Estimating the Costs of No Decision - A Multi-Billion Dollar Problem?

Gartner 06 Apr 2021 08:19

“No decision” decisions continue to fascinate me.  As I posted last month, I don’t believe that most of these choices should come as a surprise to the vendors pursuing them.  The signs are often there.

But I thought it would be an interesting thought experiment to try to estimate the cost of no decisions, for both the buying organization and the seller.  Let me be up front about this.   These sunk costs are probably not  the  biggest thing to worry about.   If an organization starts down a buying path and does not buy, but learns something in the process to be better in the future, that is a good thing.  But that does not always seem to happen.

The bigger concern should be opportunity costs and confidence.

If an org has a high number of no decisions, the question they should be asking is where could we invest those resources more effectively.   Could we focus on less projects with a more focused and effective buying effort and get better results? I think the answer to this is undoubtedly yes–if the organization can recognize the issues in their buying approach (we have lots of evidence of what those are).

For an ad hoc buying effort–on that arises over the course of doing business–no decisions typically happen earlier in the buying effort. The estimated costs:

The numbers get more interesting when you start adding them up.  I used our latest buying study to look at the mean number of planned and ad hoc no decisions by company, breaking it down by our Enterprise Adoption Profile Segments.  Then looked at the total sunk costs associated with the no decisions for each.

For the vendors pursuing these opportunities, the accumulated costs were higher, ranging from roughly $690,000 to $1,800,000.

Finally, when you start to add all these up, for our study that included 1500 respondents, the total sunk costs for buyers were $1.125 billion dollars and $1.715 billion for vendors pursuing them.  And that is just for our 1500 respondents.

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