ISVs do Well to Nurture Productive Partnership Relationships

Partner relationships broadly breakdown into two types:

  • an affiliation that benefits both barties or
  • an affiliation that serves a purpose, usually with regard to fulfillment, for both parties

ISVs should appropriately respond to either opportunity.

An Affiliation that benefits both parties
In this scenario an ISV produces products or services, which are promoted, directly, to an end customer by a channel partner. When these scenarios bubble up, ISVs should look to nurture them to capture what will likely amount to a much lower cost of product promotion. Usually this type of partner has a clear understanding of how products or services fit into a larger offer, saving an ISV the time and effort required to build a compelling case for target customers to implement products or services. The tacit recommendation represented by the partner’s effort produces a higher level of positive momentum for the prospect. The result is a shorter sales cycle for this type of opportunity.

An Affiliation that Serves a Purpose, Usually with Regard to Fulfillment, for Both Parties
When an end customer is required by procurement policy to go out to bid on any/all technology purchases, an ISV needs to work with whomever lands an order. Under no circumstances does it make sense to try to impede this process. The best way to look at an order of this type is that, without the partner who landed the order, there would be no sale to the end customer. It makes sense to have a pricing policy in place prior to contending for this type of business. This type of partner rarely expects a substantial margin. ISVs should be careful not to extend one.

Sales personnel at ISVs should have experience working with channel partners. Inexperienced personnel can make costly mistakes with either type of partner. Where management is not clear as to how to handle partners it makes sense to proceed very slowly on these opportunities. Better to be guilty of taking forever to finalize a sale, than to inadvertently make an obstacle out of a firm that can otherwise be a productive partner.

Ira Michael Blonder

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


A Transformed Enterprise IT Buyer has Transformed the Business Model of the Services Companies that Provide Support, and More

Much has been written over the last several years about the characteristics of a new enterprise IT buyer for 2013. We have written about this new buyer in earlier posts to this blog, for example in a post on the possible Obsolescence of Outside Software Sales Teams [as a result of] a Combination of Factors.

The bottom line on this new buyer is that she does almost all of the work required to research, specify, and identify likely solutions for “bleeding wounds” online before ever lifting a telephone to call on a sales organization.

Further, she is likely to be a survivor of a number of failed IT projects. We have written on this topic of failed IT projects earlier in this blog in a post titled Buyer Skepticism must be an Underlying Assumption for Enterprise IT Sales in 2012. This experience, where lots of money was expended on IT projects that failed to deliver a return on investment (ROI), as anticipated, has fed the enterprise need for so-called “portfolio management,” which amounts to an activity undertaken to ensure that, for future projects, all efforts will be made to capture as much of anticipated ROI as possible.

Our recent interactions with the services companies that do business with this new enterprise IT buyer, meaning the systems integration businesses, development shops, and other consulting and even advisory firms, indicate that they, too, have been transformed to keep up with the times, and in a manner that increases the difficulty that most ISVs will likely face should these ISVs opt to pursue channel sales strategies targeting these services businesses.

Specifically, we think that enterprise IT market demand for turnkey systems integration work is a mere shadow of earlier years. The reason for this decline in demand is that enterprise IT organizations, generally, are shouldering more of the responsibility for all of the key aspects, meaning the actual answers to “who/where/how/why” questions for all implementations of solutions for core requirements.

Enterprise IT may not provide the actual human resources required to implement core projects, but they do, with increasing frequency, specifically direct all aspects of the implementation. Therefore, in this new world, the type of products that we discussed in yesterday’s post to this blog, specifically, products on the periphery of core demand, which, nevertheless, can play an important role in an integrated solution, will likely have to look to joint marketing opportunities with vendors of core solutions if they are to capture the attention of channel partners.

In the next post in this series we will look at how this constrained atmosphere necessitates a different set of themes for marketing communications efforts for these peripheral products in search of channel partners.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Important Points for Enterprise IT ISVs to Address as They Consider Implementing a Channel Sales Strategy

There are many reasons for enterprise IT ISVs to consider implementing a channel sales strategy for products. In our experience the most prominent of these are:

  • an ISV is supported by too few internal sales personnel, or
  • a software product requires a comparatively complex installation, which is usually accomplished with some significant amount of customer-specific customization, or
  • a software product (usually a commodity) is targeted to a market where customers generally work with a select set of prime vendors and have little to no motivation to change their buying preferences

Another very important reason for enterprise IT ISVs to explore the opportunity presented by a channel sales strategy stems from the distance between a software product’s typical application and the core driver of market interest.

