SAN FRANCISCO (CNN/Money) -
With the IT industry suffering through of a slowdown of epic proportions, good news is hard to come by. Some problems are beyond the industry's control -- such as the continued decline in stock prices, caused in part by Wall Street's overall malaise.
But others are very fixable, though they might require the industry to take a long, hard look at current business practices.
Take customer relations, for example -- more specifically, the loyalty [or lack thereof] that most IT customers feel toward their vendors.
A study released Oct. 16 by Indianapolis-based Walker Information found that just 47 percent of IT staffers want to maintain relationships with their current vendors. The rest either feel trapped in their current relationship (29 percent), might not continue the relationship (3 percent), or have little intention of renewing the relationship (21 percent). The IT vendors cited most often were Adobe (ADBE: up $1.10 to $24.91, Research, Estimates), Cisco (CSCO: up $0.42 to $10.95, Research, Estimates), Dell (DELL: up $0.40 to $28.85, Research, Estimates), Hewlett-Packard (HPQ: up $0.89 to $13.98, Research, Estimates), IBM (IBM: up $1.30 to $75.55, Research, Estimates), Microsoft (MSFT: down $0.64 to $52.51, Research, Estimates), Oracle (ORCL: up $0.15 to $9.64, Research, Estimates), Seagate, Sun Microsystems (SUNW: down $0.18 to $2.56, Research, Estimates), and 3 Com (COMS: down $0.09 to $4.01, Research, Estimates).
"Product quality is a key driver of customer loyalty," says Marc Drizin, vice president and loyalty specialist at Walker. "As quality improves, loyalty will improve, but consumers have accepted lower levels of quality in the IT industry."
Low expectations may explain why, paradoxically, 80 percent of the survey respondents said they were "satisfied" with their vendors. But Drizin downplays that finding as misleading. "Even though people are satisfied, that doesn't mean they're going to buy again. Remember, one in five respondents said they were halfway out the door of the relationship."
At a time when IT vendors talk about hoping to capture new market share during the downturn, many may, on the contrary, face the prospect of losing current customers.
Of course, some limiting factors should be taken into account. For example, even though there are plenty of strains in vendor/customer relationships, the cost of switching technologies is often prohibitively high, which makes many companies reluctant to abandon their existing IT investments and start anew.
"The companies that feel trapped are, in fact, trapped," says Laurie Orlov, an analyst with Forrester Research.
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How did things get so bad, and what can vendors do to improve the situation? Part of the problem lies in the high-handed manner many vendors have used when dealing with customers -- a problem that was compounded during the boom years.
IT vendors have a history of overselling their products, or touting ephemeral cost savings, time savings, and organizational efficiencies. On paper, such glorious results may indeed be attainable. But in practice, optimistic projections are often contingent upon customers' signing up for expensive after-purchase consulting contracts -- the details of which are rarely discussed before the sale.
Another part of the problem is the woeful state of customer support after the sale.
"When the economy was going up and the vendors were selling million of products, customer service was an afterthought," says Brendan Richardson, a partner at Vision Capital, a technology venture fund.
Now, according to both Richardson and Drizin, as enterprise software and hardware products are increasingly commoditized, good service is a way for vendors to differentiate themselves.
All of this represents a difficult power-reversal for the IT industry. In all likelihood, vendors will have to inject more reality and transparency into their sales pitches if they want to hang on to customers.
A Honda salesperson can't tell a customer that the Accord can reach speeds of 200 mph, and an aspirin bottle can't claim to help headache-sufferers shed 10 pounds a week. Smart IT vendors will adopt a similarly truthful approach to sales, backed by a genuine commitment to good customer support.
"If you're looking for growth strategy," Drizin says, "get in good with the little companies and the after-sales support. No one's catering to them. It's an opportunity."
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