How PLM can adopt Sales 2.0?

April 22, 2013

The last decade was all about 2.0. To me, 2.0 trend was about how to re-think existing norms and behaviors, re-invent something well-known and to challenge existing axioms. Internet changed a lot in our life for the last decade. One of the places that remains very conservative is enterprise sales. If you are social web enthusiast, tech geek or iOS developer, try to speak to people selling to big enterprises. You can find yourself in the wrong territory after first 5 minutes of talk. However, I can see how changes are coming to this place too. In the beginning of this year, I tried to challenge my friend from enterprise sales department. If you missed my previous blog, navigate here – PLM, Viral Sales and Enterprise Old Schoolers. One of my conclusions after this post was that even enterprise sales has strong roots, the time is coming to challenge the current status.

I’ve been catching up on emails and social media during my long journey from Boston to Singapore this weekend. The following Gigaom article caught my attention – Enterprise 2.0: The science of inside sales. Take five minutes of your time and read the article. Freemium was a king of the road in consumer market for the last 3-5 years. It seems to me everybody read the “Free” bible by Chris Anderson. I remember my note back in 2009 – Is Free the future of PLM? What I found very interesting in Gigaom article is the idea of merging of two parallel models – freemium and direct sales.

At the end of the day, it is all about setting cost and price. If your cost of the sale is high, you have no chance to scale up and sale to mainstream market. I found the following passage important:

In contrast to traditional outside sales, which is done in-person and tends to involve extensive travel and time expenditures, inside sales is professional B2B sales done remotely via phone, email and chat. It is strategic selling that requires managing a deal through a multi-stage process, multiple touch points with the customer, establishing value and an ROI for the product and supporting complex purchasing methods, like procurement departments, but importantly without visiting the customer.

Another interesting snippet brings you cost vs. price model that can take you beyond the threshold of free online business and allows you to have sales people.

So how do you know if you’re ready to build an inside sales team? Truthfully, if the product is shipping it’s never too soon. A key test is the price at which you are converting free users to paid. There are a lot of apps that only charge 99 cents or $4.99 a month for the premium version. That won’t cut it – your margins won’t support a sales force. You’ll need a price point of at least $25 to $50 per user per month to validate the value of your product and make enterprise sales work. At that price or above, a workgroup of 10 to 20 users can be sold within a customer account for $5,000 to $10,000 per year. Over time, you’ll be able to increase the deal sizes through premium features like administrative functionality.

And finally, you can see an enterprise example, which probably can make sense for PLM sales too.

The typical inside rep will make $40,000 to $60,000 per year in base salary. Including bonus, their on-target earnings (OTE) will be between $100,000 and $120,000. Most Enterprise 2.0 startups are subscription businesses, so quotas should be tied to Annual Revenue Requirement (ARR) or Monthly Recurring Revenue (MRR) with accelerators for contract lengths greater than one year. A typical quota for your first rep is $500,000 of ARR. Over time, enterprise sales reps often settle around a $1 million quota.

The conversation about inside sales made me think about what PLM vendors potentially can do in order to step into the future of Sales 2.0. Here are 3 fundamental steps:

1. Delivery model. Your should be able to deliver your software without CD/DVD and people that need to come and install it. Call it cloud, online, distributed software – it doesn’t matter. You need to exclude a traditional delivery mechanism driven by traditional software development methods and long awaited releases.

2. Online configuration. After you learn to deliver software online, you need to switch an army of consultants, implementers and service providers to work online. Stop pay to airline tickets. All software configuration and tailoring must be done online.

3. Application and granularity. The nature of application is going to change. We should stop a monolithic nature of enterprise software. In the past, it was important to sell “all-in-one-box”. In order to support “inside sales” model, business software needs to have an ability to be deployed in a granular way. Some portions of applications can be provided for free, then configuration should allow to turn on licensing feature and Voilà – you converted your free customer into paying one.

What is my conclusion? The new technology is ready for enterprise. It proven by multiple startup companies and giants of consumer software business. However, enterprise companies are tricky and enterprise sales are even more tricky. Both sides – sellers and buyers are keeping an existing enterprise sales model. This is their life jacket to survive and keep an existing enterprise sales model afloat. The time is coming to disrupt it. Just my thoughts…

Best, Oleg

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PLM, Viral Sales and Enterprise Old Schoolers

January 28, 2013

I was in the air during this weekend. Literally… Long flights to move from Russia to West Coast of USA. It is a perfect time to catch up on emails and social media. Today, I want to talk about the power of technological influence in consumer and business spaces. The world is changing very fast. The technology is a primary driver of all these changes. Think about the internet, mobile, cloud, social networks, consumerization, BYOD trend… The list can be extended. It is hard to find a place where people are not talking about technological disruption these days. However, here is the candidate – enterprise sales. Speak to enterprise sales people and you find yourself in a different world.

The following TechCrunch article can give you enterprise software startup point of view on enterprise sales – Forget Virality, Selling Enterprise Software Is Still Old School. Take a moment of your busy schedule and read the article. The author, Roman Stanek is CEO and founder of GoodData company selling enterprise software. The author is discussing challenges technological companies are facing when trying to apply modern B2C principles of technological startups to enterprise world. Here are few snippets from the article where author explains the difference between consumer and enterprise market.

