Glue Products Have An Advantage When Customers Determine Value for a Solution

“Glue products” connect sections of software solutions for customers. At the application layer examples include Tibco, IBM’s MQ Series and more. At the functional level, examples include software systems for training, networking, data collection, and many more. This post will discuss functional glue products.

A brief word on how these products tie together sections of functional solutions may be helpful:
I have current experience working with Microsoft’s SharePoint server product and related training solutions. So I will present what follows specifically on training as a glue product and how I think sales teams should address value with their customers.

SharePoint customers, on-premises, have objectives like “collaboration”, “compliance reporting”, internal communications (intranet), communications with partners (extranet), etc. Without training, personnel may not be able to successfully deliver on any of these objectives. So does the value proposition for the training component depend simply on the training itself, or should the calculation of value be based on how the system chosen for the training requirement optimizes the overall value of the SharePoint solution? Sales teams should help customers understand the most accurate value calculation will be based on the value of the overall SharePoint solution with the training component included as the optimum choice for the job. This tactic enables a favorable pricing discussion for the training component for the sales team while, at the same time, promising the best chance the customer will have to extract the highest possible value from investment in the overall solution.

If sales teams don’t do the work (in other words come up with a description of the solution the customer expects to build with SharePoint, and the expected role for training or one of the other glue solutions I mention above), then the value proposition will likely come down to an “apple vs orange” comparison where one training option is compared to another without any attention to the overall solution. The sales team will likely find itself haggling over price, while the customer struggles to get to the highest possible return on investment in the overall system.

Convincing customers to participate in a value calculation as I have just described depends on trust. So sales teams should also implement supporting tactics capable of elevating the relationship with the customer.

I am often surprised to see how few early stage ISVs marketing functional glue products demonstrate understanding of these tactics. Successful efforts to sell to enterprise software customers almost always include this type of value discussion, calculation and proposition.


Succeeding at Enterprise Software Sales Still Requires Sales People Who Can Do Something More than Just Present Products

During the 2014 Technology, Media and Telecom Conference, hosted by JP Morgan, Judson Althoff, President of Microsoft, North America made clear the importance of “consultative” skills, rather than product presentation, to the success of sales of Microsoft software to enterprise business.

The North America software business, for Microsoft, per Mr. Althoff’s remarks, produces approximately “$25 billion across 8,000 folks” (quoted from a transcript of Sterling Auty’s interview with Mr. Althoff, which took place during the 2014 JP Morgan Technology, Media and Telecom Conference).

Like any other component of Microsoft, the North America business has been in transition. Presently the sales team works with a set of products “down to three or four Microsofts instead of 22 Microsofts when [Mr. Althoff] started from a product standpoint”. (ibid). Mr. Althoff characterized the world of the “22 Microsofts” as a terrain filled with silos, which often worked at cross purposes. The “One Microsoft” reorganization, in his opinion, which Steve Ballmer articulated over a year ago, is still ongoing and promises to alleviate a lot of the drag which beset the company under the “tyranny” of these product silos.

The sales process, as well, has changed. Mr. Althoff’s remarks described the old selling process, where Microsoft sales personnel would “try to dream up a big data project together [with customers]”. The driver behind this type of effort clearly was what I have referred to in this blog as “solution without a problem” syndrome.

According to Mr. Althoff, this approach has been changed. Now “we try to coach our sales force not to have a singular starting point, and show up with a canned pitch, but rather be much more consultative in our approach to understanding” (ibid) the challenges prospects and customers are facing.

He then went on to emphasize the importance of industry understanding to a successful software sales process: “[i]t varies quite a bit by industry, financial services, healthcare, and manufacturing.” (ibid). This response is entirely inline with comments made by Keith Block during yet another technology day sponsored by an investment bank — this time Piper Jaffray’s Media and Telecommunications Conference, March, 2014. Mr. Block emphasized the almost critical importance of sales personnel maintaining an accurate understanding of the software requirements for specific industries, if they are to succeed.

Bottom line: despite the apparent simplicity of a new set of consumerized IT software products, usually served from the cloud, the enterprise software selling environment is still highly complex. For both Microsoft, Salesforce.com, and, I would argue, Oracle (the past employer of Mr. Block and Mr. Althoff), sales personnel with demonstrated success selling complex products are still the most likely to succeed.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Is There a Best Background for an Enterprise Software Business Manager?

Justin Althoff is Microsoft’s President for the North American Market. Mr. Althoff was recently interviewed by Sterling Auty, Software Technology Analyst at JP Morgan. The interview took place on May 20, 2014, during JP Morgan’s Technology, Media & Telecom Conference. Mr. Althoff prefaced his remarks with some biographical notes: he has been at Microsoft for a little more than a year, spent 14 prior years at Oracle, and, before, at EMC. What is the significance of Mr. Althoff’s background, given his role at Microsoft?

