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