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


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


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


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


Are Outside Sales Teams Still Necessary for Enterprise IT Software Sales?

We no longer think that successful enterprise IT software sales depends upon an outside sales component. We have come to this conclusion as the result of our direct experience over the last 3 years selling this type of commodity into enterprise business markets. We are not precluding our customers from establishing and maintaining this type of effort. Rather, we do not think that the market is requiring this type of representative, any longer.

If our position is correct, then enterprise IT ISVs can dispense with a lot of costs that, in the past, were considered mandatory. At a minimum, these costs include rent for remote offices, and some portion (likely significant) of regular travel and entertainment expenses. Once alleviated of these costs, enterprise IT ISVs should have some latitude to apply funds in other areas, for example:

  • online marketing, which should include lead development campaigns, customer support, and brand management
  • and wider attendance of industry events, conferences, seminars, etc

The return on investments in online marketing and a more extensive marketplace presence should be substantial, and, in all likelihood, far more than perpetuating out of date sales structures where outside sales personnel are located remotely, but, nevertheless, spend most of their time on the telephone, and, rarely, on the road visiting prospects and/or clients.

For enterprise IT ISVs that have not engaged in this shift in sales team architecture, we strongly advise implementing a reorganization as soon as possible. We think it makes sense to maintain a substantial inside sales effort. In fact, we have written extensively in this blog on many topics that reside at the core of inside sales best practices, not the least of which is teleprospecting. A coordinated, integrated direct marketing effort that looks, primarily, to online marketing communications opportunities to generate leads, with direct telephone follow up and efforts to engage with prospects is, in our opinion, a winning strategy in today’s enterprise business market in the United States.

Of course, it makes sense to reorient top producing sales personnel to new roles that emphasize making better use of the telephone as a method of engaging with the market, in conjunction with periodic attendance at market events, conferences, seminars, etc. Why lose top producers when, in all likelihood, they would rather stay on board and simply reorient to the new strategies?

Finally, the best location for inside sales teams is the head office. Obviously, for virtual ISVs without a bonafide headquarters location, remote home offices will have to serve, but for businesses with headquarters, it makes sense to centralize sales team efforts.

If you are thinking about your current cost of sales and would like to trim expenses sensibly, while preserving working components of your sales team, please consider IMB Enterprises, Inc. We have direct first hand experience delivering successful results in 2012 with this type of method (in other words, a very strong inside sales effort, with little or no outside sales component). Please either telephone us at +1 631-673-2929 or complete the contact us form on our web site. We will be happy to reach out to you to learn more about your needs.

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


Obsolescence of Outside Software Sales Teams has Resulted from a Combination of Factors

A combination of factors, which include a new role for computing software as a mere commodity requirement for enterprise businesses, and a marketplace that is now characterized by much leaner enterprise businesses, have combined to hasten the obsolescence of the traditional outside sales model. Enterprise IT ISVs, whether consciously, or not, have not only adjusted to these realities, but have, actually, contributed substantially to their emergence. In fact, as we have argued in a post to this blog, Enterprise IT ISVs are Driving Market Interest in Cloud Computing Options, cloud computing makes lots of sense for businesses manufacturing software commodities (ISVs) who are looking for the lowest possible cost for producing software, distributing it to customers, and then supporting customers over product life cycles.

With software delivered one time for many (which is essentially how we see the structure of cloud computing offers), little, if any, need to deliver hard products to customers, and, finally, no longer a need to deal with anymore than the range of web browser options when architects plan for likely clients for applications, there is little need for outside sales personnel.

From a marketplace perspective, enterprise businesses have become much leaner (the chronic high unemployment rate in the United States is symptomatic of enterprise businesses with far fewer personnel, who, in turn, work under a much larger workload and have, generally, much less time for the in-person engagement that was formerly the norm for outside sales teams), with little time for lunches with outside sales staff. Further, the market can now avail of a very rich resource of information about products, solutions, customer experiences, etc — the Internet. With the wealth of information available online, we do not see where prospects require the type of in person presentation that was the case as recently as 10 years ago.