I am asking this question for a couple of reasons:

  1. I spent seven years in the contract consulting and executive search business, from 1994 to the end of 2001. I placed a lot of talented individuals at IBM Corp, D.E. Shaw & Co., First Rain, and Duck (now On2). So I tend to listen as individuals recount background experiences
  2. I spent some time last week reviewing Salesforce.com’s most recent quarterly earnings webcast and took a look at the background of Salesforce’s current President and vice chairman, Mr. Keith Bloch, who, coincidentally, spent a lot of time at Oracle.

There is one other notion I have come to believe in, which is also motivating me to look further at the importance of background: this “truism” goes as follows: the same small set of people take on all of the senior responsibilities for software products targeted to specific markets (in this example, enterprise markets for productivity software). Any changes are really a matter of musical chairs. An example of this truism, at work are all of the ex Lotus sales folks, late of IBM, who somehow ended up at Microsoft selling SharePoint.

Bottom line? I’m not sold on the value implicit to following this “truism” for the businesses doing the hiring. When I consider Salesforce.com and Microsoft Dynamics CRM as direct competitors, I do not take much heart identifying the same experience set, and, in all likelihood the same methods, and style, at work for each of the President’s heading up these organizations.

But I certainly understand the importance of familiarity with a market and its participants as a metric for judging the suitability of specific candidates to head up a software business like Microsoft North America. I am merely questioning what the right depth of this “familiarity” experience ought to be, especially when the role also requires, to a significant degree, a successful track record as someone who disrupted outdated IT approaches and solutions sometime in the past.

I am not sure I know the answer to this set of questions, but I am very comfortable pointing to them as important points of consideration for ISVs doing the hiring.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Channel Conflicts — Android Style: Why is the Moto G Hitting the Market, but not the Chinese Market?

On Wednesday, November 13, 2013, Google’s Motorola Mobility unit announced the “Moto G”, an ultra low cost smart phone. This device, which sports a high resolution screen and “the latest Android” O/S, is available at a very low retail price of $179.00. But there’s a couple of catches to this deal – you can’t buy the Moto G in China, and the Android O/S is NOT 4.4 KitKat, at least for now. Might there be a channel conflict bubbling below the surface (no pun intended) here?

The channel conflict, if there is one, likely originates with two other Android partners — LG and Samsung. The “Google Nexus 5” is manufactured by LG, and includes the Android 4.4 KitKat O/S. This smart phone also sports a very competitive retail price, below $400.00 USDs. Google sells this smart phone through the Play Store. My latest check on availability shows ship dates commencing on November 26, 2013.

Then there’s the Samsung side to this story. Samsung Makes Quiet Push for New Mobile OS. Of course, if TiZen takes off, then Samsung will have little need, going forward, for any Android O/S, including 4.4 KitKat and its descendants.

All of this complexity can lead to a headache. If Chinese consumers will not be able to acquire Moto G, and Indian consumers are unable to specify an availability date for the Google Nexus 5 smart phone, then who is managing all of this, and does this group or person have a plan in mind?

It looks to me like the folks at Microsoft/Nokia have a real incentive to release their own ultra low cost smart phone to EVERYBODY, RIGHT AWAY. Let’s cut through the complexity and get down to provisioning internet-ready mobile devices to emerging markets NOW.

But is Microsoft/Nokia interested in these markets? Do they have a low cost offer for these consumers? To date there’s been no word on the low cost accessibility topic from the folks in Redmond/Helsinki. I, for one, would be real keen to see them step forward with one.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Thoughts on Steve Ballmer’s Planned Departure from Microsoft

On Friday, August 23, 2013, Steve Ballmer, Chief Operating Officer (COO) of Microsoft® announced his intention to resign his position within the next 12 months, subsequent to a replacement coming on board.

A lot of pundits expressed opinions on this event. Microsoft’s stock price went up by over 6%. So markets appeared to react positively to Mr. Ballmer’s decision. But from what we’ve read on this topic, we don’t think these pundits and their audiences are focusing on the right drivers forcing this change at the top of one of the largest ISVs in the world.

We think it all comes down to a radically transformed market for office automation solutions across large organizations in the private, public and not for profit sectors.

These markets have turned the corner, once and for all, away from large, internal on premises data centers, proprietary client server applications, and the large staff of internal IT professionals required to support all of this apparatus.

They have a burning need for a new set of ISVs, capable of providing Infrastructure on demand, and application services on a Software as a Service (SaaS) basis across a new ubiquitous wide area network represented by the enormous Ethernet networking plant already in place, which is commonly referred to as the Cloud.

In this environment it is exceptionally difficult for Microsoft® and its peers (Oracle®, IBM®, HP®) to figure out how to make money. So new leadership is needed to demonstrate how Microsoft® can proceed further on its own evolution to better service this new market, but in a highly profitable manner.

