Competitive Benchmarking: A Strategic Guide

What Is Competitive Benchmarking?

The IT market is a crowded space in which IT providers of all sizes compete for a share of the spending customers have budgeted for business and technology transformations and modernizations. Knowing where an IT vendor stands against peers in the market and understanding what competitors provide and how successful they are in terms of financial performance are key levers that IT vendors use to build business growth strategies. Competitive benchmarking uses qualitative and quantitative data to rank IT vendors against their peers. Understanding current IT vendor positioning is key to setting a strategy to outperform peers.

 

Competitive benchmarking is a tool that TBR has been providing to leading IT vendors for nearly 20 years. The tool dives deep into multiple metrics in areas such as revenue, revenue growth and profitability; productivity and resources; operations and investments; and business segments, industry verticals and geographies to construct a meaningful picture of the IT vendor landscape.

 

While ranking IT vendors across multiple metrics is the first important step, the most essential analysis is understanding why certain vendors are taking leading positions in specific metrics and business segments. Data-driven ranking, combined with a thorough analysis of what IT vendors are offering, what their strategies are and where they are investing for growth, helps vendors understand why their peers are being placed in leading or lagging positions.
 

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Understanding the Competitive Benchmarking Process

The process of competitive benchmarking begins with collecting data across multiple vendors, ranking the vendors and analyzing their positioning. A very important aspect of competitive benchmarking is establishing common metric definitions and taxonomies that drive the benchmarking process and provide an apples-to-apples comparison across vendors included in the report.

 

The extensive and thorough collection of financial and nonfinancial information is the foundation for competitive benchmarking. The addition of expert knowledge and impartial opinions by TBR’s analysts about each vendor rounds out the competitive benchmarking process.

 

For example, TBR’s IT Services Vendor Benchmark is a quarterly research program that covers 31 leading vendors in the IT services segment and analyzes their go-to-market strategies and investments, alliances and acquisitions, resource management practices, and financial performance. The IT Services Vendor Benchmark is one of our largest benchmarks and also one of our oldest, having been publishing since 2002. The report includes 15 metrics across three strategic areas (financial, go-to-market and resource management), along with analysis of three main revenue segments (consulting & systems integration, outsourcing, and support & maintenance) and three geographies (the Americas, Asia Pacific, and Europe, the Middle East and Africa [EMEA]).

Benefits of Competitive Benchmarking

Competitive benchmarking enables IT vendors to understand in which areas they outperform or lag their peers. Understanding the ranking of peers helps vendors close gaps in areas such as portfolios, resources, alliance partnerships and acquisitions. Vendors can also identify opportunities for expansion utilizing areas of existing strength in segments, geographies and industries.

Steps to Performing Competitive Benchmarking Analysis

Effective competitive benchmarking begins by carefully selecting a topic area for the report. The topic can be broad, such as IT services, telecommunications services and software, or a deep dive into a specific business segment such as management consulting, cloud, analytics and AI, or sustainability services. The next step is selecting the vendors to cover in the benchmark. Typically, vendors of similar sizes and business models make the most suitable candidates for benchmark reports. Collecting and analyzing data and categorizing and ranking vendors through visual representations enable analysts to identify leaders and laggards and provide expert opinions around vendor positioning.

Determining Success

Using peers’ performance across metrics, business segments and geographies tracked in competitive benchmark reports enables IT vendors to determine the success of their business strategies. IT vendors can understand how successful they are against specific peers and peer groups, depending on the data cuts and analysis, which can be categorized by service area, specific geography, vendor size and/or vendor business model, among other business facets. Competitive benchmarking also provides aggregate views of trends for the entire group of IT vendors covered in the reports. This helps IT vendors understand historic market growth trends and outlooks and identify areas of improvement for future financial results.

Possible Pitfalls

Competitive benchmarking reports typically include a set number of IT providers determined by specific criteria based on the topic of the report. While competitive benchmarking includes a directional view of overall trends and vendor positioning in each report, it does not represent an all-inclusive global market view of the topic covered in the report. Lack of data availability and accuracy can be a challenge when trying to develop comprehensive competitive benchmark reports. Including too many metrics and too many companies can overcomplicate the analysis and provide inaccurate vendor landscape trends. Additionally, overemphasizing data while not utilizing qualitative analysis tied to the data and specific vendors’ business models might create inaccurate benchmark positionings.

Future Trends in B2B Competitive Benchmarking

The future of competitive benchmarking will be driven by progress in technology. Analyst firms that develop competitive benchmarks will increasingly use big data analytics, AI and machine learning solutions to gain deeper insights from datasets, improve their ability to identify and predict trends, and speed up the benchmarking process and make it more efficient.

 

Technologies will also help analyst firms change the cadence of their benchmarking process by utilizing systems that enable tracking and comparison of companies in real time. Data visualization tools will also help benchmark developers improve the quality of their reports and increase the value of their insights.

 

Additionally, an increased emphasis on customer experience and satisfaction will push analysts to customize benchmark reports to address customers’ preferences and specific business needs, thus increasing the value of competitive benchmarks. As long as competitive markets exist, competitive benchmarking will be used by leaders to stay ahead of laggards.

Conclusion: Achieving Success Through Benchmarking Strategies

Competitive benchmarking is an essential tool for IT vendors aiming to navigate and thrive in a crowded market. By leveraging both qualitative and quantitative data, vendors can assess their positioning against peers, identify strengths and weaknesses, and develop strategies for growth and improvement.

 

TBR’s comprehensive benchmarking process, which includes data collection, ranking, and expert analysis, offers valuable insights into market dynamics and vendor performance. As technology advances, the future of competitive benchmarking will be shaped by innovations in big data, AI, and real-time analytics, further enhancing its efficacy and relevance. Ultimately, competitive benchmarking empowers IT vendors to make informed decisions, capitalize on opportunities, and maintain a competitive edge in the ever-evolving IT landscape.

 

For an in-depth, personalized look at TBR’s competitive benchmarking tools, schedule your Insight Center™ private demo today!