It is worth taking a few words to explain this last notion. Consider that products designed to satisfy peripheral market needs are, necessarily, located at a distance from the core market driver. Examples of these software products on the periphery include, but are certainly not limited to, applications designed to enable wider use of specific features of the core application. These products are usually captive to the core application and intended to meet the needs of specific market niches.

If one considers Microsoft® SharePoint® as a core solution designed to address a need for enterprise content management, then a product like the Outlook to SharePoint connector offered by Colligo Networks can be seen as a means of enabling users to extract better performance from SharePoint, itself. We note that Colligo Networks’ solution provides SharePoint users with a seamless method of storing email data to document libraries, in other words the system works without any need for human intervention, thereby ensuring that a substantial proportion of documents sent by email, as well as email messages, themselves, will be correctly stored in SharePoint document libraries.

While gaining assurance that most email messaging is recorded in SharePoint document libraries may not be critically important to lots of businesses, for those businesses operating in highly regulated industries, where adhering to compliance regulations is an ongoing imperative, gaining such assurance is, in fact, very valuable, and, more often than not, worth the cost of acquiring a solution like the one offered by Colligo Networks.

In our experience, products positioned at a distance from core market drivers, which, nevertheless, can be used, like Colligo’s Outlook to SharePoint connector, to deliver a tangibly more valuable solution to users, are particularly well positioned for a channel sales strategy. After all, for a range of service providers, including businesses offering users system integration, or custom development, it makes sense to include these products in project implementation plans for the strategic role they play in ensuring that the end customer receives optimum value.

Therefore, one could argue that the task of attracting channel partners, for peripheral products correctly positioned, should be a rather easy one for sales. But, as we will show in the next post to this blog, in 2013 some other factors are at work that act as repellents, regardless of how successful a product market message may be.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Partnering with Core Application ISVs can Open Opportunities to Engage with Enterprise IT Decision Makers

ISVs offering what we refer to as peripheral solutions to enterprise businesses can experience substantial difficulties as they seek to engage directly with decision makers. Purchases of these solutions are usually invisible to decision makers as the result of two rather obvious factors:

  • the impact of the cost of acquiring these solutions is considered insignificant and
  • the requirements for these solutions often arise independently of requirements for corecomputing platforms

As we have argued in the last couple of posts to this blog, it is likely much easier for these ISVs of solutions on the periphery of enterprise IT computing to gain renewals on subscriptions where decision makers are aware of the solutions and engaged in the successful implementation of them as components of an enterprise-wide quest for value. Nevertheless, as we have just noted, most of the time engaging with decision makers is a very difficult challenge for ISVs of peripheral solutions. The end result is a difficult tone to year end where the sales team is out in the market with crossed fingers hoping that customers will opt to renew, despite a lack of support from decision makers.

A cure to this malaise is to joint market with ISVs of bigger solutions. If our readers need to be convinced on this point, then we recommend that they simply consider that the cost of these bigger solutions is always a matter with high impact on enterprise business decision makers. Further, implementing bigger solutions requires changes in operating procedures across an enterprise. Based on these two conditions it is safe to assume that decision makers will maintain focus on requirements for these bigger solutions.

The task for ISVs producing peripheral solutions is to identify likely partners who will require peripheral solutions to ensure that their customers can successfully implement their solutions. Success in this setting almost always amounts to implementing a solution that will produce a lower cost of business operation. Cost savings should be understood as largely synonymous with the concept of value for enterprise IT businesses.

We participated directly in the successful efforts of one ISV with a peripheral solution targeted to enterprise businesses. This ISV had a solution that permitted enterprise businesses to purchase very costly document production equipment. Specifically, enterprise businesses could use this ISV’s solution to spread the cost of this costly document production equipment across a wide range of computing systems, including a mainframe, work place computing and standalone personal computers. Our partner in this solution was a small company by the name of Xerox. If you care to hear further about this specific success story, then please use our contact form to submit your request.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Opportunities to Engage Directly with Decision-Makers Must be a Priority for Enterprise IT ISVs with Recurring Revenue Product Models

As we wrote in a prior post to this blog, enterprise IT ISVs with “razorblade” products built to produce a healthy recurring revenue from the periodic replenishment of the “non durable” component of the product (which is usually length of access via a cloud or software as a service, SaaS, subscription) must engage directly with decision makers. The reason for this imperative is that successfully capturing service renewals becomes a much easier task when decision makers are correctly engaged from the start of a sales plan. Lots of sales trainers have admonished their students to meet this imperative; therefore, we are not making our claim in a vacuum. The facts are that the perspective of operational personnel as regards costs, benefits, savings, etc. are very different from the perspective of decision makers who likely own budgets, and, therefore, manage capital outlays with utmost care.