So we think all the talk of missing out on the iPhone, and iPad, etc, is off target. The profitability of consumer markets pale when compared to enterprise business markets, where ISVs, in the past, could sell literally thousands of seats for proprietary software by simply closing one complex sale.

With the cloud and SaaS, the old sales methodology must be replaced. We congratulate Mr. Ballmer on a tremendous achievement. We watched Microsoft® enter the enterprise business market in the mid 1980s. We knew they’d win the desktop OS battle, but were surprised at how they won the rest of it, including placing SharePoint, Exchange, and Lync with customers who would otherwise be using IBM’s Notes product.

To reiterate, we don’t think it’s as much a matter of transforming Microsoft® into a competitor for Apple® and Google® in the consumer markets as it is a matter of finding a leader who can keep Microsoft® at the top of the list of preferred enterprise ISVs, and highly profitable, albeit for SaaS and cloud services for the enterprise.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Repurposing Sales Teams as Products Change is Challenging, a Contentious Structure May Produce Better Results

Results for the business quarter ending May 31, 2013 at Oracle® weren’t well received by Wall Street. Don Clark and Nathalie Tadena summarized the results and investor reaction in an article published on June 20, 2013, Oracle Earnings: Shares Slide on Flat Revenue, Cloud-Software Challenges in the online edition of The Wall Street Journal. The authors wrote: “Oracle lifted its profit 10% in the fiscal fourth quarter ended May 31, doubled its quarterly dividend and authorized a stock buyback of up to $12 billion.”, but investors still took 9% off of the stock price in simply 1 day of trading.

Why? As the authors aptly note, revenue reflected zero growth from the prior year. Sure Oracle is making more money from its businesses, but the bottom line is not growing. We think an important reason for insignificant revenue growth is an effort to train an existing sales force, familiar and committed to enterprise markets, to sell multi tenant cloud alternatives. Oracle reported on sales difficulties in its Q3 2013 report. The Q4 report claims substantial improvement in the effectiveness of sales teams, but there are no results to substantiate the claim.

We don’t think efforts to retrain sales teams, like this one (there are other examples at Dell and HP) work very often. We think a better approach is to restructure sales teams into a contentious formation, where enterprise sales teams can compete with sales teams dedicated to selling multi tenant cloud products for the same business. A simple review of the history of efforts by Oracle’s peers and competitors–Microsoft®, and IBM® shows little success at extracting the gold from repurposing the same sales personnel onto new products.

In contrast, a review of how other industries, for example newspaper publishing, handled similar difficult challenges, shows management fostering healthy contention between sales teams. In the 1990s and the first decade of the new millennium, separate sales teams were dedicated to selling print vs. online editions. A healthier New York Times in 2013 is an example of how contention can be used to produce better results. We think Oracle®, Microsoft®, and IBM® should think about how to use internal contention methods to better manage sales to produce the revenue improvement they need.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


It Helps to Carefully Read Analyst Reports Before Including Them in an Appeal to Authority

Carefully read analyst opinion before adding it to a sales presentation built around an appeal to authority. We almost made the mistake of pouring some comments published by Gartner, Inc. in its Highlights From Gartner’s Data-Driven Marketing Survey, 2013.

After a careful review of the material we decided the conclusions reached were not applicable to our target market — early stage Independent Software Vendors (ISVs). Here’s an example: “A majority of marketers that we interviewed, 54%, invest in digital marketing because they believe it’s key to their competitiveness. But they are not certain of the return on their investment. For that survey, which took place in April 2012, we interviewed 98 marketing executives in companies with revenue greater than $1 billion, and who had or were considering a digital marketing function.” (quoted from Gartner, Inc. A link to the full report has been provided above).

Our market is not characterized by ” . . . companies with revenue greater than $1 billion.” The companies in our market do not ” . . . invest in digital marketing because they believe it’s key to their competitiveness.” They invest in digital marketing because most of them sell software as a service (SaaS) solutions. Almost all of the revenue they produce is the result of online sales and marketing.

So what’s the big deal? The big deal is how we got to this report. We followed a link from an innocuous sentence on a web page on the IT World, Canada website: “Many organizations are plagued by disconnected analytic efforts, according to research firm Gartner Inc.”.

Note the hyperbole in the sentence. There are comparatively not ” . . . [m]any organizations . . . ” with revenue over $1Bil. The survey conducted by Gartner, Inc. speaks to a very small segment of businesses here in the United States.