Rather, customers are thoroughly researching requirements independent of vendors. As several leading businesses in the sales lead development space have made clear (these firms include Alinean and Marketo, both of which we have written about in past posts to this blog), the moment of engagement when prospects reach out to sales is, in fact, much later, which, in turn translates into a much longer sales cycle, but one that appears to “close itself”. Therefore, we think that enterprise IT ISVs can certainly work on an assumption that outside sales personnel are not the essential component to a winning market effort that was the case in the past.

If you would like to renovate your internal sales architecture to better address present day market opportunities, please consider IMB Enterprises, Inc. We have direct first hand experience delivering successful results in 2012. Please either telephone us at +1 631-673-2929 or complete the contact us form on our web site. We will be happy to reach out to you to learn more about your needs.

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


Selling Enterprise Computing Support Services is all About Commodities and Having a Very Low Cost of Delivery

On September 13, 2012, the All Things Digital web site published an interview, conducted by Mr. Arik Hesseldahl, with Mr. Stephen Schuckenbrock, Head of Services for Dell. The points of this interview that were most meaningful for us where:

  1. Mr. Schuckenbrock’s evident deep grasp of Michael Porter’s Five Forces of Competition
  2. and his understanding of selling realities of 2012 and the need to pick and choose opportunities carefully instead of legacy styles that called for an “anything you want” posture for customer facing sales in enterprise markets

When Mr. Schuckenbrock speaks of ” . . . put[ting] everything in services together as one team, and then we globalized everything, so when you a buy a notebook in the U.S. and you happen to be in India, we know where you are, and we can fix the machine. We couldn’t do that in the past.” (quoted from Mr. Hesseldahl’s article, for which a link has been provided, above) he’s actually talking about building a support system that is inherently less expensive for Dell to run, which makes them much more formidable as a competitor if one follows Porter’s prescriptions.

Looking further, when he goes on to note that the enterprise services and support businesses are actually rather similar, but points out that ” . . .customization worked in the old way, when margins were at 30 to 35 percent. When you start pushing margins into the teens and add in the capital intensity and then the risk profile of those contracts, it only takes a few bad deals to fundamentally break a good company. As x86 (systems based on chips from Intel and AMD) has become the dominant compute platform, services can start looking more like the machine that we have in the support business. Not identical, but more like.” (ibid) we can’t help concluding that Mr. Schuckenbrock understands, very well the fact that customizing solutions will result in a much higher cost of delivery, which, in 2012, will prove to be a fatal flaw. Once again, he’s keeping his attention fixed on maintaining the lowest cost of delivery that he can manage, to protect a highly competitive advantage.

In fact, the positive comments that he makes in this article about cloud computing, as well as about a set of forward-thinking set of customers who recently chose Dell over the competition, can be looked at the same way — in other words, that cloud delivery affords Dell a very low cost of provisioning services to customers. After all, with cloud, there is no on premise component, etc.

As regards his mastery of selling products to enterprise IT buyers, we detected his expertise in this area when he noted that ” . . . [c]ustomers who just want me to do it their way, but cheaper, I’m not so interested in.” (ibid). Here is a manager who is prepared to walk away from a deal — a breathe of fresh air.

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


Enterprise IT Software Sales People Must be Comfortable Playing the Role of Facilitators

We very much like how the BusinessDictionary dot com web site defines the term “facilitator”. In fact, this definition illuminates not only the activities typical of facilitation, which include:

  • ensuring clear communication between members of a team, and
  • contributing to efforts to solve problems that arise as teams work on attaining objectives

but, further, the fact that the role of a facilitator is typical of the type of matrix organizational structure that we have talked about through prior entries to this blog.

This definition specifically posits that a facilitator “does not contribute to the actual content or management of a team’s project (which is a team leader’s function).” (quoted from the BusinessDictionary dot com web site page link cited above). In sum, a top enterprise IT software sales person in 2012 plays a leading role delivering on his/her objective to win the sale, but an invisible role, which the BusinessDictionary dot com web site refers to as serving as a “lubricant” — what we refer to as a matrix participant — in the prospect’s own project management process for the software product/service/integrated solution that is being considered for purchase, or, post purchase, for implementation.