There is much talk in the Silicon Valley community of lean startups and pivoting. The idea is that you get going, learn from your mistakes, and then evolve toward what the market needs. In the B2C space, this process can work because the marketing costs are low or nonexistent and there is an efficient path to massive scale. The goal is that the uptake happens virally and the figuring out takes place with a safe cushion of huge numbers of users… This model just won’t work in the B2B space. New products, especially those aimed at IT, must usually be sold. Gaining a toehold in the enterprise is a separate swim lane from engaging consumers or startups who never pay for support or consulting.

So, enterprise software must be sold and not bought. At the same time, world is not standing still. The move from selling to buying is one of the most visible trend in consumer space, but not only. We don’t like when somebody is hard-selling us stuff. One of the most popular new marketing models these days is called freemium model. In software industry, the roots of these idea is going back to 1980s and mostly driven by low cost of manufacturing. Software vendors distributed free floppy discs or CDs with promotion of full version. Internet and SaaS software provided additional boost to freemium model. Very often, freemium is combined with another new trend – viral marketing. In a nutshell, it is a technique combining usage of social network and online materials to increase brand awareness and achieve marketing objectives and product sales.

The discussion about about freemium and viral marketing in B2B and enterprise software is trending online and offline. You can find slides, materials and presentation about that. Established enterprise software vendors, consulting firms, enterprise IT, new enterprise SaaS vendors, startup companies are trying to understand if a new model will change the rules of enterprise.

I can recommend you 16 Ventures whitepaper – The reality of freemium in SaaS. Navigate to the following place to download the paper and see slides. Author brins examples of B2B companies that succeeded using freemium and viral marketing methods. In the slides it summarized as something called “Narrow-band Horizontal” with examples of Box.net, Yammer and Xobni.

I can see some traction of freemium and viral methods in PLM eco-system. Established software vendors and startup companies are innovating in technologies, marketing and business models. Here are some examples. Aras Corp is innovating in business model and offering so-called “enterprise open source” – you can use Aras Innovator for free and pay only maintenance and services. Autodesk, Dassault and some other software vendors are creating free mobile application that can be used by engineers and designers. GrabCAD established free social network for engineers and now developing collaborative applications that can be used by engineers. I’m apologizing upfront for not mentioning all companies innovating in this space.

What is my conclusion? TechCrunch article brings 6 requirements of enterprise software sales success. My summary of these rules – follow the rules of enterprise old-schoolers, otherwise you have no chance to succeed in enterprise software game. It might sounds like a good idea for startup company… However, you need to remember that all these rules were created by enterprise software market on both sides – software vendors selling to enterprise and enterprise ITs buying enterprise software. Both sides are interested to keep the status quo. In most of the situation, I can see how freemium and viral applied to compete with “enterprise old shcoolers” from the marketing and distribution cost standpoint. However, large enterprises have no problem with money – they have problem with time. In order to change the rules of enterprise sales (PLM included), you need to look on the solution as a combination of cost of sales, value proposition, ROI and (most important) time. One of the combinations will be winning jackpot. Just my thoughts…

Best, Oleg

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PLM App Store and The Future of Sales

January 10, 2011

Talking about App Store is not a big news nowadays. Companies in CAD, PLM and other companies in enterprise market segment are talking a lot about app stores. However, no specific actions were made and identified. App store is definitely consumer market invention. Thinking more about the topic, is it really true for a long run?

I was reading the article “Amazon preps upmarket US Android app emporium“. The article made me think about the future of sales channels. Android is just a use case and weak development chain, since Google wasn’t very successful in development of their own app store. Amazon is a very sophisticated sales machine. By inviting developers on their App store, Amazon is creating an opportunity to become a sales channel. In the past, Microsoft was a very successful company focusing on developers, and it seems to me Jeff Bezos learned this lesson from Micorosft. CAD/PLM (and not only) software providers will be looking for alternative ways to sell their products to businesses. Amazon can be an interesting option to become a department store to market, sale and (what is very important too) to deliver applications for business too.

What is my conclusion? For the moment, enterprise/business application developers are actively using two paradigms – direct and indirect sales. However, in current market conditions, online sales channel with no religious dependencies to a specific platform (opposite to Google and Apple) can be an attractive option for application providers thinking about how to sell their products to a small business. Just my thoughts…

Best, Oleg

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Key Success of SharePoint – What Should PLM Learn?

January 6, 2010

I’ve been thinking about Microsoft SharePoint success in enterprise organizations. For the last few years Microsoft leapfrog in their ability to provide SharePoint-based solutions. I will put below few points that in my view are the foundation of this SharePoint success.

1. Basic solution for share files and portal availability.
2. Initial licenses embedded in Windows Server.
3. It doesn’t require huge upfront implementation and service efforts.

What I can conclude is that most of SharePoint deals were down without huge IT involvement and, of course, CIO approvals. I’m sure that many CIOs even don’t know how many SharePoint instances they have in their organization. The conclusion – no CIO involvement can simplify your solution path to the organization.

Now, I’m thinking back about PLM. For the last half decade, the most important message from businesses and sales I heard about – we need to sell PLM to C-Level. This is so called ERP lesson. This is the way ERP was sold to many organizations. My question today – is it something that PLM need to continue pushing forward? No, I don’t think so. Don’t take me wrong, I don’t see any problem in selling enterprise solutions to CIO in the big organization. However, when you think about mainstream adoption, ability to expand the solution in the organization, to get some end user commitment will be very beneficial.

So, what is my conclusion today?. PLM needs to learn how to play Trojan Horse in the organization and start flying below CIO radars. This is what SharePoint did, and, I think, it was successful. Of course, after implementing such strategy you will be invited to CIO too. However, your position will be different.

Just my thoughts. YMMV.

Best, Oleg

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