EYE ON THE STATES

Companies Shop for Leads

Thomas Davies

One of the greatest challenges ? some would say headaches ? facing companies selling to state and local governments is staying on top of the market. The sheer number of opportunities simply outstrips the resources most companies have to effectively follow what's going on.

In response, market research companies have developed opportunity databases, often referred to as prospect or lead databases, that identify and track selling opportunities for companies. But selecting the right database to subscribe to is becoming more difficult for many companies.

Until very recently there was, for all practical purposes, only one credible database covering the U.S. state and local market. Now there are at least three well-recognized market research companies that offer tracking services enabling companies to access rich Web-based databases of upcoming selling opportunities. Each database offered by e.Republic Inc., Federal Sources Inc. and Input Inc. has its strengths, but no one is completely meeting the needs of the industry.

In choosing a database to support their market intelligence needs, here are five easy questions companies should consider as they kick the tires.

What is an opportunity?

This may seem like a puzzling question, but it may be the most important one in making the right choice. Companies selling to state and local government rarely share the same profile of what an attractive opportunity looks like. Some target large, complex projects; others like simpler, more product-oriented opportunities. They can't pursue everything, so the successful ones focus on their sweet spot.

Not surprisingly, the market research companies do the same. There are too many opportunities to research cost effectively. One well-known market research company, for example, focuses on projects that exceed several hundred thousand dollars and are typically purchased by government through requests for proposals. It does not focus on identifying government purchases that are made through task orders that avoid a traditional request for proposals. So to avoid surprises ? and disappointing results ? companies are well-advised to understand the guidelines the market research companies are using to uncover opportunities.

What is the market segment coverage?

There are far more government buyers than researchers. With 50 states, more than 3,000 counties and more than 17,000 cities and municipalities, market researchers have to pick and choose which buyers to cover. Even within one state, there are many more buyers than most research firms can adequately cover.

So market research firms are faced with the trade off between how deep and how broad to do their research. Most will place limits on the coverage model, for example, only cities and counties in excess of $1 billion revenue or more than 500,000 population. Others will focus only on designated vertical segments, such as human services or criminal justice.

Companies should ask for these parameters and get a list of what jurisdictions and market segments fall outside the range they may be targeting.

What technologies do they cover?

Communications technologies, peripherals, software, hardware, devices, professional services and so forth are purchased using different procurement practices and contract vehicles. No one market research database today does a good job covering all the technologies that are sold to state and local governments.

In some cases, the market researchers overlook just how much technology is bought through business arrangements that, on the surface, don't appear to include information technology. For example, many of the largest contracts in state and local government are for business process management services.

Under these arrangements, the largest integrators administer government programs on behalf of their customers. In doing so, they purchase millions of dollars of IT goods and services annually. Yet it's rare that any of the market research databases break out the IT spending that takes place under these contracts.

How timely is the market intelligence?

Uncovering a new selling opportunity is difficult. Doing so ahead of the curve and then staying out in front is especially challenging. Market researchers are only as good as their government contacts. The closer the contacts are to the buying action, the more timely and reliable the intelligence will be.

Too many market research firms take the path of least resistance and rely predominantly on contacts within government purchasing offices. While helpful, purchasing agents often are not in the loop during all phases of the IT buying process. At the early stages, when IT needs are first identified and plans developed, it is important that the market research firms reach out to the operating departments and the program offices. Without such contacts, market research firms can only uncover what everyone already knows or can easily find out.

What is the price per opportunity?

How should companies compare the choices they have? It's not easy to do an apples-to-apples comparison of the different databases. But one quick and easy metric can be produced by dividing the number of active opportunities being tracked at any point in time by the annual price of the subscription. While this isn't the only measuring stick a company will want to use, it will help identify the databases that yield the biggest bang for the buck.

No one market research database will meet all of a company's lead generation needs. There are important considerations beyond those mentioned here. And the databases simply aren't comprehensive, detailed, broad or timely enough to satisfy everyone. But many companies find them valuable as a supplement to other sources of market intelligence. Now that competition among the market research companies is heating up and there are more alternatives to choose from, the IT industry should have more and better choices in the future.

Thomas Davies is senior vice president at Current Analysis, Sterling, Va. His e-mail address is tdavies@currentanalysis.com.

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