Recent earnings calls by IBM and SAP triggered two broad yet interconnected thoughts:

• The current pause in economic activity presents a pervasive period of thinking slow — recalling the book “Thinking, Fast and Slow” — for businesses, which could result in persistent share shifts.
• The tactical need for more digital commerce avenues seems poised to accelerate a skill set transformation in selling organizations, away from the affable blue suit seller and toward a more consultative selling model.

Thinking slow requires deliberation, and deliberation comes when life-changing events happen

That headline is the fundamental premise of the book, which nets out as two different lines of thinking. System 1 is our reflexive thinking, and System 2 is our more deliberate thinking. System 2 gets triggered by life-changing events, such as reviewing purchase patterns while preparing to add the first child to a family. This was the underpinning of Target’s strategy to market to expectant mothers to lock them in to long-term buying patterns. COVID-19 has certainly triggered System 2 thinking for business decision makers.

IT is the backbone of digital commerce and, therefore, gets called into question by virtually all businesses no matter where they are on the transformation continuum. Close scrutiny of all discretionary spend and major projects means IT purchasers will be rapidly assessing their buying criteria, including revisiting those used prior to the COVID-19 outbreak to determine if they still apply in light of the current economic climate and somewhat fuzzy future outlook.

IT firms with solid digital practices and the ability to meet enterprise demands from a nimble virtual environment will be able to gain long-term share once the economy stabilizes and thinking fast returns to the business community.

Is COVID-19 the Death of a Salesman?

Both IBM and SAP mentioned in their earnings calls the need to shift more of their selling motions to virtual activities. IBM also highlighted the shift to virtual garages. This movement has a couple of potential impacts:

• Blue suit selling has to shift from relationship building to advisory selling, satisfying the aforementioned System 2 thinking going on among enterprises around the globe. This shift will require more immediate translation of technical implications and seller capabilities around business pain points — something that was previously addressed in the second or third sales interactions when the blue suit seller brought in a coterie of subject matter experts. In essence, that first point of contact is being replaced by digital tools. That somewhat depersonalizes the engagement, but it also strips considerable cost and turnaround time out of the prevailing selling models while enabling decision makers to seek answers through System 2 thinking. In some ways, this brings the consumerization of IT into the enterprise in much the same way that omnichannel marketing from e-tailers such as Amazon has disrupted traditional brick-and-mortar delivery of consumer goods to the populace.
• Advisory selling will have to become more of the norm for all technology sellers and not just the high-end advisory firms. Buying more network capacity could be considered a quick-hit selling transaction for a territory sales rep. It could also be an opening to discuss the overall IT estate, the impact of SD-WAN on security and cloud access, and the need to revisit the whole enterprise IT construct for better resiliency lest an economic impact like COVID-19 — or COVID-19 itself — resurfaces in the future. System 1 thinking would have the seller “take the order,” no questions asked. System 2 consultative selling would ask the questions of the purchaser and seek to expand the engagement into a broader discussion more beneficial to the client and more lucrative to the seller.
• Will the buildup of design centers wind up as a competitive cost disadvantage as more businesses become comfortable with virtual engagements? We saw the phenomenon of virtual activity replacing in-person activity solidify teleconferences as a business after 9/11 curtailed air travel. Now the health risks of in-person meetings will spur further use of virtual meetings and, with it, a potential reduction in demand for these high-cost design-thinking studio facilities.
• Transformation maturity impacts buying behaviors considerably. Those ahead of the curve on transformation are feeling very optimistic about their ability to weather this economic pause. They did the System 2 thinking and are somewhat comfortable in System 1 mode. They also are likely to have some checklists and deeper understanding of the ramifications that they can step through more quickly than less digitally savvy peers. Others are delaying transformation engagements due to a desire to conserve cash, and still others hear horror stories in other industries and see where digital transformation of their operations could inoculate them against this business threat if they move ahead with infusing intelligence into their front- and back-office systems. So leaders lengthen their leads, the hesitant can fall behind, and the newly awakened can get ahead of the vertical impact by heeding the lessons learned of their business colleagues in adjacent industries.

The global economy as we know it is on pause. Our System 1 thinking — our conventional wisdom — is being seriously challenged. This enables savvy business leaders to take this time to rethink their IT investment decisions. When thinking slow, they will be making decisions on suppliers that will have far-reaching market share implications. In turn, savvy technology companies will need to pivot to virtual engagements to provide customers with the desired self-service content and the technically savvy advisors to help work through customers’ future plans in light of this once-in-a-lifetime economic event still cascading through economic activity in real time.

For more insight on how COVID-19 is changing IT sales strategies, read Principal Analyst Allan Krans’ special report SAP and IBM were prepared, responding rapidly, but are still waiting for COVID-19’s peak impact.

This piece is an update to our blog post in late March that looked at how IT organizations are being impacted by COVID-19, including insights from TBR’s survey of enterprise IT leaders. The blog discussed how we are experiencing the second wave of impacts from the outbreak, in which widespread business disruption is affecting demand for IT products and services.

In typical IT research, we tend to track trending on a quarterly, semiannual or annual basis. Given that nothing we are experiencing during this pandemic aligns with the typical way of doing business, we have decided to compare how sentiment has shifted among IT leaders over a roughly two-week span. During the first half of April, we refielded our March pulse survey questions, which yielded the following trends in sentiment.

Overarching IT projects remain in wait-and-see mode

A delay in IT initiatives is one of the clear emerging trends as companies ride out disruptions to employees’ workflows and gauge the financial impact of the pandemic. Compared to the second half of March, there has been no change in the status of existing projects in the first half of April, with 42% of respondents indicating they are delayed. Trends have also remained constant in regard to IT budgets, with about 32% of respondents indicating budgets are frozen and new spending is on hold.

Attention is increasingly shifting toward enabling remote work

While long-term projects may be slowing or paused, there is growth in IT teams’ spending on and delivering of remote work capabilities for end users. In the latter half of March, 34% of respondents reported increasing spending on remote productivity; by mid-April, nearly half of respondents indicated this was the case. TBR believes this trend is driven not only by extensions of stay-at-home orders but also by general acknowledgement that a reintroduction to “normal” life will likely be a slow process.

Reliance on cloud is increasing

SaaS and IaaS are among some of the few IT segments that may see increased demand in the first half of this year. Responses from IT experts reflect this trend, with a considerable increase in respondents indicating usage of cloud resources has grown compared to our survey fielded in March. Currently 30% of respondents are increasing cloud usage due to data center shortages while 19% are increasing cloud consumption to offset labor shortages related to social distancing.

The impacts of the pandemic will be lasting

Respondents have not wavered from their belief that the use of cloud technology at their company will increase in the long term due to the COVID-19 pandemic, as indicated by 48% of those surveyed. Further, a decrease in respondents indicating their use of cloud technology will diminish in the long term suggests that companies expect this wave of cloud adoption will be maintained in the future, rather than serving as a temporary fix for employees needing to conduct business remotely.

On the other hand, there are also simultaneous increases in optimism and uncertainty compared to responses from two weeks ago, as more respondents indicated that they intend to return to typical IT strategies post-pandemic or that they do not know how the pandemic will shape their IT strategy.

While the pandemic has a variety of implications across different types of businesses as well as the IT vendors that serve them, our survey data suggests that IT strategies and ways of working will change for many. Contact TBR to learn more from our analyst team.