Anyone of a certain age remember this Palmolive commercial from the early 1970s?
In the commercial, a manicurist advises a frequent dishwasher to switch to a kinder, gentler brand of dish soap. When the client inquires further, the manicurist tells her, “You’re soaking in it!”
Today, there’s a fascinating experiment underway. The $450 billion world of software buying is moving online. It’s been in the works for about 10 years, beginning with the rise of e-commerce; however, evidence that the move was here to stay has only come in the past few years. Like Palmolive, the movement in the tech buyer world to source, evaluate, purchase and deploy enterprise-grade software entirely online crept up without much fanfare. Three points underscore the impact of this change on the tech buying industry.
- Tech buyers trust online advice and recommendations. G2 will soon top 1,000,000 verified reviews of software and technology services; other review sites are experiencing similar growth, albeit on a smaller scale. In a recent G2 survey (Apr. 2019, N=1,362 respondents) 82% of respondents stated they use online review sites to get information and recommendations to support their tech buying decisions.
- Large-scale software subscription contracts, conducted end to end online, are routine. To date, there have been at least two, and perhaps many more, seven-figure software purchase or license deals done entirely on the AWS Marketplace. And that means the entire process—the selection of software; the price negotiation in online deal rooms; the contract automation using a platform focused on 4–5 areas of typical contention; and finally, deployment on a massive cloud infrastructure, ready for configuration and user rollout.
- Technology procurement has transitioned from a centrally run CFO function to an IT leadership function. This is the case at more than 30% of enterprise corporations (1,000+ employees) in the United States. This is also true at over 35% of large corporations (10,000+ employees) and at nearly 50% of very large corporations (50,000+ employees). At these firms, it’s not always called procurement, and where it once was ad hoc and tactical, it’s now strategically imperative for large IT organizations to speed up how they identify, source, and buy the best software.
Today’s B2B consumers trust online reviews
A recent G2 survey found that 85% of technology buyers read up to 10 customer reviews before making a final decision. Additionally, 90% of business buyers do their own research online and will find vendors when they’re ready to buy. Forrester Research conducted a study of business technology buyers that found peer experiences, product ratings, and online reviews are the top data inputs tech buyers seek when they research products online.
Research by Northwestern University’s Spiegel Research Center (N=122,000 online reviews) found that displaying reviews can increase conversion by 270%. When the price is higher, there is more risk involved in the consumer’s decision, reviews give buyers more information and help mitigate that risk. According to the same data, the higher the price of the product, the more reliant the buyer was on verified, trusted reviews to make a buying decision (190% for lower-priced, one-off products, to 380% for larger purchases).
For C-level IT leaders, large technology investments are among the riskiest career moves they can make. Clearly, more information from trusted peers and verified buyers helps lower some of this risk.
B2B tech marketplaces matter
Many assumptions have been made about customers’ willingness to buy from marketplaces, whether single-vendor or vendor-agnostic. The notion of “trusting” marketplaces as a point of sale (POS) for any software purchase larger than a small, one-off license or seat, has been considered sketchy at the least, and career-ending at the worst. Considering the dynamics in negotiating software price and terms, there’s a limit to how much an enterprise buyer will spend without sales contact (or a “handshake”) before they need to have direct negotiations with the tech seller.
However, large marketplace operators have reported in analyst forums over the past year that there have been many six-figure (and a few seven-figure) sales made directly on large tech marketplaces. The reason many buyers give is the ability to have quick access to the software they need to build, secure, and run proof of concept (PoC) applications important to their business. For buyers, instant access to the application trumped any downside, even if prolonged negotiations materialized into better terms or a lower price. This is a major milestone in the transformation of distributing software capability, and a proof of concept that just as in our consumer lives, ease and speed can mean more than the lowest cost.
It’s taken tremendous innovation to get to this point. Major marketplace providers—like Microsoft’s Azure Marketplace, Google’s Cloud Platform Marketplace, Amazon’s AWS Marketplace, ServiceNow, Oracle Cloud MarketPlace, Ingram Micro Cloud Arcade, and many others—have built features that helped remove long-standing online buyer objections regarding negotiation, best price, and right-fit.
For example, AWS built a private deal room function to let buyers and sellers negotiate price, receive volume discounts, benefit from multi-year contracts, and request custom legal terms. Oracle automated the contracts process and focused on 3–4 enterprise user license agreement (EULA) contract terms and conditions the company said caused over 95% of legal barriers to making a deal, so sales can happen smoothly. ServiceNow and Ingram Micro have a huge transactional history of software sales and service tickets, respectively. They can both ensure right-fit technology purchases which will likely integrate with buyers’ existing tech stacks and topologies.
Not your father’s procurement
While buyers turn to B2B peer reviews and online marketplaces, the world of B2B procurement of technology has quickly transformed. Global procurement is a long-established purchase and distribution network that includes everything from paper clips to outsourcing services, with more than $4 trillion in global transaction volume in 2018. Technology products and services occupy a huge piece of this pie, both in the form of one-time product purchases and subscriptions for software services.
For many years, enterprise procurement was in the domain of the CFO, as it was organized for compliance and spending oversight, with a mission of responsibly managing fixed capital expenses. Since speed is the new currency of strategic IT organizations, and software products are designed to run across any infrastructure-as-a-service (IaaS) platform have become the norm, the idea of a software package immediately deploying—whether it’s endpoint security, sales automation, or a database—an alternative tech procurement vehicle has emerged.
A huge obstacle to tech procurement is the time and energy devoted to identifying right-fit solutions, negotiating contract terms, and finally receiving access to the software. Large B2B marketplaces have shortened the period from selection to deployment to two weeks maximum. Furthermore, many are building in capabilities such as contract acceleration, private rooms for bespoke negotiations, and tools for vendors to operationalize how and when they charge. Instead of building in a finance function, these tech buying teams have moved to the office of the CTO directly. They recognize having both the technical acumen to vet and select the right solution, as well as the agility needed to gain quick access. This method allows both success and failure of different procurements to convince the rest of the organization to pivot and respond to opportunities appropriately.
Source: Palmolive ad
You’re soaking in it
As with the vast changes in how we shop as consumers, which parts of our enterprise businesses gets to choose B2B products, the tools we use to identify the right-fit tech products, and how we make the purchase—and arrange for support—have changed all around us. We’re soaking in it, and within two years, G2 expects more than 20% of software licences and SaaS “seats” will be procured at B2B marketplaces. Getting advice from peers in similar roles, with similar problem statements, in similar company types, industries, and geographies, has always been a best practice before any important purchasing decision. As we know from our consumer lives, the best advice comes from thorough verified reviews from trusted peers. Extending this model to B2B technology means changes in user behavior, improvements in marketplace choice, enhanced services for buyers and sellers, and a mandate for strategic tech acquisition as a differentiator.
If one thing’s for sure, G2’s review volume, and trends in how these reviews are used, show us that this movement to online technology procurement is real and lasting.