• What do buyers and suppliers really think of the IT market? [Research]

Probrand asks buyers and suppliers what they really think of the buying and selling experience

Frustrated buyers say ‘stop calling us’, suppliers say we want transparency!

Executive summary

The B2B IT market is evolving at a rapid rate as suppliers and resellers look to keep up with customers’ shifting buying preferences. Yet research, conducted by Probrand, shows that a large gap exists between what buyers expect and what is currently being delivered.
This report unearths modern purchasing preferences and some of the frustrations that are hindering the buying and selling experience. It also outlines how the market is changing to bring buyers and suppliers closer together.

Introduction - a complex buying and selling market

Due to the rate of change in the technology industry, IT buying is often viewed as being more complex than purchasing in other markets. This is largely down to the speed of development within the computing and communications sectors – which means products are either old or obsolete within just a few years of their launch. This makes it hard for buyers to stay on top of the market and understand what the best product or service to purchase might be at any given time.  Read more about the impact of a complex three tiered IT supply chain on price and stock here.

Furthermore, supply chain complications, such as currency fluctuations (particularly significant in the wake of the Brexit vote in the UK) or restricted availability to raw materials and components, can have a significant impact on trade prices. And as new products arrive in the market all the time, the demand and, therefore, stock levels of existing products can also be hard to predict and track.  Related read; report into factors driving market volatility.

All of these variants make facilitating buying and selling within this fast-moving market difficult. To resolve this challenge a large value-added reseller (VAR) sector exists – the 100 top players in this industry have a combined turnover of £12.7bn. Sitting in between customers and distributors and vendors, resellers play the role of the trusted adviser to buyers and a facilitator to suppliers trying to reach their end users.

This has been a long-accepted reality, but VARs have come under pressure in recent years due to changing buying behaviour. To some extent, B2B buyers are now able to act more like customers in the consumer market. They will use the internet to carry out research, browse service offerings, compare prices and find suitable deals. In response, resellers have been diversifying their offer through their service proposition or ecommerce.

With the market evolving, we want to know how buyers now prefer to procure IT and what barriers might be getting in their way? To do this, Probrand surveyed more than 200 buyers and 74 suppliers to get a better understanding of the current landscape. 

Preferred methods of buying

There is little doubt that the internet has impacted B2B over the last decade. In the past, buyers with limited information to hand, usually a paper catalogue, would have sought the advice of a sales representative much sooner – typically while still in the research phase of their decision making. However, research by Gartner’s CEB, has revealed that 57% of the purchase process is now usually completed before a B2B customer engages directly with any supplier. That’s because it’s now much easier to find product analysis and reviews online.  This is where marketplaces have risen to fame.

This readily available information has also made it easier for buyers to purchase products via the internet, completely cutting out the need to talk to an adviser. This shift in behaviour was borne out in Probrand’s survey of buyers. It reveals that more than half of B2B buyers (53%) now like to research and purchase IT products online, compared to just over one third (36%) who prefer to buy through a sales representative.
A similar percentage of suppliers (38%) believe that their buyers prefer to purchase products via a salesperson. There seems to be less appreciation for how many prefer to buy online, however – with only 39% believing this is how buyers choose to buy.

There is, however, a significant difference in buyer behaviour when it comes to purchasing IT services, as opposed to products. This may be because services are perceived as being more difficult to research and buy online, as there isn’t the same level of information available or the facilities don’t exist to support it.   

The research reveals that almost three quarters (73%) still prefer to talk to a salesperson when buying an IT service, compared to less than one fifth (19%) choosing to buy online. The suppliers also understood this preference, with 68% believing sales representatives would be the preference and just 11% thinking online would be the better option.

Four in five buyers (80%) also say they see value in the technical advice made available by suppliers. However, despite the ‘value added’ trusted adviser role resellers offer, nearly half (45%) say they would now like to cut out resellers altogether.

The lesson here is that although buyers do still value quality advice, especially when it comes to more complex purchases, their preference for dealing with resellers has waned.
Buyers now want the option to research and buy on their own terms. For some that may still be through a salesperson but the majority also want the ability to do this online without interference. 

Frustrations with the IT purchasing landscape

It’s clear that traditional reselling practices are at odds with modern day B2B IT purchasing preferences. And while most buyers may find purchasing IT relatively easy, our research revealed there are fundamental frustrations that are hindering the IT buyer.  Much of this comes from the complexity of the IT supply chain, which you can learn more about in our dedicated report here.

