control -Drummond, Ensor, Ashford published by Butterworth-Heinmann. I have seen some models that add another entity that owns the budget – “budget holder” or “Financier” but for our purposes we’ll wrap that role up in the Decision Maker because in my experience in infrastructure software sales the decision typically comes from where the budget is.

As I mentioned above, for each cloud computing market segment I’m going to identify the most likely job roles that fall into the IGIDBU categories above. Alongside them I want to map their needs and the likely marketing materials and messaging that is needed to help them arrive at the “right” decision.

The Change in Perceived Risk

Of particular interest to me is the change in the perceived risk of the ‘purchase’ with Cloud Computing. With an enterprise software licence, the degree of perceived risk in purchasing comes from a number of key areas including:

• Will the product meet the functional needs of the users?
• Will the performance of the product match the requirements?
• Is the vendor stable/credible/’suable’?
• How large is the capital outlay – and can we afford to write it off if the project fails?
• etc.

Cloud computing adds or at least adjusts a number of these categories of risk:

• Will the committed service level meet our needs?
• Will the service level delivered match what was committed to?
• etc.

With an on-premise purchase of licensed software, hardware, etc. the onus for ensuring performance and functional fit after the sale is with the company making the purchase. However, in a cloud situation where performance and more than likely functional capabilities will be documented within a service level agreement, the risk is mitigated to a degree. As long as the SLA is specified correctly, the onus for ensuring that the service level is met now lies with the service provider.

So the question is, will this perceived lower risk, speed-up or otherwise streamline the decision making process? And if so how will that change the way vendors/service providers market to the DMU?

The Change in Expense Accounting (Cap-ex to Op-ex)

Another significant change that Cloud Computing introduces is how the cost is accounted for. Instead of tying up significant capital expense and watching it depreciate on an on-premise solution involving physical hardware and software licences, a comparable cloud solution can be paid from operating expenses, based on actual usage over time.

As mentioned above in traditional sales, the size of capital outlay and the thought of having to write that off if the project fails is a key determinant of the level of perceived risk in arriving at a decision to ‘buy’. Again, the rhetorical question is whether this reduced capital commitment will change ‘purchasing’ behaviour and if so what impact that will have on vendors’ sales and marketing efforts.

I plan to publish the research later in the year. I am in the process of recruiting a number of vendors/services provider who are willing to provide input anonymously in return for access to the research. If you represent such an organisations, please contact me for more information.

As usual I will document the process in these pages.

Danny Goodall