We know of three different methods of producing this type of engagement very early in a sales plan. The first method is to implement what is often referred to as a “diagnostic” or “deeper dive” activity with a prospect. The purpose of this activity is to collect all relevant information about a prospect’s needs, ostensibly to determine not only the factors that a prospect is looking to change, but the severity of these factors, which most sales trainers agree will permit sales teams to estimate the likelihood of a sale. The general rule is that the more severe the factors, the greater the likelihood that a sale will be made.

Of course, the details that emerge from this “deeper dive” activity more often than not will include identification of decision makers as well as the roles of other important contacts in a purchase decision. Where factors are severe, in our experience, there is a greater likelihood that prospects will acquiesce to including decision makers in a discussion. But for products that sit on the periphery of larger applications, it is often very difficult for sales teams to get prospect commitment to engage in a deeper dive, especially in 2012 where prospects have generally accumulated all of the information they require about meeting their needs before they contact sales.

In these cases we highly recommend identifying other contacts within the same organizations. In other words, while an initial sale is in process, lead generation teams are using techniques like teleprospecting to engage with other contacts at the same business. It is much better for this process to be effective not to link the two activities. In other words, we recommend that sales teams continue to execute on their sales plan with immediate prospects independent of the activity of lead generation personnel. Over time, a map of decision making for the enterprise should emerge.

The last method is simply to use renewals as an opportunity to engage with decision makers. In our experience, prospects are much more open to identify decision makers post sale than is usually the case while the sales plan is in process. Of course, it is much more difficult to engage with decision makers after the sale has been made, but in some cases there is simply no alternative.

In the next post to this blog we will look further at how ISVs of peripheral products can leverage partners to get to the same aforementioned decision makers.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Any Opportunity to Include Decision-Makers in a Sales Plan for Enterprise Software should be Acted Upon

Sales teams representing enterprise IT ISVs need to act on any opportunity to include decision-makers in their sales plan. It is is easy to be lulled into skipping this critically important step. Here’s an example: sales receives an incoming inquiry from a user at an enterprise organization. This user, as it turns out, is looking to implement a specific solution like our ISV’s product. The user has gone through a preliminary step of gaining management approval to purchase some solution to meet his/her requirement. Therefore, from this user’s perspective, the next step is simply to gather all of the information required to make an informed decision as to which product will best meet the objectives of the requirement.

In 2012, the user depicted in our example usually doesn’t even need to reach out to sales at any point prior to placing an order. In fact, our ISV, like all of its competitors, has exposed lots and lots of informative content about its products, clients, testimonials, etc on its web site. Even more, pricing information is included in this material. The result is that our user knows just about everything, without any required contact with sales.

Once the inquiry finally comes in, the purpose is generally to shop the product, or, often, to place an order. Our sales team may try to slow down the process, in order to collect a lot of information about the user, his/her application, why the purchase was likely approved, etc., but our user may have very little tolerance for the efforts of the sales team to slow things down. After all, our user already has all the answers to the qualification questions he/she required to determine the set of products that would likely meet the requirement, which, in turn, needed further review. Our sales team will likely back off of its requests and assume the role of order taker.

If our ISVs product is a cloud offering with an annual subscription, it may be literally “up for grabs” as to whether or not our user will renew the enterprise subscription in year two, or not. When our sales team makes the attempt to secure an approval to send an invoice for the renewal charge, the response may be something like “I love your content, but I’ve moved onto another set of tasks and management has turned down a request to renew even though the team that took over for me would certainly benefit from a renewal”.

In fact, our sales team laid the groundwork for this problem way back when our user placed the order. It would have been much more fortuitous to push our user prior to accepting the original order. In the next post to this blog we will present some of the technique that we exercise to get the actual decision-maker included in the discussion.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Dell Q3 FY 2013 Results Point to a Need for Better Management of Its Business Transformation

We sat through a webcast of Q3 FY 2013 conference call for Dell. Our rationale for spending the time required to attend this earnings presentation was simple. We are investors in Dell. As well, we are largely focused on realities and potential trends in IT computing for enterprise businesses and comparably sized organizations in the public and/or private sectors. Regardless of Dell’s present condition, the company is, nevertheless, a major factor in our area of focus, and, therefore, worth our attention.

