How to Sell an Investment in IT - When No One's Buying

Updated: August 21, 2012

The dictionary definition of a recession is "a period of reduced economic activity" or "a business cycle contraction." Usually declared after two quarters of negative growth in GDP (Gross Domestic Product), recessions vary in severity and duration but not in their effects, which include declines in real personal income, employment, industrial production, and wholesale-retail sales.

What we face today is a crisis that has destroyed personal and business wealth by trillions of dollars globally, undermined the foundations of the global financial system, triggered sudden and massive layoffs throughout the economy, and prompted an unprecedented level of government intervention. We can only guess at the long-term consequences, but we have already seen fast and furious restructuring in the financial sector, which has been the largest purchaser of technology in recent years.

Justifying technology investments in this environment is challenging. Revenues are down in most sectors. Credit is tight to nonexistent. Decision-makers are dealing with unusual levels of uncertainty, making them risk-averse and prone to freezing expenditures. Meanwhile, IT departments are short-staffed and scrambling to manage their existing projects, let alone contemplating new ones.

But it's not Mission: Impossible, especially if you can save your customers money. If you can make a compelling business case that wins over all constituencies — including business users, IT departments , legal and procurement departments, division heads, and bean counters — there is no reason you can't make the sale. But how do you make that case?

A primary consideration for most business investment decisions, though rarely the only one, is ROI (return on investment). That is, how many dollars in cost savings or revenue gains can be expected for every dollar invested? Even in normal times, the rule of thumb for technology investment is that the return must be at least 10 times the investment. You must gain $10 for every $1 you invest.

This seems like a high hurdle until you consider risk, which is another major factor that your prospect is weighing. What is the probability that the promised return will be realized? How hard and precise are the vendor's numbers and what are their assumptions? Can we predict and contain the disruption in established processes, the retraining required, the wind-down of the old technology, the cost of IT resources required to test and implement the new solution, the opportunity cost of not having those IT resources available to other projects, the risk that the solution might not work in our specific environment, the vendor risk, and the risk of time and budget overruns — among others?

And speaking of time, the third major consideration is payback period. How long will it take to recoup the initial investment? The longer it takes, the less predictable the outcome and the riskier the investment.

Thus, in today's environment, your prospect is looking for infinite ROI at no risk with an immediate payback. (Even then, she'll need to check with legal and IT.)

Now you're in a position to frame the benefits you offer in terms of ROI, risk and payback. What might those benefits be? On the cost-reduction side, your technology might reduce costs because it:

• automates a process and eliminates headcount;
• reduces error rates;
• reduces downtime;
• is more efficient;
• makes workers more productive; and/or
• helps meet regulatory requirements efficiently.

Then there is the revenue side. You can't fight the shrinking economy, but you may still be able to help enhance revenues. Does your solution shorten the sales cycle? Do you have tools and training that will make salespeople more effective or more efficient? Can you enable a new sales channel, such as online sales? Marketing and sales departments are interested.

Boosting revenues and slashing costs are the fundamental benefits that businesses buy — but not the only things. For example, 39 percent of the respondents in a recent survey of 100 CIOs by Hitachi Data Systems found that that in the next three years, the CIOs' biggest concern would be managing complex IT environments with minimal resources. If you have a solution that helps CIOs harmonize new and legacy technologies or standardize systems or reduce maintenance burdens — with fewer IT resources — they will be listening. Even if your solution does not specifically do that, the easier it is to implement and the fewer IT resources required, the better the chance it has of being approved.

Although they're not for everyone, SaaS (Software as a Service) solutions can take a significant burden off internal IT departments, because they are hosted and maintained by vendors. Upfront investment costs are usually a fraction of what conventional software solutions cost, while per-user charges allow companies to keep costs down in slow times and ramp up when business bounces back. If the solution also helps manage critical functions such as sales, payroll, travel, communications, or regulatory compliance, then the business case is even better.

Whether they're SaaS or conventional solutions, a number of tools and technologies ease the burden on IT departments and should do well in recessionary times, including:

• Network management tools optimize networks and strengthen security by detecting nonstandard hardware and software, as well as unauthorized network activity (e.g., high levels of bandwidth usage for nonbusiness purposes).
• Virtualization tools turn one server into multiple servers, make network management easier and less costly, and enable deployment of additional applications without the purchase of additional hardware.
• Remote sales, training and support tools not only minimize travel, they also enable outsourcing and delivery of these services from anywhere in the world, saving on travel, labor and office expenses (rent, electricity, heat, and so forth). Likewise, any technology that enables or facilitates telecommuting will have similar benefits.
• Green technology is not only an idea whose time has come, it is receiving attention and funding from governments (one of the best sources of money in times of economic crisis). Green technology saves money now and prepares organizations for the future, when fossil fuel prices will inevitably rise again.
• Open source software is now a viable alternative to commercial software, even in large enterprises. Almost invariably, it's less expensive and usually results in lower hardware costs and more flexibility in enterprise deployments. In some situations, if the right support infrastructure and IT staff are in place, it could even be free.
• Regulatory compliance solutions will help organizations in the medium to long term adjust to what will probably be an overhaul of the U.S. financial regulatory system, not to mention the health care system.

And if none of this works with your customers and prospects, you may have an opportunity to pitch the Infinite ROI Solution: helping them find other uses in their organizations for technology they've already bought from you. It may not bring you any new revenue, but by embedding your technology deeper in those organizations, you'll be well-positioned for the inevitable recovery.