LOS ANGELES, Calif., June 6, 2016

Most TSPs Prioritize Innovation Investments in Customer Engagement Ahead of New Product and Services

Technology and service provider (TSP) CEOs are using innovation projects and leveraging digital business to drive growth through better engagement with customers, according to a new survey by Gartner, Inc. The survey found that investment is being driven toward sales and customer-facing roles instead of toward new product development or cost-saving measures.

Gartner analysts presented these findings during the Gartner Tech Growth & Innovation Conference, which is taking place here through Wednesday. The survey involved 501 CEOs from North America and Western Europe at TSPs with annual revenue from $10 million to more than $1 billion.

"Gartner has long believed that the best product doesn't always win and that many other factors contribute to success, especially a positive customer experience," said Todd Berkowitz, research vice president at Gartner. "Customer engagement received the highest investment from an innovation standpoint with 42 percent of TSP CEOs listing it as one of the top two priorities, ahead of new products and services and significantly ahead of internally focused activities."

Innovation spending is still being directed toward new products and services, but more often it is being directed to find new ways of engaging customers, which includes sales, marketing and customer success management efforts.

"With only 5 percent of technology vendors very or extremely effective at differentiating themselves, differentiation continues to be a major issue for TSPs, and it's even harder when the differentiation is tied to product features and capabilities," said Mr. Berkowitz. "Superior customer engagement, which leads to a superior customer experience, can be a powerful source of differentiation, although only when based on real proof, versus simple claims."

Like all end-user CEOs, TSP CEOs believe that digital business will be transformational to their business. However, the survey showed that, when compared to all end-user CEOs, those from TSPs are more likely to believe that that digital would be impactful in allowing them to enter new markets and industries rather than just drive down costs and push more business through digital channels. TSPs said that they are using digital business to create revenue/customer value (43 percent in top three expected outcomes) and cross-industry boundaries (40 percent) rather than reduce costs (33 percent) and drive more business through digital channels (30 percent).

While TSP CEOs clearly view customer experience improvements as the single biggest factor in winning more deals, they see improving sales and marketing effectiveness as being more important in hitting future growth targets. They are investing more heavily in sales and marketing than anywhere else, including customer experience or product development. Sixty-two percent of survey respondents placed sales in their top three areas for investment and 51 percent had marketing in their top three, compared with only 37 percent for product development. CEOs are also investing more heavily in customer-facing roles to help hit those targets.

"For TSPs, long-term success, and even long-term survival requires continued innovation, embracing of new opportunities and responding to the changing needs of customers," said Mr. Berkowitz. "By innovating in areas outside of products and services and using digital to improve customer engagement and experience, TSPs can drive competitive advantages. In addition, by adapting sales and marketing strategies and continuing to invest in those areas, TSPs can more easily meet future growth targets."

Additional information is available to Gartner clients in the report "Technology Provider CEOs Believe that Customer Experience Provides a Winning Strategy."

Additional details on the future direction of the tech marketplace is being discussed at the taking place at the Gartner Tech Growth & Innovation Conference through June 8 in Los Angeles, CA.