It is hard for us to believe, but nevertheless true (per this report), that Dell embarked on its effort to transform itself into an “end to end” solution for enterprise markets four years ago. Brian T. Gladden, SVP and CIO makes mention of this fact at the start of this webcast presentation of the Q3 results. Gladden also notes that this “end to end” product produced approximately $4.8 Billion in earnings for the quarter, which, by any standard, is a considerable amount of money. But the composite growth rate, at a mere 3%, in our opinion, is much more indicative of a stable, mature business, than a growth vehicle. Further, the fact that the leading group of products in this complex set of solutions (in terms of revenue generation), namely hardware servers and network equipment, are simply the foundation for Dell’s growing set of offers at the application layer (principally Quest Software) says to us that enterprise IT spending on software is largely at a standstill, at least for Dell.

Mr. Gladden noted that total company revenue was down 11% year over year, but still within the range management forecasted in August, 2012 (albeit at the low end of that range). Gross margin, at 22% declined 60 basis points, from Q2 fy 2013. We think that some of this decline in gross margin can be attributed to what we have written about elsewhere in this blog, namely, the phenomenon whereby IT software is trending, from the customer, demand, perspective, to mere commodity. Profitability was shored up by careful management of operational expenses (OPEX). Nevertheless, earnings per share amounted to a 28% reduction below Q2 fy 2013.

Sales of network hardware grew by 40%, which is impressive. Mr. Gladden noted that Dell launched its “Active Infrastructure Converged Offering” in this quarter. This offer includes hardware, software and services components ” . . . under a common design architecture . . .” (quoted from Dell’s webcast, which can be accessed from the Dell website, for which a link has been provided above). He characterized the market forces driving this offering as a need for “simpler” solutions.

Per Mr. Gladden, the drop of 3% in sales of storage solution resulted in revenue that fell below management’s expectations. Nevertheless, he characterized this drop as more the result of weaker market demand than any competitive factors.

Our conclusion from this section of the Dell webcast is that enterprise IT spending on data center, on premise solutions is on hold, at least for the class of solutions offered by this vendor. Further, and with specific reference to Dell, itself, we think that the fact that hardware components — namely servers and network devices — remain key revenue drivers, despite 4 years of transition, indicates some management difficulty with regards to truly transforming this business.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Sales Cycle for Enterprise IT Purchases for Calendar Q4 in 2012 is Slower than Usual

We are witnessing a slower pace for enterprise IT sales in the fourth quarter of 2012 than we would have expected earlier this year. We think that a constellation of factors, including:

    Macro events in the United States, which include the so-called “fiscal cliff”, and the concern that enterprise business appears to have about the series of mandatory steps that will have to be taken to ensure full compliance with the universal healthcare act of 2011 (which moves forward, decisively in 2013)
  • Evolution of the office computing hardware device paradigm from PCs and laptops to smaller, lighter, less energy intensive tablets, ultrabooks and smart phones, and, finally,
  • lackluster overall business performance as the result of slower purchasing on the part of international customers in Europe and emerging markets

have contributed to this purchasing slow down.

Of course, if we are accurate, then publicly traded ISVs like Dell, HP and even Microsoft and Oracle, will likely report results below analyst expectations when March, 2013 rolls around.

The question for enterprise ISVs becomes how to manage this type of slow down. We strongly advocate eschewing any finger pointing at sales for poor performance. In fact, most of the conditions driving the type of slow down that we are witnessing have little, if anything to do with sales techniques. If anything, the type of purchasing climate that we are witnessing should prod enterprise IT ISVs to take steps to insulate sales teams that are performing to expectation from the type of hit that would otherwise occur as the result of these environmental conditions.

We are not calling for bonuses to be paid out when revenue falls below expectation. Rather, we are calling on sales management to carefully evaluate sales team performance and provide encouragement, where it makes sense, to ensure that talented individuals are not lost to competitors. In fact, we are entirely confident that present conditions will eventually improve; therefore, top performers will be needed as opportunities re-emerge. If top performers can presently be identified within sales teams, it makes sense to take the steps to retain them. It is common knowledge that the cost of replacing top performers is much higher than the cost of taking the steps required to retain them on staff. Why waste precious cash in an effort to replace talent that should have been kept on board?

