it services sales metrics and the sales dashboard · publication date: 10 october 2003 research...

Publication Date: 10 October 2003

Research Brief

IT Services Sales Metrics and the Sales DashboardAbstract: Identifying key sales results for measurement and establishing industry benchmarkeddashboards are critical to the success of IT services sales organizations.

By Michael Haines

Recommendations

■ IT services companies should identify, measure and manage based on key salesmetrics that will help achieve corporate financial objectives and market strategies.

■ IT services sales executives should identify and capture key quantitative andqualitative sales metrics and identify actions to be taken based on the results.

■ IT services companies should build sales dashboards, leverage them at multiplelevels, and regularly evaluate and refresh the set of metrics in the dashboard.

2 IT Services Sales Metrics and the Sales Dashboard

2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 10 October 2003

IT Services Sales Organizations Need to Gear Up for ImprovedAccountability

The continuing growth and importance of IT services in the total ITsolutions mix sought by customers places pressure on companies that sellthese services to make constant improvements to their services salesmodels and sales forces. Also, it heightens the need for IT servicescompanies to efficiently measure key sales results and effectively act onthose results. The insight gained from effective sales measurement can alsoform the basis for reliable and comprehensive sales dashboards.

In the world of sales, activity leads to productivity. When measuring salesorganizations and salespeople, too often the focus is on productivity (thefinal results, such as revenue per salesperson) without understanding theaccompanying statistics or activities that contribute to desired salesproduction. Sales performance can be reduced to its elements simply bylooking at the metrics and statistics.

Being able to measure and track the efforts of a sales force is afundamental sales discipline. Forecasting and budget projections are animportant part of every successful sales system. Sales metrics should notonly measure performance but also create the basis for incentives andgoals that need to be achieved. Setting sales goals that are logically andrealistically aligned with the sales system, as well as corporate objectives,ensures that appropriate expectations are being placed on the sales force.

To assist IT services sales organizations with the identification of relevantsales metrics to use in the optimization of sales strategies, and to assistwith the sales dashboard process, Gartner Dataquest conducted a two-phase, sales metrics research project.

MethodologyIn Phase 1 (conducted in June 2003), Gartner Dataquest conductedinterviews with sales executives at 11 leading IT services companies thatrepresented a variety of service provider types. The focus of theseinterviews was to determine the types and categories of sales results thatare being measured in the IT services industry.

In Phase 2 (conducted in July and August 2003), Gartner Dataquest usedthe input and responses from the Phase 1 interviews to develop a Web-based survey that solicited feedback from IT services companies about themetrics that correspond to the types and categories of sales measurementidentified in Phase 1. This survey resulted in responses from 16 IT servicescompanies.

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©2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 10 October 2003

The companies that participated in the Phase 2 research survey wereprimarily small and midsize consultant and systems integratororganizations, value-added resellers (VARs), and solution providers. Thus,the average sales metrics documented in the average metrics section of thisResearch Brief will have particular applicability to IT services companiesthat fall into these categories.

DemographicsThe participants in the Phase 1 interviews represented a wide variety of ITservices companies in terms of type and size of company. Theparticipating companies are as follows:

■ ACS

■ Acxiom

■ Ajilon

■ Ciber

■ CompuCom

■ Computer Sciences Corporation (CSC)

■ DecisionOne

■ EnPointe Technologies

■ Sarcom

■ Sungard

■ Unisys

The survey component in Phase 2 was designed to gain insight into theactual metrics that are being realized by IT services companies. The firstdemographic question sought to determine the types of IT servicescompanies that were participating in the survey (see Figure 1).



Figure 1Type of Service Provider

Consultant/SystemsIntegrator

VAR or SolutionProvider

Service Divisionof a Hardware orNetwork Product

OriginalEquipment

Manufacturer

Service Divisionof a Software

Developer

OutsourcerTechnology

Management

Others (StaffingFirm, Managed

Service Provider)

0

5

10

15

20

25

30

35

Percentage of Respondents

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Note: Number of respondents = 16Source: Gartner Dataquest (August 2003)

The vast majority of participating companies fell evenly into twocategories: consultant and systems integrator organizations, or VARs andsolutions providers. The companies in the first of these categories almostexclusively sell services, while the companies in the second categorytypically sell a mix of products and services.

The next question sought to determine the size of the participatingcompanies, both in terms of total annual revenue and annual servicesrevenue (see Figures 2 and 3).

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Figure 2Size of Service Provider by Total Annual Revenue

Less Than$20 Million

$20 Million -$49 Million




$1 Billion -$4 Billion

0

5

10

15

20

25

30

35


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Figure 3Size of Service Provider by Annual Services Revenue

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Less Than $20 Million

$50 Million to $199 Million



0 10 20 30 40 50 60 70Percentage of Respondents




Virtually all the participating companies can be classified as either small ormidsize IT services companies. From an annual services revenuestandpoint, we can classify the majority of participants as small IT servicescompanies (annual services revenue less than $20 million).

The people who responded on behalf of their companies worked primarilyin either marketing or sales. Some were also in either operations orbusiness unit management. Nearly all held a title of director or above.

Categories and Types of Sales Results Measured by IT ServicesCompanies

In the Phase 1 portion, Gartner Dataquest interviewed sales executives at11 companies that are considered leaders in the IT services market space inwhich they compete. These interviews sought input on the types andcategories of sales performance issues and metrics that are being measuredand monitored within their companies. The respondents were asked toprovide input regarding sales performance categories and criteriameasured at the corporate/organizational, sales management andsalesperson levels.

Measurement at the Corporate LevelAt the corporate or organizational level, participating IT servicescompanies capture a variety of metrics related to sales performance. Themetrics that are typically captured and measured at the corporate ororganizational level fall into three categories. These include revenue andgross profit metrics, sales expense metrics, and pipeline and forecastmetrics. The categories and types of sales related results that are capturedat these levels are as follows:

■ Revenue and gross profit metrics

❏ Total revenue/plan

❏ Revenue/plan by product and/or service offering

❏ Revenue/salesperson/year

❏ Total gross profit/plan

❏ Gross profit/plan by product and/or service offering

❏ Gross profit/salesperson/year

❏ Average gross profit percent/sales opportunity

❏ New client revenue/total revenue

❏ Established client revenue/total revenue

■ Corporate sales expense metrics

❏ Selling, general and administrative (SG&A) expenses/revenue andgross product

❏ SG&A expenses/revenue and gross product by product or serviceoffering

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❏ SG&A per sales engagement

❏ Run rate growth

■ Pipeline and forecast metrics

❏ New account growth (number, size vs. target)

❏ Established account growth (number, size vs. target)

❏ Size and growth of pipeline

❏ Number of new accounts/target

❏ Average revenue/new account

❏ Size of total sales pipeline — 30, 60, 90 days

❏ Quarter-to-quarter pipeline growth — 30, 60, 90 days

❏ 90-day pipeline percent of quarterly forecast needed to achieve target

❏ Win rates (past year)

❏ Average monthly book to bill ratio

Measurement at the Sales Management LevelAt the sales management level, participating companies primarily capturesales metrics for both revenue and gross profit (financial results), andpipeline and forecasts (future outlook). Input relative to the specific salesmetrics captured by the participating companies at the sales managementlevel are as follows:

■ Revenue and gross profit metrics

❏ Revenue and gross profit/plan

❏ Gross margin dollars/salesperson

❏ Revenue growth in established accounts per sales manager

❏ Revenue growth in established accounts/sales manager by product orservice

❏ Net new business per sales manager per year

❏ Number of new accounts per sales manager/plan

❏ Number of sales manager's teams that have booked revenue incurrent year

❏ SG&A expenses/plan

■ Pipeline and forecast metrics

❏ Number of opportunities in the pipeline per sales manager

❏ Average value of opportunities in the pipleline per sales manager

❏ Weighted value of the pipeline per sales manager

❏ Percent of deals that close and close on-time per sales manager

❏ Pipeline that is late in the sales cycle/new business forecast (byquarter)



❏ Number of outstanding proposals for each sales manager's team

❏ Number of face-to-face client meetings with sales representatives permonth

❏ Average win rates per sales manager

❏ Average win rates per sales manager by product or service

❏ Number of sales opportunities won per quarter per sales manager

❏ Average revenue/sales opportunity/sales manager (by quarter)

❏ Average loss rate per sales manager

❏ Average loss rate per sales manager by product or service

❏ Percentage of sales representatives on plan (quota) year to date

❏ Average number of sales engagements worked with internal teams(collaboration)

❏ Sales representative turnover rate per year

Measurement at the Salesperson LevelAt the salesperson level, the participating companies indicated that salesmetrics are captured in what can be categorized as four categories. Theseinclude financial metrics, pipeline and forecast metrics, specific servicesmetrics, and sales activity metrics. The specific types of metrics beingcaptured in each of these categories are as follows:

■ Financial metrics

❏ Total revenue/target

❏ Total revenue/target by product and/or service offering

❏ Total gross profit/target

❏ Total gross profit/target by product or service offering

❏ New customer business revenue and gross product/target

❏ Existing customer business revenue and gross profit/target

❏ Revenue growth per salesperson

■ Pipeline and opportunity management metrics

❏ Value of rolling four-quarter pipeline

❏ Value of total pipeline

❏ Value of weighted pipeline

❏ Number of all active sales opportunities

❏ Value of all active sales opportunities

❏ Win and loss rates

❏ Win and loss rates by product or service offering

❏ Number of contract terminations/total contracts per year

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■ Specific services sales metrics

❏ Attach rate of services sold/product sales

❏ Attach value of services sold/product sales

❏ Service renewals sold/plan

❏ Book-to-bill ratio

■ Activity-based metrics

❏ Number of appointments per month/plan

❏ Number of executive level calls per month/plan

❏ Cost per sales call

❏ Number of proposals generated per month/plan

❏ Number of leads generated per month outside thecompany/quarter/plan

❏ Number of leads generated per month inside thecompany/quarter/plan

❏ Sales expenses reported (expense reports)/salesperson/quarter

❏ Fully burdened sales cost/salesperson/quarter

Average Metrics of IT Services Companies: The NumbersOnce the categories and types of sales metrics were captured in Phase 1,Gartner Dataquest launched an online survey (Phase 2) to solicit feedbackfrom IT services companies regarding the actual metrics that they arerealizing for the various types of sales metrics discovered in Phase 1.Sixteen IT services organizations participated in this survey, most beingsmall to midsize providers and either consultants and system integrators,or VARs and solution providers. The metrics reported in this section canbe considered as valid benchmark data only for similar types and sizes ofcompanies. Because a significant portion of the companies that provide ITsolutions to the overall marketplace, especially the sizeable and growingsmall and midsize business (SMB) market, fall into these categories, thesurvey results should provide valuable data to a significant portion of thecompanies that provide IT solutions to the business and governmentmarketplace.

As with Phase 1, the survey questions posed in Phase 2 sought sales metricdata at the corporate, sales management and salesperson levels. Thesurvey also sought input on an additional set of questions related to salesmetrics.



Industry Average Metrics at Corporate LevelNearly all participating companies (94 percent) capture sales metrics at thecorporate or organizational level. Only two-thirds (67 percent) indicatedthat they measure sales pipelines at the corporate level, while one-thirdmeasure sales pipelines at a lower level of the organization. The averageresponses for sales metrics captured at the corporate or organizationallevel are documented in Table 1.

Table 1Sales Metrics Reported at the Corporate or Organizational Level

Category Metric

Revenue and Gross Profit Metrics

Total Revenue/Plan for Most Recent Fiscal Year (%) 86.6

Product Revenue/Plan for Most Recent Fiscal Year (%) 72.7

Software Revenue/Plan for Most Recent Fiscal Year (%) 65.2

Services Revenue/Plan for Most Recent Fiscal Year (%) 85.4

Sales Revenue/Salesperson/Year ($Millions) 1.76

Total Gross Profit/Plan for Most Recent Fiscal Year (%) 49.5

Product Gross Profit/Plan for Most Recent Fiscal Year (%) 30.8

Software Gross Profit/Plan for Most Recent Fiscal Year (%) 30.7

Services Gross Profit/Plan for Most Recent Fiscal Year (%) 77.7

Average Gross Profit/Salesperson/Year ($K) 275

Average Gross Profit per Sales Opportunity (%) 47.30

Percentage of Total Revenue from New Clients 21.3

Percentage of Revenue from Existing Clients 76.6

Run Rate Growth (%) 23.5

Expense Metrics

SG&A Expense/Revenue (%) 24.7

SG&A Expense/Product Revenue (%) 93.7

SG&A Expense/Service Revenue (%) 33.6

SG&A Expense Dollars per Sales Engagement 41,683

Pipeline and Forecast Metrics

New Account Growth (Number of New Accounts for Past Year) 25.5

Percentage of New Accounts/Target 55.10

Average size of new accounts ($K) 274

Average Pipeline

30 Days ($M) 5

60 Days ($M) 8.9

90 Days ($M) 14.8

Quarter-to-Quarter Pipeline Growth

30 Days (%) 48.30

60 Days (%) 38.70

90 Days (%) 86.70

Average Win Rate Past Year (%) 43

Multiple of Quarterly Forecast that Pipeline Needs to be to Ensure Target Achievement 14.87 xForecast

Average Monthly Book to Bill Percentage Ratio (Revenue Booked vs. Revenue Billed) 53Source: Gartner Dataquest (August 2003)

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In the most recent fiscal year, the respondents reported total revenue at86.6 percent of plan, while gross profits were only 49.5 percent of plan.Considering the recent state of the economy and the IT sector, thesenumbers are not surprising and reflect severe margin pressure in theindustry. It is apparent that these companies have had to cede ameasurable level of profits to win sales opportunities, thus sacrificingprofits for revenue and market share. Revenue attainment is at the lowestlevels with software sales, while services report the highest levels. Theonly category that experienced near-acceptable gross profit attainment toplan among the participating companies was services (77.7 percent).

Nearly three quarters of the revenue of the participating companies camefrom established clients, while the remainder came from establishedclients, while the remaining quarter came from new clients. This ratio isconsistent with ongoing feedback that Gartner Dataquest receives from ITservices and solutions companies. At the corporate level, SG&A expensesare running nearly 25 percent of revenue, slightly higher than the industryaverage.

Respondents report strong quarter-to-quarter pipeline growth, likelyreflecting an improving economy. At the same time, they report that theirquarterly pipelines need to be nearly 15 times their projected (forecast)revenue to ensure that they reach quarterly objectives. This numberindicates that both win rates are quite low, and sales cycles are long withinmany of the participating companies. This finding indicates to Gartnerthat significant improvement is necessary in a number of IT companies inthe areas of pipeline management and forecasting tools and discipline.

Industry Average Metrics at the Sales ManagementLevelTwo-thirds of the participating companies capture sales results at the salesmanagement level, and 75 percent capture revenue and profitabilitymetrics of sales managers. Only 36 percent capture win/loss statistics atthe sales management level. The average responses for sales metricscaptured at the sales management level are documented in Table 2.



Table 2Sales Metrics Reported at the Sales Management Level

Category Metrics

Revenue and Gross Profit Metrics

Revenue/Plan (%) 79

Gross Profit/Plan (%) 82

Average Annual Gross Profit Produced per Salesperson ($K) 218

Revenue Growth in Existing Accounts/Plan (%) 45

Product Revenue Growth in Existing Accounts/Plan (%) 43

Services Revenue Growth in Existing Accounts/Plan (%) 46

Net New Biz/Sales Manager/Year ($M) 3.5

Number of New Accounts/Plan (%) 57

Percentage of Sales Managers Teams That Have Booked Revenue This Year (%) 97.50

SG&A Expenses/Plan/Sales Manager (%) 72.75

Pipeline and Forecast Metrics

Number Opportunities in the Pipeline/Sales Manager 24.7

Pipeline Value/Sales Manager ($M) 12.8

Weighted Pipeline Value/Sales Manager ($M) 10.2

Percentage of Forecast That Closed (Past Year) 68.2

Percentage of Forecast That Closed On Time as Originally Forecast (Past Year) 50

Pipeline Late in the Cycle/New Business Forecast (Most Recent Quarter) (%) 53

Average Win Rate for all Sales Managers (%) 48

Product Win Rate (%) 63

Services Win Rate (%) 47

Number of Sales Opportunities Won/Quarter, Last 4 Quarters,/Sales Manager 25.3

Average Revenue of Sales Opportunities/Sales Manager/Quarter, Last 4 Quarters ($K) 900

Average Loss Rate/Sales Manager (%) 35

Product Loss Rate (%) 15

Services Loss Rate (%) 40

Activity Based Metrics

Number of Face-to-Face Client Meetings/Sales Manager/Month 14.7

Sales Manager Client Meeting Objective/Month 15.6

Average of Sales Engagements Worked With Internal Teams, Collaboration (%) 40.70

Percentage of Salespeople on Quota 56.1

Average Turnover of Salespeople/Year (%) 15.3Source: Gartner Dataquest (August 2003)

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Interestingly, 68 percent of the respondents' forecast opportunities closed(measured over the past year), but only 50 percent closed on time (whenoriginally forecast). These responses indicate that the participating ITservices companies are doing an adequate job converting prospects intocustomers, but that the management of the sales process and salesforecasting is lacking, to a measurable degree, in that many of the salesopportunities are slipping to a later time frame. In a period of economicsluggishness, longer sales cycles are a reality because of buyer hesitancyand budget constraints. As a result, forecasts to investors can be missedand cash flow negatively impacted. These results are reinforced by thefinding that only 52 percent of the most recent quarterly forecasts ofparticipating companies were reported to be late in the sales cycle (nearlyat the closure point).

The participants also indicated that only slightly more than half (56percent) of their salespeople achieved their targeted sales results (quota) inthe most recent fiscal year. This finding is cause for alarm and shouldserve as a catalyst for action on the part of sales managers. In a smallnumber of cases, quotas may be unrealistic and may need to be adjusted.In the majority of cases, sales management should consider training,coaching, and implementation of improvement plans to increase theportion of the sales force that can be expected to achieve or exceedtargeted levels. Also, sales managers must be prepared (and willing) toremove nonproducers when it becomes evident that those salespeople willnot (or cannot) succeed.

Gartner Dataquest also asked the survey participants to indicate, using alist of several qualitative measurements, which ones they use to measuresales managers. The responses are documented in Figure 4.



Figure 4Degree of Application of Qualitative Measurements for Sales Managers

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Others

Usage of Tools

Industry Knowledge

Business Acumen

Sales Process Knowledge

Coaching Skills

Relationships With Clients

Personal Development Skills

0 20 40 60 80 100Percentage of Respondents

Source: Gartner Dataquest (August 2003)

The findings to this question were encouraging, because nearly all of thequalitative measurement categories are receiving significant attention. Theonly category not receiving adequate measurement at the sales managerlevel is the use of tools. With the pressure on IT sales organizations toconstantly improve responsiveness, collaboration and agility, more focusand measurement must be applied to this important issue.

Industry Average Metrics at Salesperson LevelNot surprisingly, all participating companies capture and measure salesmetrics at the salesperson level. Surprisingly, only 87.5 percent of theparticipants capture revenue-based metrics for each of their salespeopleindividually, and only 57.1 percent capture gross profit-based metrics foreach of their salespeople. Only a third of the participants regularly captureand measure pipeline metrics for each of their salespeople, while 70percent capture win/loss data by salesperson. And none of theparticipants attempt to determine the cost/sales call by salesperson. Forthe most part, the participating companies that don't capture and measurethis important sales performance information were small IT servicescompanies. Many of these companies have only a handful of salespeople,thus making it easier to track the actual and relative performance of eachand the contribution that each is making to the company's sales results.Despite this, it is important for all IT services companies to capture acomprehensive set of sales metrics and regularly act on the results. Nomatter the size of company, you can't manage what you don't measure.

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The average responses for sales metrics captured at the salesperson levelare documented in Table 3.

Table 3Sales Metrics Reported at the Salesperson Level

Category Metric

Financial Metrics

Revenue Growth/Salesperson (%) 14.1

Product Gross Profit Production/Target (%) 25.0

Services Gross Profit Production/Target (%) 44.0

Existing Business Gross Profit Production/Target (%) 20.7

New Business Gross Profit Production/Target (%) 20.0

Pipeline and Opportunity Management Metrics

Value of Total Pipeline/Salesperson, (Rolling four-Quarter Pipeline), ($M) 2.9

Value of Total Weighted Pipeline/Salesperson ($K) 841

Number of Current Working Sales Opportunities/Salesperson 12.7

Average Value of all Sales Opportunities Being Worked/Salesperson ($M) 17.5

Average Win Rate (all opportunities) (%) 51.3

Product Opportunity Win Rate (%) 68.3

Services Opportunity Win Rate (%) 33.3

Average Loss Rate (%) 50.5

Number of Contract Terminations/Salesperson/Year 7

Specific Services Sales Metrics

Average Services Attach Rate (%) 60

Attach Value of Services Sold/Product Sale ($K) 83

Renewals Sold/Plan (%) 83

Book to Bill Ratio (Most Recent Year) (%) 92.3

Activity Based Metrics

Appointments per Month/Salesperson 17.7

Appointments per Month — Percent of Target 71.5

Executive Meetings per Month/Salesperson 6.5

Executive Meetings per Month — Percent of Target 65.8

Number of Proposals per Month/Salesperson 39.8

Number Of Proposals Per Month — Percent of Target 60

Number Of Leads Generated Outside The Company (All Salespeople in Most RecentQuarter)