One of the more obvious irritations is the number of unsolicited reseller sales calls that IT buyers are often forced to field. Probrand’s research reveals half of buyers are receiving more than six calls per day on average – and 11% receive more than ten. One participant even complained that they can receive up to 40 reseller calls in a single day. More than half (54%) also added that reseller calls are never helpful!
Suppliers also express a level of concern that buyers are receiving too many calls. While 41% admit they don’t know whether this is the case, more than a quarter (27%) think there are too many.

Another major source of frustration for buyers is the amount of administration work involved in the procurement process. Almost one quarter of respondents say that this amounts to more than 25% of their working time.

Despite this hindrance, however, neither procurement procedures nor manual processes are considered in the top two barriers that buyers experience when it comes to purchasing IT.
In an indictment of the reseller sector – which is supposed to provide trusted advisers to buyers – they were actually the second biggest barrier.  Nearly half (48%), however, said it was a lack of visibility over stock and price changes that were the biggest barrier.

It appears that IT buyers are only too aware of the complications involved in tracking price levels. Nearly two thirds (65%) understand that there can be up to 15,000 price changes in the IT product market in any given day.  

Surprisingly, given their frustration at the lack of visibility over price and stock changes, 85% of buyers think they never overpay for IT products. This is in sharp contrast to separate research, conducted using IT benchmarking application KnowledgeBus, which revealed that IT buyers pay an average mark-up of 18% on IT hardware, and as high as 1992% in extreme cases. That’s considerably higher than the industry best practice level of 3%, which is recommended as ‘fair’ by the Society of IT Managers (Soctim).

A lack of visibility in the IT market is not just a frustration that affects buyers, however. Suppliers also want greater transparency in the market. Almost one quarter (24%) say a ‘lack of visibility of the end user community’ is their biggest source of frustration.

Their second biggest frustration is end users receiving out of date information. This can be attributed to the inability of current systems to update product details, as well as price and stock levels, in real time. This may also be the reason why buyers struggle to track prices and stock levels.  On that point, you might find our report into market volatility interesting, which looks deeper at factors driving price and stock changes, an ultimately impacting the prices you pay.

An inability to get up-to-date information to the end user is compounded by the view of some suppliers that the money they allocate to resellers for marketing is not providing a return on investment (14%), or is not being spent wisely (12%).

Conclusion - Evolution of the IT buying market

Our research shows that both buyers and sellers are frustrated with the current B2B IT market’s reseller model, and this must change.

When almost half of buyers say they would like to cut resellers out of the process, VARs need to question whether they are still providing the ‘value added’ element of the reseller promise. Despite their frustration, however, 55% of buyers say they still see a place for resellers. The need for buyers to access trusted advisers is also becoming increasingly important, especially as purchasing decisions are becoming less and less straight forward.

A modern IT purchase is not as simple as picking the fastest computer within your budget. Buyers need to make choices between virtual or physical IT environments, they need to consider cloud computing options or determine whether it is better to opt for a desktop, mobile or for a two-in-one device, for example. Being able to speak to an expert, who knows the IT landscape and can suggest products and services to best serve specific needs, can be extremely helpful.

At the same time, however, there needs to be a recognition that buyers also want the option to do their own research and buy online. There is also a desire, from both buyers and suppliers, to remove the barriers and increase market transparency.

In trying to find a solution to these challenges, the consumer market has developed online marketplaces such as eBay, Etsy and Airbnb. These platforms are providing buyers with greater choice and better visibility when it comes to availability and costs. Buyers can also connect and communicate with suppliers easily. These marketplaces have grown to such an extent in recent years that 30 million people in the UK are now using them.

It’s logical that the B2B sector should follow suit. Analyst Frost & Sullivan certainly thinks so. It anticipates the rise of B2B online marketplaces will be worth $6.7 trillion by 2020 – a prediction that puts them on course to eventually outpace the B2C sector.

The ideal solution for the B2B IT sector would be to supplement these online marketplaces with independent advisers that can offer added value to buyers in the fast-moving IT sector. In such environments, suppliers can update data in real time and buyers can have full visibility over the market –  while still being able to access support from experts when a complex decision is required.

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