Selling to the enterprise is a mythical goal in the software industry. The million dollar deal is the stuff of legends, and throughout the '90s and early 2000s, the dream of every sales person. With 4% to 8% commissions (depending on stage of company and sales person stature), who can blame them.
But those days are over. Even before the current recession, the tides were turning. Unless you are Oracle, IBM, HP or a handful of other mega-vendors, you're not going to see 7-figure deals, well, except for the occasional bluebird.
We're now witnessing an increasing trend of bottom-up sales. A casual decision made by developers on a day-to-day basis, not a grand strategy laid out by the CIO. Try-and-buy is the norm, and so are subscription payments and other models that take off the financial burden from the customer and places it on the vendor. Long gone are the days that a large vendor can offload $50 million of upfront software licenses on its customer, add another $150 million in professional services for customization and integration, and 3 years later (with ongoing maintenance and support fees, mind you), leaving the customer with what is essentially shelfware (at which point, to avoid embarrasment, the customer declares victory on the project).
Charlie Federman, a VC I deeply respect from the days he was on the board of directors of GigaSpaces wrote an interesting post, entitled Firing Prospects, with some anecdotal evidence on the phenomenon:
I met today separately with two successful CEO's who, unprompted told
me they were deemphasizing their marketing/sales efforts to Enterprise
accounts; one company is in the application arena, and the other is in
the infrastructure space.
Each told a similar story:
They
don't have the 'patience or resources to go through the hoops' required
in committee sales. Translation, is that they don't want to fund the
direct salesforce/field engineers for the traditional 6 month sales
cycle, where they have to commit the equivalent of hundreds of
thousands of dollars upfront before a decision is made. Moreover, if
the decision is positive, it's normal to wait a few more quarters for
implementation to move forward.
Each stressed the opportunity
cost is simply too high when many alternative channels are present that
are open to a 'fast test/fast purchase' decision cycle. Today, their
biggest issue is prioritizing their time/resources in an environment
where they receive near-instant market feedback from traffic, trial and
conversion statistics. Direct Enterprise sales (as opposed to Business
Development) is being extracted from their company DNA.
The history of the trend away from the enterprise sale is easily traceable. It starts with free-trial CDs; it really picks up steam with downloadable enterprise software (salute to the WebLogic folks). It becomes downright mainstream with open source: Linux/RedHat, Jboss, MySQL and the rest. And now, we come to cloud computing: the final nail in the enterprise sale coffin.
Cloud computing, whether infrastructure-as-a-service, platform-as-a-service or software-as-a-service empowers developers, system admins and others in the rank & file to move quickly with their projects, select the easiest tools, and pay very little for them as they progress through the application lifecycle of development, testing, QA, staging, production and post production (on going maintenance, upgrades and end-of-life). Because it does not involve large capital expenditures, and initially requires very little expenditure of any kind, budgetary approvals can usually be made at much lower levels.
It's an unstoppable trend and many of the software start-ups I am working with are realizing they have an urgent task to move to a SaaS model (if they're not already there).
Of course, the new model represents some new challenges for both the vendors and the customers, but the benefits are so compelling, it's inevitable.
