When Gartner predicted in 2012 that by 2017, CMOs would spend more money than CIOs on technology, it felt like a longshot. Although 70% of the companies surveyed by Gartner for its 2012-2013 CMO Spend Survey had already appointed a Chief Marketing Technologist, marketing and sales technology budgets still generally rolled up to the CIO.
Nevertheless, fast-forward five years and Gartner’s prediction is now poised to become a reality.
As the final part of our series on Gartner’s 2016/2017 CMO Spend Survey (read Part 1 here, and Part 2 here), I’m going to drill into this shift in the balance of purchasing power between CIOs and CMOs, and the implications that shift has for marketing departments everywhere.
The Impact of Technology’s Transformation into an Operating Expense
Prior to the age of cloud computing and software-as-a-service, most businesses treated their technology investments as capital expenditures. The process of procuring and implementing a new system involved a massive amount of time, resources, and services in order to pull it off, and it was the responsibility of the CIO to ensure the right purchasing decisions were made and that this process was as efficient as possible. And even then, organizations still couldn’t be sure that the investment was going to pay off until years after the initial deal was signed (hence why these investments were considered capital expenditures and not operating expenditures).
But once the SaaS wave hit, it hit with force. Now, year-long implementation cycles have been condensed to weeks, and 3-5 year standard contracts have been reduced to monthly subscriptions. This has empowered organizations to expect more immediate value from the technologies they purchase, and has encouraged them to be more comfortable with investing in more innovative solutions.
It wasn’t very long after SaaS started gaining momentum that organizations began shifting their marketing technology budgets from IT to marketing, and from capital expenditures to operating expenditures. If marketing was ultimately accountable for the results that marketing technology produced, then marketing should also be responsible for purchasing those technologies, especially if the department has the flexibility to cancel subscriptions whenever these platforms stop providing value.
The Impact of Technology on the CMO’s Budget
So how has the addition of marketing technology impacted the CMO’s budget? Looking again at the 2016/2017 CMO Spend Survey, technology now accounts for 27% of the average marketing budget.
Not only are marketing departments having to absorb the costs of marketing technologies, they also have to absorb the cost of the services needed to implement them, as well as the infrastructure, security, and support needed to ensure continued safety and success. Not to mention that this 27% identified in the survey does not account for the portion of the Labor category of spending dedicated to marketing technology use and management.
The matter of which technologies marketing departments are purchasing specifically is a topic we will cover in greater detail over the course of this year, but it’s safe to say they have absolutely no shortage of options from which to choose:
When 75 percent of marketers believe that within the next 3-5 years they’re going to assume responsibility for end-to-end experience over a customer’s lifetime, it’s safe to say there is a tremendous amount of pressure to accumulate the best technology stack possible in order to help negotiate this role, hence the nearly 4000 technologies in Scott Brinker’s martech supergraphic.
With greater purchasing power comes a tremendous amount of responsibility, one that most marketing departments will probably take some time to learn how to navigate successfully. So how should the average marketing department respond?
1. Hire a Marketing Technologist (if you don’t already have one)
In 2014, 81% of companies over $500M in annual revenue had a Chief Marketing Technologist. Three years later, it is now time for mid-market companies to learn from their enterprise counterparts and do the same. While the role by no means has to be a C-Suite or VP-level position, they do need to have trust and authority within your organization to make critical technology decisions.
2. Align Your Efforts with the CIO
Tom Kanshige at CIO.com published an awesome summary in 2014 of the plight of the modern CIO, drawing from Gartner’s 2014/2015 CMO Spend Survey. In it, he highlights the challenges that IT departments now face as their internal influence is being threatened and pressure is rising to demonstrate their value. While I believe the shift of technology purchasing from IT to marketing is a net positive trend, marketing departments are not staffed to be able to handle the complexity of managing an efficient and secure data infrastructure.
The best way to avoid becoming the next organization in the headlines for getting hacked: empower your IT department and service partners to be responsible for system efficiency and security. You focus on what you do best – serving your audiences across their engagements with your organization.
3. Don’t Think in Silos
While many technologies within the typical stack are considered operating expenditures, a full 88% of companies surveyed in Gartner’s 2016/2017 CMO Spend Survey had a dedicated marketing capital expenditure budget for long-term projects. For those that do have such a budget, 75% of those budgets are administered by marketing (in some fashion), while only 24% are administered by IT.
Again, while this trend seems positive, marketing departments run the risk of investing this money without considering the greater context of the organization’s total technology infrastructure. Say what you want about your IT department, but CIOs are generally acutely aware of all of the capital expenditure initiatives happening across the organization at a given time (hence their previous influence over the power of the CapEx purse). With this shift, it’s critical that marketing departments remain excellent team players and make decisions with the whole organization in mind.
4. For those who are overwhelmed by all of this, it’s time to catch up.
Lastly, I think it’s important to be brutally honest about how difficult marketing in 2017 really is. We work with clients that span the full spectrum between fast-growing regional business and publicly-traded company, and for some of our clients and some of you, the thought of having to assume responsibility for marketing technology, much less the need to hire a dedicated role on your team (or outsourced solution) to help you navigate your technology stack seems daunting, if not absurd.
But the reality is that marketing in 2017 is not for the faint of heart. Marketers representing organizations of all sizes need to pay attention to the trends outlined in Gartner’s CMO Spend Survey, because these are the trends that are going to affect us all.
If all of this information seems overwhelming to you, it’s time to suck it up, dig in, and determine how you’re going to respond. Because your competitors aren’t going to let up, and neither is your audience.
So go back, review your strategy for how you’re going to invest in and manage marketing and sales technology in 2017, and if you don’t have one or if yours is insufficient, fix it before you’re too far into the year to change course. And if you still need help figuring out where to begin, find a partner who knows how to assist you.
Part 1: Unpacking Gartner’s 2016/2017 CMO Spend Survey
Part 2: How Marketing Budgets are Expected to Change in 2017
Access Gartner’s full 2016/2017 CMO Spend Survey here