Opting to include information actually unrelated to a subject at hand in an “appeal to authority” substantially diminishes the effectiveness of the appeal. Sad to say a lot of the argumentation we read today is hastily put together with information actually irrelevant to the discussion at hand.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Enterprise Purchasing Policies Can Inadvertently Impede Return On Investment in IT Systems

Early stage Independent Software Vendors (ISVs) planning on a customer profile typified by a larger, enterprise class business customer, should have a tactic in place to handle modern enterprise business purchasing methods, at least for the United States market. These purchasing methods usually include a simple sole source procedure to fill orders. The rationale for these methods goes like this: Sole source vendors are comfortable selling computing technology products, and even services, as commodities to their customers. So the vendor accepts lower margins in return for larger order volume.

To play the game, early stage ISVs will need to sell products to their end customers at a lower price through these sole source vendors. The sole source vendor, in turn, will sell the product to the end customer at a set price, usually directly negotiated between the ISV and the enterprise IT business customer. But internal sales teams, where compensation plans are weighted towards commission, will not have the incentive to pursue the business if they must anticipate splitting the percentage basis of the commission with the sole source vendor. In some cases the sole source vendor will get 75% of the margin, leaving sales people a mere 5 – 10 percent of normal commission.

The purchasing method, itself, is problematic. Sole sourcing results in a low cost order processing procedure, but some ISVs will simply not be able to compete for the business, especially self-financed ISVs lacking the financial resources required to compensate sales staff in lieu of commission.

Enterprise business suffers where the best solution for a requirement is manufactured by an ISV poorly equipped for the enterprise IT selling experience. Frequently this type of ISV will drop out of the competition for the business if sales teams cannot be fairly compensated for the extensive effort they must make to win the order. The result for the customer is a mediocre solution promising a limited return on investment. IT portfolio management roles should be designed to ensure enterprise business doesn’t fall into the trap of buying products, which can be procured through a sole source channel, but are, nevertheless, not well received by peers in the same market.

If your business falls into either of the roles we’ve just presented (meaning you’re either an enterprise business with a substantial need for computer products, or you’re
an early stage ISV with a product targeted for an enterprise customer profile), you need a better tactic to successfully use your strategy to attain targeted objectives. IMB Enterprises, Inc. can help you. Please contact us to learn more.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Plan on Six Months Before New Sales People Produce Meaningful Revenue

ISVs should plan on at least six months preparation time before new sales people start producing. Better not to hire new sales people than to bring them in under an unreasonable expectation of how quickly they will start selling.

New sales people must be trained before they start working with prospects and customers. A good sales training program includes:

  • a technical introduction to products and services
  • all of the information required to write sales
  • a review of the sales plan, territory or industry assignments
  • a review of the business plan
  • a review of any restrictions on selling to prospects working for regulated organizations in the private, public or not-for-profit sectors, along with proper etiquette guidelines

Tests should be included in the training program to make sure important points have been correctly understood. Any sales people failing tests should be kept in training until they pass. Sales people are often the only representatives of your business prospects meet. They need to communicate your message and accurately represent your company. If you aren’t sure they are 100% ready for the job, don’t put them in front of prospects.

Assigning new sales people to existing territories is a good way to pay for the training time. You already have a stream of revenue coming in from existing customers. New sales people with the right skills and experience can be safely trusted to manage accounts. An account manager spends a lot of time exercising customer service skills. Usually these skills are the same across an industry.

If account managers are expected to provide technical support to customers, then it makes sense not to place new sales people in these roles until they demonstrate correct understanding of technical procedures specific to your products.

Start ups and early stage ISVs have a tougher time finding a way to pay for new sales people. Usually these businesses do not have established territories requiring account managers.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Joint Marketing Programs can Help ISVs Jump Start Channel Sales Programs

Early stage ISVs can find themselves competing against systems integrators who may be prospects for channel partner relationships. It takes no more than a couple of bruising experiences to sour a potential partner. Joint marketing opportunities can present a more favorable channel partner introduction option. Product marketing should pursue joint marketing opportunities with complementary businesses that already have a distribution channel in place.

One of our clients recently landed an opportunity like this one. During the meeting, the other party expressed some interest in actually reselling our client’s products. It makes sense to keep the two conversations separate. Blurry lines between topics in this type of discussion can lead to lost opportunity and lost revenue.

How best to handle a Joint Marketing discussion with channel building potential?
If your business lacks expertise managing channel partners, you should defer to your joint marketing partner on how best to introduce your product to their channel partners. They have already gone through all of the turf wars associated with migrating competitive relationships with integrators into complementary ones. They will know far better how to handle this opportunity for you.

But what about the syndication opportunity?
Keep in mind that syndication is a completely separate subject from joint marketing, or how to use someone else’s sales channel to get wider distribution for your product. Your joint marketing partner may be introducing the topic to try to blur the lines, to establish a favorable negotiating position. We think the best response to a syndication opportunity is to address it only after the actual joint marketing opportunity has been thoroughly discussed and assessed for its value.

In the next post to this blog we will talk further about syndication opportunities.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved