Archive for the Enterprise Software Sales Category

Software vendors, tear down this wall !

Posted in Enterprise Software Sales, Pricing of Technology Products, Sales - Basics on January 16, 2011 by Shankar Saikia

Historians say that Ronald Reagan’s 1987 “Mr. Gorbachev, tear down this wall” speech at Brandenburg Gate catalyzed the end of the cold war. Similarly, innovations such as web 2.0, social media, analytics and smartphones have enabled companies to change enterprise software sales and perhaps sales of other products as well.

Traditionally, a salesperson was needed for the following purposes:

– provide product information
– demonstrate product capabilities
– price offerings
– negotiate agreements

Technologies such as the internet, web 2.o and social media have changed the dynamics of software sales. Today customers can research product information using tools such as search and social media. In addition customers can “try-before-buy” by signing up for free trial accounts. Several companies list their pricing on the internet. Vendors that facilitate transparency increase their credibility and reputation.

The benefits to prospects are many, such as:

– increased transparency (e.g., finding information about a vendor by researching tweets, LinkedIn updates etc.)

– pricing clarity (e.g., learn how product is priced by studying online listing of prices)

– increased product knowledge (e.g., online trials, online resources)

Vendors also benefit:

– reduce cost of sales (e.g., instead of salesreps answering questions, have the prospect get answers from multiple online resources)

– improve credibility (e.g., increased transparency leads in increased trust)

With all the innovation in technologies, it is surprising that vendors have not leveraged these technologies to improve the sales process. If customers have started to embrace web 2.0 social media, smartphones etc., shouldn’t you as well ?

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2011 New Year Career Resolution – Build a Moat

Posted in Career Management, Enterprise Software Sales on December 25, 2010 by Shankar Saikia

Merry Christmas everyone – it’s been a while since I have blogged.

It’s almost the beginning of 2011 and I am very excited about 2011. At 30 minutes past midnight on January 1 I will head to Miami for a mini-vacation – I will be staying at the luxurious Eden Roc Renaissance Miami for 3 nights and on January 3rd I will watch Stanford and Andrew Luck play in the Orange Bowl. I feel very thankful for a great 2010 and now I am getting ready for a fantastic 2011.  I have a plan to make 2011 fantastic from a career perspective, as I am a firm believer in the saying “if you fail to plan then you plan to fail”.

For 2011 I have one major theme – build a moat around me. A moat?

Moat

Here’s what I mean – I am going to focus on my strengths, get better at what I do and learn a few new skills. My skills represent my moat – to use a sports analogy, the skills represent both my defense as well as offense! To learn more about the moat analogy read this summary of an interview of Warren Buffet and Jay Z

To be specific here are my career-related resolutions for 2011:

– became a better salesperson (i.e., improve the key capabilities: prospecting, qualification, positioning, negotiation and closing)

– learn a key technical skill: mobile programming

These are the skills that I plan to improve and develop in order to widen the moat around me.

How do you plan to build and widen the moat around you?

Sales and Marketing: How Much To Spend?

Posted in Enterprise Software Sales, Enterprise Software Startup Sales, Sales & Marketing Expenses on August 1, 2010 by Shankar Saikia

No matter how functionally rich and technically advanced your software is, you have to expend resources (i.e., time and money) to get customers to buy your product. Most entrepreneurs, especially founders with primarily an engineering background, do not seem to understand this aspect of starting and operating a business. I have heard of only one tech company that does not have a sales force or has very few salespeople (Atlassian).

Here is some data on the what various publicly traded software-as-a-service (SAAS) companies spend on sales and marketing as a percentage of total revenue (source: 10-K reports at www.sec.gov) :

Salesforce.com 47 % ($605 million out of 2009 revenue of $1.3 billion)
Netsuite 46% ($76 million out of 2009 revenue of $166 million)
Successfactors 52% ($80 million out of 2009 revenue of $153 million)

As you can see each of these companies spends over 45% of its annual revenue on sales and marketing. If you are an entrepreneur you should budget at least that much for sales and marketing (perhaps  more on marketing in the beginning so that you can build awareness).

Experts cite many credible reasons for the success of one tech company over another. One reason is the concept of network effects and increasing returns to scale – for example, a platform that enables others to build applications for it (e.g., Microsoft Windows, Apple’s iPhone App Store) – the greater the number of apps, the greater the value of the platform.  Yet another reason for the success of a tech company, especially an enteprise software company, is effective sales and marketing. As I said in the beginning of this writeup, you cannot win with just a great product.

Data Deluge!

Posted in Data mining, Enterprise Software Sales, Twitter on January 12, 2010 by Shankar Saikia

The year was 2006, George W was in the white house and Google was the king of search. If you wanted a restaurant review you probably either looked at a copy of Zagat (the book, not online!) or you did a Google search. Fast forward to 2010 and what’s changed? Beyond the obvious change inside 1600 Pennsylvania Avenue, now if you want to research a restaurant you do a Yelp search – what a difference 4 years makes! What else has changed?  The biggest change is the growth of data – mobile interactions, Google searches, Twitter tweets, Yelp reviews, Facebook friends and pokes and pictures …. it’s a data deluge out there!

I”m increasingly being convinced that the next big tech opportunity lies in being able to do something with the data deluge. A recent column in Gigaom mentions that Facebook’s greatest asset is it’s social graph (i.e., the connections between people and their friends, pokes, pictures etc.). Facebook is working very hard at extracting value from this data. Similarly, Yelp is trying to mine its own user-generated restaurant reviews.

The key to solving this data-mining challenge is to engage in “non-linear thinking.” It’s important to keep in mind that there is more to data mining than the IT-focused steps such as data collection, aggregration, modeling, validation etc.  One of the most difficult parts of data mining social media information is that the data is mostly unstructured (i.e., text, pictures etc.).

I’m really excited about the data challenges – this is the age of big data – for more on big data read this .

What do you think? Do you see an opportunity in the data deluge?

NEW PRODUCT PRICING: Is the MARKET right?

Posted in Enterprise Software Sales, Entrepreneurship, Pricing of Technology Products, Pricing Theory on August 12, 2009 by Shankar Saikia

A key challenge that an entrepreneur, especially in the case of new and innovative products, often faces is “how do I price my product or service?” I faced this situation at two early stage companies that I worked for and at one startup where I was the cofounder.

Conventional pricing theory, which Robert Phillips explains very well in his book Pricing and Revenue Optimization, says that there are three (3) methods for setting prices:

  1. Cost-based: add a markup to the cost of production.
  2. Market-based: charge the price where supply equals demand – the final price is arrived at after the customer compares competitors’ prices
  3. Value-based: relate price to the benefit gained by the customer –  negotiate a price that is proportional to the value that the customer gains by using the product

While one can make a case for each method of pricing, my experience has proven the following related points regarding new product pricing:

– a customer will pay a price that is similar to what it pays for something that it (i.e., the customer) perceives as a substitute

– a customer will pay what it feels is the market price that in turn is constrained by a budget. For example, back in 1999  when I worked for one of the early software-as-a-service (SAAS) companies, one of our prospective customers had a $10K per month budget for application software – the price that we eventually negotiated did not exceed the $10K  per month budgetary limit.

In my 20+ years in the enterprise applications business I have noticed that, while vendors like to rave about “value-based” pricing, customers end up negotiating a market-based price. I do feel that the value-message is the right one – it’s just that customers often, and rightly, feel that it is impossible to link value to specific products. Therefore, the market-based pricing method is what actually works in the real world.

Pricing is a hot topic in several industries. Most of us are aware of yield-management in the airline industry where different classes of customers (e.g., leisure travellers that book early versus businesspeople that buy at the last minute) pay different prices. In the software industry several companies, especially those with SAAS offerings, offer “freemium” products – you can use a free version upto a certain number of users etc. In the world of web 2.0, social media and online gaming, there are challenges such as what to charge for virtual goods, how to monetize offerings (e.g., Twitter) etc.

There is a lot of debate about pricing in the world of enterprise software as well as consumer software. Recently Techcrunch published a great writeup on free pricing in enterprise software. Bill Gurley from Benchmark Capital has a nice writeup on pricing-related opinions of several notables including Malcolm Gladwell (author of Outliers, Blink (my favorite book) and Tipping Point). My perspective is that nothing of value is ever free. In the enterprise software industry, newer technologies such as cloud computing and web 2.0 collaboration are enabling vendors to provide freemium offerings – the vendor benefits by lowering the cost of pre-sales  (instead of viewing demonstrations, why not try the software for free!) as well as by getting faster product feedback (therefore lowering the cost of product management/development etc.). In my own experience as an entrepreneur I started using free versions of software until I had to upgrade because of increased users – I paid because I saw value.

