What are the current challenges of IT companies?

Answer 1

Differentiation of product from those of competitors; where IT companies do try and move in a different direction than the pack success can be limited due to a number of factors. These include solution costs being higher than competitor's (which can have an impact on sales even if the solution does provide greater comparative value) as well as customers' potential hesitancy to move from industry standards due to past experience where non-standard offerings are later dropped by the vendor). Difficulty (for sales/marketing/solution architects within IT companies) in aggregating their business's siloed product and services business units, as well as those of their partners, to build solutions that add value to their customer's business. Customers who approach IT vendors with suspicion, or are unwilling to partner with a vendor but instead make purchasing decisions based primarily on price. This in turn reduces the value they receive from their IT vendors, who become less willing to spend time understanding the customer and developing solutions to assist in their business, as all of this time and IP can be taken and tendered to the market by the customer, with the purchasing decision being based on the lowest price rather than the IT company who invested in developing the solution. The ongoing movement of funding from R & D to marketing. IT companies are often concerned that differentiated products will not be successful in the market (as noted above); even if the developed products are of greater value to the market than the current standards the increase in sales cycle time for new/unproven solutions raises the cost of sale, thereby reducing profit. Once the product does gain enough traction in the market to start making profit and recoup the development costs it will generally be replicated by competitors who commoditise the solution (as they have no real development costs to recover, and also need to make the sale based on price as they are not perceived as the leader in this area) and drive down the product margins. Therefore IT companies often view it as cheaper/easier to differentiate the customer's perception of their brand rather than investing in true innovation. Continual reduction of resources and services being made available to customers (both internal and external) in a bid to reduce costs. Although this is obviously an issue for not only IT companies they are being impacted more than most businesses, primarily due to IT being one of the more recent sectors to move from a growing, high-margin model to a more stable, mature business; with the falling profit margins shareholders and management see a reduction in costs to be a quick and easy way to offset the resulting devaluation in share price.