Hopefully it will be clear to the reader that hiring managers in need of top sales talent for these enterprise IT software markets need individuals who have demonstrated an ability to modulate their activities, as required, to win the sale. Specifically, we mean individuals who are comfortable taking the lead, as appropriate, but who are also comfortable serving as a contributor to someone else’s leadership when objectives dictate this type of role.

All too often these same hiring managers are simply looking to recruit individuals who have succeeded at, what looks to be, the same job for other employers. Success is almost always simply defined as exceeding quota targets for some arbitrary number of years — usually a minimum of 3. Finally, the candidate should be widely known in the marketplace and come to the position with lots of contacts.

We think that hiring managers for enterprise IT ISVs who need sales people need to substantially change the skills and employment history criteria that they look for in candidates if they are to successfully hire the type of major contributors to business success that we think these individuals will need to be. Broadly speaking, much more emphasis must be placed on the likely flexibility of an individual, meaning his/her ability to adapt to serving in different capacities, as required, in order to deliver, successfully, a valuable sale or, over time, revenue targets for the business.

If you cannot afford to hire the wrong person for the sales or marketing opening at your company, please contact IMB Enterprises, Inc. We look forward to collaborate with enterprise IT ISVs that face an imperative to change sales and marketing methods to successfully align with their markets. Please call Ira Michael Blonder at +1 631-673-2929 to further a discussion about our retained search services. You may also email Ira at imblonder@imbenterprises.com.

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


In Late Summer, 2012, Dell and Hewlett Packard are on the Trail of Highly Capable Enterprise Sales Personnel

Dell reported their second quarter earnings for their 2013 fiscal year on August 22nd 2012. Hewlett Packard followed right behind on August 23rd, 2012 with their Q3 results. We found lots of consistency between the two reports:

  1. A common theme — 2012 presents a challenging “macro” environment where personal computers sales have declined steeply, year over year for both companies
  2. A second common theme — enterprise deals are moving at a substantially slower pace than was the case in the past
  3. A shared objective — improve the performance of enterprise IT sales teams

In the next post to this blog we will express some of our opinion on pt 1, above. For the remainder of this post we will focus on pt 3 and, to an extent, pt 2. As we have consistently voiced in this blog, since its inception in early 2011, the characteristics of effective, valuable sales personnel charged with selling products into enterprise-class (meaning very large) businesses, and comparable sized organizations in the public and not for profit sectors, have changed, radically, since the early days of the personal computer (late 1970s, early 1980s).

Back then, the winning mindset for top sales performers was much the clarion call of the wild hordes. The art of selling was as easy as “taking candy from a baby.” Finally, the optimum mindset that sales personnel needed to cultivate in order to “hit their numbers” was to think like a rabid dog driven to “go for the jugular” of the prospect. The environmental habitat that underpinned this selling environment was exclusivity — sales personnel who consistently exceeded quota mastered the technique of convincing prospects that they truly had something to offer that no one else could deliver.

Those days are gone in 2012, where entire categories of products overlap, groups of prospects must arrive at a consensus in order to purchase products/services/integrated solutions, etc and, of most importance, budgets are almost no where to be found when needs are at hand. Today’s most successful enterprise IT sales personnel must be masters of all of the steps required in a complicated process that can take, literally, several years to develop. Much of that work, as we have written about in this blog, is actually a matter of facilitating the natural evolution of the prospects purchase process, by no means does it have much to do, at all, with pointing their boat and forcing them to drive in your direction.

We were gratified to see that these two public businesses acknowledged, in their quarterly reports, the imperative they share to build more effective sales organizations. We are absolutely convinced they are after precisely the type of skills that we have delineated in this blog.

If you head up an early state enterprise IT ISV and need to staff up with sales personnel who can work, successfully with prospects in our 2012 enterprise business climate, please contact IMB Enterprises, Inc. We have a methodology that we can teach you to implement that will certainly shorten the time it takes to develop the sales team that you require. Please call Ira Michael Blonder at +1 631-673-2929 to further a discussion about our services. You may also email Ira at imblonder@imbenterprises.com.

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