Pricing is a complex topic with nuances such as price differentiation, dynamic pricing (i.e., the price changes with supply and demand) and monetization strategies (e.g, Twitter). Despite the complexities, I have seen that conventional economic principles of supply and demand still influence prices. My simple rule of pricing is to set a price that is close to that of similar products and then run it by your customer – the customer will most probably compare your price to those offered by the competition, and eventually pay what the customer feels is the right price – which is essentially the market-based price!

What do you think?

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Startup Sales Advice: Choose the Right Customers

Posted in Enterprise Software Sales, Enterprise Software Startup Sales, Market Segmentation, SMB Software Sales on July 27, 2009 by Shankar Saikia

Ask any enterprise software entrepreneur what his/her biggest challenge is and you will hear some variant of the following:

… sales … revenue … customers ….

My experience at 4 early stage (less than 40 employees) startups has taught me the value of choosing the right customers, especially the right initial customers.

While a startup usually does not have the luxury of “choosing” a customer (heck – any customer will do, right??), the following guidelines will help:

1. AVOID “OUTSOURCED DEVELOPMENT ORG”:  Avoid an overly demanding customer that essentially uses your organization as it’s outsourced development arm! One of my startups licensed our software to a major telecommunications carrier. Thereafter, 65% of my company’s effort went into supporting the customer, instead of using that valuable time/effort to develop additional capabilities that would have attracted more and less-resource-intensive customers. Keep in mind that “cost of sales” and “cost of support” are as important as “sales revenue.”

2. SEGMENT THE MARKET: In seeking your intial customers it may be tempting to cast a wide net and try to win any customer regardless of industry, company revenue etc. My experience has taught me that it is better to focus on a few industries and company sizes (e.g., financial services companies with revenue = $ 50MM – $250 MM etc.). Choose segments that are early adopters and need relatively less support. One benefit is that your sales team can leverage the experience gained from selling within the same segment.

3. SUCCESSFUL CUSTOMERS ARE YOUR BEST SALESPEOPLE: One of my companies learned this the hard way. We acquired quite a few customers but were unable to help the customers get tangible value from our software. As a result we did not have an adequate number of referenceable customers. In retrospect, had we limited the number of our initial customer wins and instead focused on helping our few customers become successful with our product, we would have acquired more customers later at a lower cost of sales.

Here is a 3-step mantra: choose wisely, choose few and make everyone successful!

What do you think?

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Selling Enterprise Software To SMB: 5 Lessons

Posted in Business Process, Enterprise Software Sales, SMB Software Sales on July 21, 2009 by Shankar Saikia

In my 19+ years in enterprise software I learned a lot about the differences and similarities between selling to larger businesses and selling to the SMB (small & medium-sized businesses). For the purpose of clarity, in the US a business with upto 100 employees is considered “small” and one with 100-500 employees is in the “medium” category.  Here is what I learned about selling to the SMBs:

1. Scarce IT resources: SMBs typically do not have employees with deep expertise in technologies such as relational databases, middleware, enterprise application integration etc.

LESSON: Show how easy it is to use your software and de-emphasize technical complexity and robustness.

2. Hosted solutions: Lack of IT resources and elimination of relatively large upfront license fees are some of the reasons why SMBs prefer the software as a service (SAAS) model.

LESSON: While emphasizing SAAS ensure that you address issues of data security, such as “how will you ensure that my data is safe?”

3. Process expertise: SMBs usually do not have well-defined processes for operations such as purchasing, expense reports, order management etc.

LESSON: Show how your software can help implement processes and describe how processes will save money.

4. Support: SMBs, because of their lack of IT and process resources, need support in all major areas such as networks, e-mail, security, applications functionality and business processes.

LESSON: Ensure that you understand the customer’s definition and interpretation of support.

5. Quick start: SMBs want solutions that can be used right away – 18+month implementations will not work.

LESSON: Demonstrate quick “time to value.”

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