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Why oil companies purchase technology

Wednesday, November 2, 2011

As a technology salesperson, if your aim is to understand your client's objectives and technical requirements, it is important to engage regularly with them and seek to understand how their business operates, rather than just try to analyse it yourself, says Paul Gibb of consultants CouttsGibb.

In a presentation to his sales team, a sales manager confidently stated, 'Our customers buy software when they have money!'

'Of course cash flow and a certain amount of financial freedom must be important...' suggested a business development manager.

Unfazed, the sales manager continued to assert his theory. 'It was a moment of epiphany, I have looked back at the revenue the company has earned over the last 5 years. When the oil price increased our customers bought software, when the oil price dropped they didn't. Therefore, the company's revenue is linked to the oil price!'

'In order to develop a detailed analysis,' suggested the business development manager, 'we might use a third party to undertake a study which over a period of approximately two months could collate and review technology trends, commercial influences and customer expectations.

'Or, alternatively the third party could host a collective dialogue which would encourage our existing and potential clients to clarify their current technology requirements, investigate their future expectations and include their preferences regarding commercial models or other selected criteria.'

'I don't think we need to spend time and money confirming what we already know. I'll be sharing our conclusions with the regional management team next week.'

Different factors

It is seldom the case that one factor alone will influence an oil companies behaviour; there will be a number of contributing factors that will have influenced technology sales and a technology vendors revenue trends.

Internal vendor metrics that might have contributed to additional sales and increased revenue might include a new product release; the acquisition and promotion of a complimentary technology; the availability of technology on a new platform; revised pricing and other commercial incentives.

External vendor metrics which might influence increased acquisition of technology, includes: client mergers and acquisitions; clients new or expanded regional focus; new geotechnical challenges; an increase in clients personnel and the consequential demand for access to technology; new management and review of existing technology portfolios.

Internal influences which might drive additional sales and increased revenue, might include: effective and strategic marketing campaigns; effective sales strategies; effective management coupled with an experienced sales team.

External influences which might drive additional sales and increased revenue, might include: government incentives for the vendors clients to pursue new projects or develop what once might have been considered to be uneconomic assets; or, the emergence of new sources of hydrocarbons such as shale gas.

External influences which might increase the price of a barrel of oil include: actual and potential geopolitical instability; refining capacity and distribution restrictions; stock market activity; calculated global reductions in production by OPEC; increasing regional demand by countries such as China or India.

External influences which might negatively affect potential sales opportunities, include new government legislation and increased taxation leading to the suspension or the cancellation of planned projects; reduced demand, recession and fiscal tightening.

There is a broad range of factors that influence a client's business objectives and technical requirements and it is important to engage regularly to ensure that your sales strategy can help them achieve their objectives, [not yours].

At many oil companies, budgets are calculated and set prior to the start of the new fiscal year. The budgets are designed to support the oil company achieve their business objectives with provision included for new or additional technology where required.

A rise in oil price - within a financial year - is unlikely to lead to additional revenue for a technology vendor unless the clients objectives and the budget are also changed, however, a significant drop in oil prices might lead to a pause or review of budgets and spending.

Through regular engagement, a business development manager or account manager will be able to ascertain the client's objectives.

Starting with some assumptions they have drawn from annual reports, past objectives and technology requirements, recent client press releases, and existing relationships with their clients, a business development manager can begin to qualify their assumptions through regular dialogue with the client. As the clients requirements are identified and are confirmed sales strategies aligned to those specific requirements can be developed.

Effective sales managers will make many broad assumptions and qualify those assumptions by engaging with their clients. Coherent sales strategies are prepared to demonstrate the vendor has technical solutions to support their clients achieve their objectives. The outcome of understanding your clients' needs will result in considerably more success and revenue when compared to a sales strategy based exclusively on the analysis of internal vendor metrics [and the occasional misguided nonsense].

Associated Companies
» Coutts Gibb Consultants
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