156

Number Of Leads Generated Inside The Company (All Salespeople in Most RecentQuarter)

48

Expenses Per Salesperson/Quarter (From Expense Reports) 431

Expenses Per Salesperson/Quarter Vs. Budget, (All Salespeople — Most Recent Quarter),(%)

90

Fully Burdened Sales Cost/SP/Quarter ($K) 80Source: Gartner Dataquest (August 2003)

One interesting and encouraging finding is that gross profits reported forsales to new vs. established accounts indicates that the participatingcompanies are not giving away much margin to win business with newclients.



In the area of pipeline metrics, respondents report a significantly betterwin rate for product sales opportunities than for services opportunities.The respondent base comprised many companies that have yet to developeffective services sales teams. IT services companies must closelyscrutinize the win rates for services opportunities as an indicator of theneed to retool sales forces.

Specific services sales metrics indicate that participating companies arerealizing a services attach rate of only 60 percent to product sales. Inaddition, service renewals were reported to be only 83 percent of plannedresults in the most-recent fiscal year. For IT services companies that areattempting to grow the services component of the business mix, these twometrics indicate key areas for focus.

Activity-based metrics for salespeople are particularly revealing.Salespeople within the participating companies were, on average, wellbelow target for three key sales activities. These were the number of clientappointments per month (71.5 percent of target), number of executive levelappointments per month with clients (65.8 percent of target), and thenumber of proposals presented per month (60 percent of target). Untilactions are taken and programs implemented that lead to significantimprovement in each of these critical activities, these IT servicescompanies will not realize their financial targets.

In addition to the metrics documented in Table 3, Gartner asked thesurvey participants to indicate from a list of several qualitativemeasurements, which ones they use to measure salespeople. Theresponses are shown in Figure 5.

Figure 5Degree of Application of Qualitative Measurements for Salespeople

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Others

Team Management Skills

Usage of Tools

Business Acumen

Communication Skills

Sales Process Knowledge

Industry and Solution Knowledge

Relationships With Clients

Presentation Skills

Account Management Skills

0 20 40 60 80 100Percentage of Respondents


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As with sales managers, the participants exhibit a high degree ofapplication of most of these qualitative measures. However, there werethree exceptions that Gartner finds alarming. In addition to limitedmeasurement of tools usage by salespeople, there is also limitedassessment of business acumen and team management skills. The buyersof IT services and solutions are increasingly business unit executives, andthe solutions sold must address critical business issues of the client.Therefore, salespeople need to possess a high degree of business acumento successfully sell into this buyer environment (see "Wanted: SalespeopleWith Business Experience," ITSV-WW-DP-0449). Also, complex servicessolutions often require team selling, and IT services companies shouldimplement training and coaching in this area and measure the teammanagement skills of their salespeople to ensure they are effective in thisincreasingly important skill.

Additional Sales MetricsIn addition to the sales metrics outlined in the previous section, whichcorresponded to the sales metric types and categories provided byparticipating companies in Phase 1, Gartner also solicited feedback in thePhase 2 research survey regarding other sales metrics and related issues.

The first question posed in this section asked participants about thefrequency of measurement of sales results at the corporate, salesmanagement, and salesperson level (see Figure 6).

Figure 6Frequency of Measurement of Sales Results and Activity

Corporate Sales Management Salesperson0

10

20

30

40

50

60

70

80


Monthly

Quarterly

Annually

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Although all levels are primarily measured monthly, corporate and salesmanagement results are also measured significantly on a quarterly basis.

The next question sought to determine the actions that are taken withinthe participating companies based on the metrics captured and the insightgained from the analysis of the information. These actions as follows:

■ Corporate level

❏ Adjust spending up or down, evaluate what we are selling

❏ Account and executive reviews with possible corrective action

❏ Planning

❏ Revise budget

❏ Review strategic plan

❏ Adjust vertical market focus as well as product emphasis

❏ Outlook rebalancing and strategy implementation metric reviews

❏ Weekly pipeline calls

■ Sales management level

❏ Look at activity metrics for clues to what is going on. Make planadjustments

❏ Coaching, planning

❏ Revise sales model

❏ New opportunities, new solutions, new partnerships and newproducts

❏ Quota and market assessments

❏ Training, planning

❏ Initiate targeted team selling with weekly follow-through andwin/loss reviews

❏ Outlook rebalancing and team level discussions

❏ Account reviews and corrective action initiatives


■ Salesperson level

❏ If below expectation results, evaluate human factors (skills,approach), reassign/realign tasks within group

❏ Opportunity reviews (weekly or monthly) with reporting manager

❏ Coaching

❏ Terminate staff

❏ Training, plan of action

❏ Bonuses/dismissals

❏ Activities, motivation, training

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❏ Establish near term call metrics and dollar targets

❏ Development/early performance indicator


The survey participants were next asked if they apply similar sales metricsto measure the sales results of channel and alliance partners. More thanhalf (56 percent) indicated that they don't even measure sales results byspecific partner. Yet, IT services companies are increasingly sellingservices via other IT services providers (see "Selling IT Services via OtherIT Services Providers," ITBS-WW-FR-0118). Sales partners are becoming anincreasingly important component of most IT services companies salesstrategies, and Gartner recommends that appropriate sales metrics beapplied measure the results and contributions of these important salespartners.

Slightly more than 37 percent indicated that they do not use the samemetrics to measure the sales results of partners as they do for their ownsales organization. Only 6.25 percent indicated that they use the samemetrics.

The final set of questions in this section asked the participants to indicatewhether their company measures a number of other sales-related issues.The responses can be seen in Table 4.

Table 4Degree of Measurement of Specific Sales Performance Issues(Percent)

Category Yes No

Differ Metrics Used by Sales Responsibility 43.75 56.25

Customer Satisfaction/Salesperson 31.3 68.8

Sales Training Effectiveness/Salesperson 50.0 50.0

Teamwork and Cross-Selling/Salesperson 68.8 31.3

Sales Lead Conversion 62.5 37.5

Closing Ratio by Buyers Job Title 6.3 93.8

Win Rate by Geography 25.0 75.0

Win Rate by Value of Opportunity 43.8 56.3

Close Rate by Tenure of Salesperson 18.8 81.3

Sales Cycle Length by Offering (Product or Service) 37.5 62.5

Fallout by Phase of the Sales Cycle 25.0 75.0Source: Gartner Dataquest (August 2003)

In only two of these categories are the majority of participating companiescapturing this information. Yet, virtually all of these categories canprovide valuable insight for sales improvement strategies and should bemeasured by IT services companies.



Finally, the respondents were asked to document any other salesperformance metrics that they capture but that weren't queried aboutwithin the survey. The responses are as follows:

■ The staffing business is highly active and transactional. We collectmetrics about staffing opportunities vs. number submitted, and numberinterviewed vs. actual number selected for assignment.

■ Number of follow-on implementations after delivering an architectureservices project

■ By lead source

■ Emphasis on profitability and also a focus on selected verticals wherewe track success, especially as a total dollar amount. Example might beUnix Systems or LAN/WAN networking or extendedwarranty/maintenance contracts in which volumes are trackedmonthly, quarterly, and annually. We use this to establish quotas/goals,and also budgets for the following year.

■ Length of relationship with client

■ Measure sales expense against non-weighted (gross) service revenue.Also measure unburdened service labor cost as a percentage of servicerevenue. The variable is that the sales team does not control the laborcost of service

The respondents documented additional metrics that can be valuable to allIT services firms or to those that focus on specific sectors of the IT servicesmarket.

The IT Services Sales DashboardIT services companies are challenging their sales organizations to deliversignificant results. Without regularly capturing appropriate metrics andestablishing sales dashboards, targeted results will be difficult to achieve.Many IT services companies do not know how the sales organization isperforming. For many, it is not easy for the sales team to align its day-to-day work with the company's key organizational objectives. Interpretingsales data is all about uncovering the key business drivers. The salesdashboard is a key component of this exercise. The sales dashboard is acollection of relevant key performance indicators garnered from salesmetric measurement at each level of the organization that sales executivescan monitor as part of a sales optimization program. It enables companiesto deploy their sales forces effectively and identify concerns andopportunities. With sales dashboards, IT services companies can answercomplex and critical questions such as the following:

■ Am I spending too many resources on low-value sales opportunities?

■ Is my revenue stream exposed to a few high-value orders?

■ How can I anticipate contract renewals and increase my attach rates?

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■ What percentage of my target has been achieved, and how does thiscompare with last year's results?

■ What is the impact on revenue by customers who are spending less?

Despite the importance of creating and using sales dashboards, only 43.7percent of the companies that participated in Phase 2 of this researchproject have sales dashboards in place. Of those, 43 percent indicated thattheir sales dashboard had been in place for less that a year. Only 14percent indicated that their dashboard had been in place for more thanfive years.

IT services and solutions companies that have yet to implement salesdashboards will realize sales results well below target levels and willcontinue to struggle with the optimization of the sales organization andstrategy. In a competitive marketplace that is seeing signs of recovery froma three-year drought, this is not an appealing position.

Gartner Dataquest PerspectiveSales organizations, especially in the world of IT services and solutions,are undergoing significant changes and are under pressure from executiveleadership to produce increased results. Buyer profiles are changing, asbusiness unit executives become more involved in the decision-makingprocess for IT solutions. Sales forces are becoming more mobile and agileby creating a more client-facing, virtual sales organization. Competition ischanging as new providers emerge in a converged world. IT solutionsproviders are increasingly looking to leverage partners (and their salesteams) for expanded sales reach into target markets. All of these issues arecontributing to the need for IT services companies to improve themeasurement of key sales activities and results if they expect to have theinformation and insight needed to make decisions that will lead to neededimprovements and successful results. In many cases, these dynamics areforcing sales executives to measure different issues and to measure indifferent ways than they did in the past.

Gartner Dataquest RecommendationsBased on the findings from this research, Gartner Dataquest recommendsthe following:

■ Every IT services and solutions company has a unique combination ofservice portfolio and target market. Thus, the specific sales activities andresults that need to be captured and measured will be unique to eachcompany. IT solutions companies must carefully consider a finite set ofmetrics that is applicable and most useful to them as a foundation forsales success measurement. Time and resources wasted on collectingand analyzing irrelevant sales results cannot be afforded. In otherwords, "measure smarter, not harder."



■ Too often, sales management within a specific business unit establishesa set of sales activities and objectives to be measured within their ownsilo and without consideration of the "bigger picture." Sales managersand executives must take the additional step to ensure that the salesactivities and results that they are capturing and measuring align closelywith the objectives and strategy of the company. To do otherwise maylead to actions and results that are at cross-purposes with the intendeddirection of the company.

■ In conjunction with the above recommendation, corporate and salesexecutives must ensure that sales metrics that are captured at thecorporate, sales management and salesperson level are carefully alignedand coordinated. IT solutions companies must clearly identify at whichlevel each specific metric can best be captured and take steps to avoidredundant sales measurement efforts.

■ Most sales executives and managers are diligent with regard tomeasuring quantitative sales results. In most cases, the results arereadily available and are the foundation for what these managers arebeing tasked to do: drive numbers. In many cases though, these samesales managers are less than attentive to qualitative sales measurement.Therefore, sales management must increase focus on the qualitativeissues that lead to sales success. In particular, focus should be placed onmeasuring such qualitative issues as business acumen, teammanagement skills, and consultative and strategic selling skills.

■ The tendency to avoid change is human nature. Sales managers tend tofocus on traditional sales metrics and are less likely to aggressivelyconsider new areas of results measurement. However, the salesenvironment and competitive landscape are constantly changing andrequire new perspectives and insight to successfully react to this change.Sales executives must regularly review the set of metrics that theycapture and measure and revise or expand this list as required by thechanging business landscape.

■ Business partners (channels and alliances) are increasingly contributingto the go-to-market strategies and sales results of most IT solutionscompanies. Yet, more than half of the companies that participated inPhase 2 of this research do not measure sales production generated byeach of their partners. IT solutions companies must establish key salesmetrics to measure the sales results of partners and develop specificactions to be taken based on the results. This process should be acollaborative effort with the partner community in general and withindividual partners specifically. These actions should also beincorporated into the overall framework (terms and conditions) of thepartner programs of these companies.

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■ Provide timely access to critical information to people throughout thesales organization: this is an essential success factor for effectivedecision making. Technology advancements have enabled managers togain timely access to an enormous amount of information (somerelevant and some not). Thus, dashboards have emerged thatconsolidate relevant information in a timely manner to make the accessprocess more efficient. However, many sales organizations have notdeveloped and implemented the usage of sales dashboards. IT servicesand solutions companies that have not implemented sales dashboardsmust do so immediately.

Key Issue

What are the characteristics of successful services sales models?


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it services sales metrics and the sales dashboard · publication date: 10 october 2003 research...

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