This blog in this series discuses the paradigm shift for ISV’s
The top 5 paradigm shifts I see for Sales in the Cloud:
1. Shorter sales cycles
One of the important characteristics of the cloud is: pay as you uses. Customers do not need to invest and can just get a subscription for a few users and a short period of time. Most business managers can spent the subscription fee out of their operational expense budget. So decisions can be taken by the manager itself, which mostly results in a shorter sales cycle.
The turn over of a customer is not clear, not only in the beginning but also during the total time the customer is a customer. So how are you going to compensate your sales for getting the customer in. A percentage of the licence value isn’t possible anymore, because the customer just pays you the subscription fee, not the whole amount in the beginning. And if you give your sales rep. a fixed amount, you could have a liquidity problem. Most times I see sales getting a certain percentage of an expected 3 years revenue of the first innitial deal. Business consultants are then charged for up-selling and will be paid based on extra revenue and reducing churn.
3. Margin for channel
On average the prices for SaaS-functionality is lower than sort of the same functionallity on premise software. Further more, a part of the cost is not only related for the Intellectual property, (the software) but also directly related to hosting infrastructure, and management employees. So we see that for SaaS services their isn’t that much money available for the channel. In the US, 50 % of the SaaS providers, have less than 15 % of the revenue available for the channel. And also the money is retrieved during a period of time, so not at the beginning of the contract. How are you financing your channel? Keep in mind that most of the SaaS companies, in order to be scalable, reduce the number of implementation days required to implement the service. Also reducing this is reducing the possible income for the Channel.
4. Who is the customer
As “traditional” ISV you are normally dealing with the IT-manager or CIO. But in the Cloud-world, 50 % of all services are already bought by the business users. So are you addressing the right person and do you have sales contacts inside the user organisation of your customer. Do you know what the user wants?
5. Contract, contracts, contracts.
In the Cloud world, the sales focuses on contracts. It is not that relevant what the total sales volume per new customer is, because this can be increased by up-selling. It is necessary to have as much as possible qualified customers. So you need hunters in you’re direct sales channel. Not farmers. Up-selling can be done by business consultants and the service organisation is responsible for keeping the customer. But sales should focus on contracts. So do you have the right sales people on board?
This is just my top five. I think and please respond that others have other top fives.