From a product management perspective, it may make sense for enterprise IT ISVs to produce very low cost (and even no cost) versions of products to keep the process of seeding major account opportunities moving forward. After all, when macro factors improve (as they most certainly will), enterprise customers committed to a platform will likely pay to extend usage. The key for ISVs is obtaining their commitment> If resources are such that a quarter or two of slower progress can be tolerated, then it makes sense to continue winning commitment, even with “freeware”.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


ISVs with Cloud Offers Need to Include Enterprise IT in Discussions

In the last post to this blog we talked about enterprise IT, and their likely role in cloud computing discussions. There is another reason for ISVs to actively search for opportunities to include enterprise IT organizations in discussions about cloud computing offers. In fact, these organizations are usually highly influential within the management hierarchy of enterprise businesses, and, therefore, may have the authority to mandate enterprise wide use of solutions — which can result in substantial sales volume for ISVs.

Enterprise IT organizations can take on this role as a sponsoring authority for a computing standard either as a driver, or, on the other hand, as an implementer, working on behalf of a line of business (LOB) organization. When enterprise IT drives products as company standards, LOBs within the organization will usually adhere to policy and implement approved solutions for requirements.

When enterprise IT implements products on behalf of LOBs, the LOBs are usually powerful within their respective organizations. If ISV sales teams have done their work, meaning that they have reached out enterprise IT organizations and established credibility, then they have an opportunity to leverage successful implementations as a reference for other LOBs within the same organization. This latter approach requires more work, but can be equally productive as regards sales volume.

The point is that ISVs — especially Cloud ISVs — need to understand that enterprise IT is a very important group within the organization, and, certainly, not one to be treated in a casual manner. Gaining this understanding means carefully modulating promotion based upon the bring your own device (BYOD) movement, or the consumerization of IT to ensure that enterprise IT guidelines and policies are respected, and, further, presented to LOBs as they emerge. There is no more certain failure plan for a sales strategy for enterprise business opportunities than to go against enterprise IT policies and mandated procedures.

In fact, enterprise IT organizations will usually welcome outreach. They understand their obligation to provision as optimal a computing environment for internal users, as possible and will, in all likelihood, make reasonable best efforts to deliver on their mandate. We need to note that outreach should be effected appropriately in a carefully modulated manner. There is no need to include enterprise IT in early stage negotiations with LOBs beyond simply establishing, within the lead generation stage for the opportunity, whether or not LOB contacts are aware of any enterprise IT policies or procedures for the type of solution under discussion. Lightly covering this base very early in the sales cycles makes sense. A lot of wasted effort can be spared by qualifying prospects on this question.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


It is All a Matter of Return on Investment when Enterprise Business Considers Implementing IT Software

As the result of a long history of poor to mediocre return on efforts to implement IT software solutions, enterprise businesses and other large organizations in the public and not for profit sectors are much more reluctant to consider IT software purchases. Therefore, it is absolutely essential that sales personnel managing prospects and accounts pay very close attention to customer expectations of the probable results of IT software purposes.

Paying attention goes much further than simply attending to the task of setting reasonable, realistic expectations of purchase benefits by prospects and even customers. Paying attention means participating, where ever possible, along with prospects in the formation of the true value of enterprise IT software implementations under consideration. We have written on this topic earlier in this blog.

We highly recommended several books authored by Jeff Thull on this topic, and still do so. From our unique perspective, we can attest to the truth of the value imperative for our customers. For example, we are presently selling training systems for IT software to enterprise customers. Lately, we are learning with increasing frequency that our prospects must demonstrate for management the actual value of IT projects that have been implemented. Like any other successful selling organization we have no other option than to support our customers and prospects as they proceed through this process. Indeed, we welcome opportunities to do so. Further, we think it makes sense for other enterprise IT ISVs after the same markets to do the same.

We need to note that not all enterprise IT organizations will welcome the participation of vendors in the formation of specific value propositions. We think that part of this reluctance amounts to a “once burned twice shy” attitude. Another driver is so-called “commoditized IT”, which we now find to be a realistic position. Some purchase are just too mundane for enterprise businesses to consider including a vendor in the formation of a value proposition. In fact, we think this makes perfect sense. When we encounter this position, our policy, as ever, is to accomodate.

Nevertheless, the larger enterprise IT ISVs, along with prominent consulting firms typically participate in this type of value formation on the part of customers and prospects. Therefore, whenever an opportunity for this type of role emerges we advocate moving forward and taking up the offer on a position in the decision-making.

Bottom line: it makes sense to maintain awareness of the importance of delivering value once enterprise IT software projects have been implemented. At all costs, it is essential for successful efforts in this area to monitor customer impressions to verify positive results.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved