What is “strategic influence”, how does it impact buyers and sellers, and what do trends in it mean for the tech market? For decades, I’ve worked to model market behavior as a means of providing another data point to surveys, which present a multitude of issues if you rely on them completely. One thing that’s come out of all that work is that major technology initiatives are driven rather than simply developing, and that the ability of a vendor to advance major technology changes depends on the degree to which it can influence buyer strategic planning. Hence, “strategic influence”.
At the start of this century, IBM was the runaway leader in strategic influence. If we set a scale using my models, and assign values to mean that a vendor has totally decisive influence (score 100), enough influence to outplay competitors (50) or no influence on strategy at all (zero), IBM in the year 2000 had a score of 48, and over the period up to 2010, it vacillated between 46 and 53. No other vendor of any type ever achieved a score even in the 40s. FYI, in the 1980s, IBM’s score hit its high of 65, but retrocasting my model, I estimate that in the late 1960s it hit 79.
Other IT vendors hit their high in the 1990s, which is also when IBM’s score dipped into the high 30s, but none of them ever equaled IBM. HPE managed to score 31 in this period, its high point, and Dell hit 27, also its highest. The only software platform player to break into the 20s was VMware, who managed 22 in 2014 and fell slowly after that, to 18 in 2023. Cloud providers hit their high between 2015 and 2022, with Microsoft leading with a high of 37. Amazon with 30, and Google at 22. They’ve all fallen by roughly 4 points since.
Network vendors did their best between 2002 and 2008, with Cisco hitting a high of 24 in that period, rivaling IT vendors, but today even Cisco can’t break into the 20s (in 2023 their score was 16). They had another boost during COVID but didn’t quite get back to their best levels.
Now let’s look beyond influence for a moment, at another metric, which is the percentage of IT spending that represents new projects, versus orderly upgrades to infrastructure. Up to the 1990s, “new” spending tended to account for between 58% and 65% of all IT spending, and since 2000 it has dropped pretty steadily, to the point where in 2023 the new projects made up only 38% of IT spending.
You can see that there’s an interesting synchrony involving strategic influence and IT spending. When IT vendors had stronger strategic influence, more project spending was present. This raises the question of which factor was the driver. My older data from users can’t answer that, but the free-form commentary I’ve gotten over the last year can offer some insight.
Enterprises seem to have boosted their project activity in response to vendors having delivered new technology that opened up new avenues for applying IT at a good ROI. Up to some point in the 1990s, this happened on a regular cycle whose average length was roughly 12 years, but those cycles then ceased. I contend that this failure to introduce new paradigms was the leading cause of the decline in “new” IT spending, and also for shifts in strategic influence. No new paradigms, no new spending.
So can we declare that the chain of events? Not totally, because my enterprise chats also suggest that as new project spending declined, vendor strategic influence fell because there were fewer initiatives where that influence could be applied. And as budgets focused on cost control, vendors became more cautious about even proposing something new. So you can see an element of circularity here.
Wouldn’t vendors, faced with falling IT spending, want to introduce something new? Sure, but here we encounter another force, the “higher apple” problem. The technology shifts needed to move the needle on productivity gains have grown, because the easy connections between tech and productivity have already been exploited. What’s needed now is more of an ecosystem than a product. A lot of pieces have to be put into place, and that means either that a vendor has to share profits with others who supply missing elements, or have enough strategic influence to insure that if they supply all of the pieces, they can drive the project and lock it in to themselves. And, of course, drive a “spend more” story in a market that’s been dominated by “control costs”.
I think this is more of a factor in network equipment, and even IT spending than I first believed, because of this positive-feedback effect. We are now in a market situation where buyers have become conditioned to maintaining the status quo, at first because they weren’t being presented with any transformational technology options, and then almost out of habit. Vendors then found it harder to offer anything that didn’t control costs and simply hold the line. And the problems with transformational new projects that started the whole mess became more acute because cost-driven buyers don’t promote aggressive new product planning.
IBM, champion of strategic influence, missed on revenue yesterday. They also announced their acquisition of HashiCorp to improve their already-strong position in hybrid cloud. Their consulting revenue was down slightly versus 2023, and I think that reflects growing buyer concerns about the economy overall. Even with strong strategic engagement, IBM can’t promote aggressive new project adoption against such a negative tide. It’s the biggest tech problem of our time; how do we restore confidence that IT can really improve and transform business. It’s a question that’s going to get harder to answer as buyers get more ossified into the status quo.
