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Common Misconceptions – Sales, Sales, Sales

September 8, 2011

This is part two of the common misconceptions series. It will be focused on sales of cloud computing. Part one can be found here.

Is cloud computing a whole new world? Will it change the mechanics of enterprise business? Will it shake the way IT is implemented and used in its foundations? I am not sure. We do see some major shifts towards the social enterprise and the use of consumer devices in the enterprise environments happens more often than in the past. But what about the way cloud computing is sold and purchased?

Cloud only competes with cloud

This is one of the statements where I can say wholeheartedly it is wrong. Very few CIOs go out and search for “a cloud solution”. If you look at it from the perspective of the customer, they do have a business challenge that needs to be solved. The evaluation of potential solutions covers self-hosted, classic hosting and amongst others the cloud. So this is where a cloud solution is compared to non-cloud solutions.

Nobody is going to the cloud for the sake of the technology or because it is the new kid in town. It has to deliver some real value. There is a downside to the broad range of competitors. Often you stop comparing apples to apples and rather look at a fruit salad. It is important to any sales person to know their competition and be prepared for the different angles the customer’s business challenge can be approached.

I have spoken to some sales people lately that did not take the view of the customer and where surprised when I named a classic outsourcer as a competitor for a cloud services. This is a risky position to be in as the sales strategy around e.g. FUD is completely different when competing with a non-cloud service.

Cloud is a new way of operating servers only

Do know your cloud competitors even the ones not discussed yet in the major tabloids. As pointed out in this recent post I have had my encounter with ignorance or at least lack of knowledge about the recent developments in the collaboration / productivity market. The world is changing. New players emerge and new ways of doing things as well. Even if you have a strong market position today it will be challenged tomorrow by someone new. Let’s take an example, the way Amazon has entered the cloud IaaS and PaaS market was unexpected by many and even ignored for a long time by many more. The way companies like SalesForce.com and Yammer are reshaping the way enterprises communicate and collaborate internally and interact with customers is something the major player in the market, Microsoft, has not yet fully realized. Also the amazing way in which SalesDorce.com is expanding their portfolio is another warning sign to understand that cloud is not about servers in the internet any more, if it ever was.

No need for a sales force; customers go online and buy it

The hope to reduce the cost of sales and the sales force in the field is just a hope. If you have a small enterprise solution that is fully standardized, needs no integration and is targeted at the U.S.A. only you might succeed. But beyond that the sales motion has not fundamentally changed. A large enterprise would still want to go through the sales process they know. This is especially true as the purchasing departments and the IT departments do have to compare classic IT and cloud services. There is still a level of integration and training needed and as you sell cloud services from the top, the CIO certainly wants to meet and talk rather than go to a website and read only.

On top of that you need to be aware of regional differences. Microsoft was surprised and postponed the BPOS (now Office 365) launch in parts of Europe when they found out that European enterprises of all sizes just do not go only and purchase an ongoing service by credit card. There was the need for a regional sales force not only to explain back the local purchasing habits but also to go out to the customers and explain the new services.

You can easily integrate cloud services into your payment scheme for your sales teams

This is one of the major inhibitors to success. You need to get the way to pay out your sales people right the first time. As selling a continuous service differs much from the purchase of a piece of hardware or software with regards to the revenue stream this impacts the payment scheme big time. If you carry an existing business line on and add a cloud services revenue stream you’ll have to find the right mix. It is a little bit like having a tree full of fruits in one hand that fills your belly today but soon enough dies and a small slip that will deliver your fruits in the future in the other hand. You cannot focus on the slip only as you will starve before it can deliver sufficient fruit and if you focus your attention on the fully grown tree only your slip will never grow into a tree. It is the balance that makes things work and your payment scheme for sales needs to reflect that. At Microsoft I have fought the battle with the field over this as the commission scheme had been unbalanced resulting in many lip services and a continued focus on the classic software sales. Steve Ballmer’s personal statements in an internal video set the tone right. Sadly only very few people outside of Microsoft U.S.A. ever saw this. It must be said also that the strong focus on the current month, the current quarter and the current financial year can be compared with the focus on the tree of fruit solely.

If you start cloud computing only you can focus on one commission scheme but need to make sure it differs from the classic sales model. This is why SalesForce.com has done it differently from the very beginning.

http://www.businessinsider.com/salesforce-chief-calls-accounting-criticisms-ludicrious-2011-9

To be continued …

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