Maintaining Incumbency Requires Work — and a Plan

You already know this: Incumbency provides a huge advantage versus competitors during renewal time.

You understand the client’s business inside and out. You’ve established strong relationships with their key decision makers. You’re keenly aware of their hot buttons, eccentricities and future goals.

And your client knows that too. From their point of view, it costs significantly more to replace your firm than to keep it. In fact, we found in our recent pulse survey of professional services providers and their IT clients that the client would need to see, on average, 64% of additional value to replace an incumbent.

Then why do incumbents get displaced?

Our survey revealed that the #1 reason clients replace an incumbent is due to a change in their internal business strategy and direction. Failing to recognize and respond to these changes decreases the perceived value of the incumbent and favors a competitor who addresses the client’s strategic pivot. And the #2 reason clients replace an incumbent is because a competitor is perceived to offer higher quality delivery.

Incumbents can make sure they position themselves advantageously on both of these fronts and keep competitors at bay. But without an established, long-term plan for maintaining incumbency, it’s inevitable that a competitor one day will demonstrate the added value the client is looking for.

Here are four ways to maintain your edge.

1. Begin early. Your sales team should begin strategizing for renewals well before the end of the project or contract, while there is still time to build the track record and strengthen your business case. Address any changes in the client’s business strategy head-on with ways your firm will respond to those changes. And demonstrate quality over mere efficiency in delivering work that meets the client’s strategic goals.
2. Emphasize the value derived from your relationships. Delivery teams must double down on building client relationships by demonstrating enhanced knowledge of the client’s future direction based on your intimate knowledge of their business. Show that a competitor couldn’t possibly have the insights you’ve demonstrated and the value these insights have provided to the client’s business.
3. Establish relationship health checks. Ensure that there are formal mechanisms to gauge relationship status from both internal and client perspectives – beyond just technical performance metrics.
4. Build a change-based mindset. Build skills to embrace client changes – versus ones that overemphasize standardization and stability for the sake of efficiency.

In our work with professional services organizations around the world, we’re often surprised by how even the most sophisticated firms can lapse into incumbent complacency. Working with these firms to establish a formal plan that involves changing both processes and mindsets has allowed them to both demonstrate and realize value during renewal time.

Incumbency shouldn’t be assumed. It must be won.

About the Report
“Winning Deals and Improving Margins” — an IT market report based on a cross-industry study of deals greater than $5M annual contract value with 163 executive leaders, directors, and managers at firms with greater than $250M annual revenue (125 Clients and 38 Providers).

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To learn more about the Vantage Partners Professional Services practice, click here.

To learn more about the Vantage Partners Technology practice, click here.