Involving Channel in Selling Software in The Cloud

So you are a software vendor or channel player and you want some sales of Cloud product. What's different to the way you sell software on-premise today?

To put a finger on the whole software industry, this is the vital question. Today, in a mature PC world, conversations about general volume software sales usually involve either questioning what the budget is, numbers of users required or what is the licence base today and calculating the difference required. It's a given that people know how the software works.

It's rare that the conversation goes much further than the above, to be honest. So when it comes to working a customer through the differences that Cloud products make will take some changes to the approach.

Firstly, to test whether Cloud is applicable, I would suggest a different set of questions. Typically, SME companies are going to be most interested today and it's where the software vendors would really love to get sales. So concentrate there for best results is sound advice. Then think about what customers are trying to achieve and ask the following sorts of questions:

Are you interested in decreasing costs and increasing cash-flow?
Are you interested in increasing performance?
Do you have a mobile workforce?
Are you interested in scaling your organisation?
Do you have to ensure you are managing your data and complying to regulations?
How secure is your data?
Do you want to spend less time and money on IT and more of both on selling your own products?
Do you want to simplify technology?
Do you want to get access to the latest technology whenever it's available without costly upgrades?

There are more questions and you can phrase them differently but the obvious inference here is that selling in The Cloud takes a bit of brain power and effort. It's not just about what a product will do but what difference it will make to the company. You will have to be prepared to walk people through how the software works differently in The Cloud, so demonstrations may be required.

But the most important requirement will be to develop an easy, thought through Step Plan to take customers from where they are today to working in The Cloud. For most products it will involve at least some steps. For example, those vendors who only ever sold Cloud products like Salesforce.com had to deal with how to import legacy information and all the relevant data associated like notes or activities from old products like ACT or similar. If you are selling MS Office 365 as another example, you need to understand how to migrate users by obtaining DNS and domain transfer information, user accounts and more. There will be training required as SharePoint is involved as well as running through the web apps. Not knowing the steps involved will create fear and customers don't like the unknown and will not trust those who haven't thought things through. This usually means there are opportunities for professional services but my advice is not to be greedy here as high start up costs can kill any Return on Investment argument and will almost certainly limit the long term worth of the sale.

That's just the start - to get the initial sale. It is paramount in the 'Sales Plan' to ensure that users adopt the new software and use it. Salesforce.com made sure that salespeople and support staff were all over customers after a sale to ensure that users used the product and then the adoption became viral as other departments got involved.

Here's a lesson in the Cloud - pick off departments first to prove the concept and then make that sale a reference within a company. Make sure users are trained, do web surgeries regularly and be prepared to demo to more people so have regular set demo times to maximise efforts.

All of the above selling tactics are very, very different to current on-premise selling. It's why, yesterday, I blogged that many vendors are approaching the whole issue of selling in The Cloud wrongly. They are making it low profit for their channels whereas the likes of Salesforce.com realised that you need highly incentivised salespeople.

There was a reason that Salesforce.com and the like did not widely adopt channels in the early days. Not least that they did not want to dilute their profits but mainly because they did not believe that channel salespeople were good enough to sell their products. They believed channel salespeople were fat and happy with the margins that volume software gave them and that they had not really sold for a long while. So Salesforce.com went for a new breed of salespeople as these salespeople would have to fight the market, the FUD, the mis-selling that goes on and understand the key issues to win sales while also knowing their technology in terms of handling objections about data security and availability.

So it is highly likely that the current breed of salespeople both at vendors and in the channel will simply not be capable enough to sell The Cloud as it will seem a) like hard work and b) not very rewarding for the effort they put in.

I am back to my theme from yesterday. Software vendors have to realise that in order to tap into the rich vein of sales that the Cloud can bring, they are going to have to invest in the market and the level of sales capability. Most of the software vendors who are bringing out Cloud versions of their product are applying similar margin models to their channel. It isn't going to work.

Investment is required and that will mean upfront profits in the Cloud will not be there. Live with it. Under the annuity model, vendors and channel get their profits a year or more down the line. And then they are big.

Think about it. You sell 100 licences every month, which may seem a low monthly value but this time next year you will have the annuity of every licence you have sold previously to 'bank' before you start selling new licences again. Make sure those customers are happy and renew, and you have the beginnings of the stepwise profit accumulation that makes the Cloud hugely profitable. But it will not be in year one. In fact, in year one all you will do is invest.

And the more you invest upfront, the more you will make in subsequent years. So, no rocket science here, the MORE you invest now in providing education, incentives and margin to the channel, the more you will make in the future. And make sure that renewals are also rich so that channel players will support customers once they have bought as renewal is not a 'given' - it has to be earned.

So do Distributors have a role to play? Any Distributor who says that they will continue to perform the same job as before, I advise you don't use them for Cloud. It's no longer about credit and reach, it's about focus, investment and changing techniques. It's about channel enabling, education and providing platforms to sell easily and consolidate billing. If a Distributor cannot see that now then they only will ever invest in buying to catch up. Don't give them that chance, is my advice. If there are profits to be made down the line, make sure those who invest know make them with you.

Resellers are not as incapable as software vendors make out. The big guys will carry on doing what they do but the mid-market who serve the SMEs are hungry for new products and to make money. This is where to concentrate your money and efforts and its why a good Distributor can be important.

The problem for software companies is to get ahead of where Salesforce.com came from. Sales can be sequential and hard going - every customer needing convincing, possibly a demo but certainly fear needs to be taken out of the equation. To scale this it is vital for vendors to work with their Distributors to get 'massively parallel' rather than 'serial' in sales. A good Distributor will have educational plans, a way to bill effectively, dedicated Cloud sales focus and above all, a plan.

Vendors will need partners who are willing to invest and adapt to the new sales Cloud can bring. It's pointless just assuming Distributors and channel offer no value - assume the opposite to start with and filter out the time wasters. But bypassing channel will be a path to failure unless you have large pockets. The fact is that vendors who capture the power of the channel and switch it on to their advantage will succeed wildly whereas these who don't engage channel will fail.

Think about that last statement. Cloud sales, if left to the web, will go with Google. Why? They dominate the Search and advertising market. When it comes to the web - they already have won it. Not even Microsoft can compete there. So how can Google be stopped? The thousands of capable, willing and hungry salespeople in the channel are the answer. Educate and incentivise them correctly and you can win.

It means investment. Vendors cannot avoid it. Don't turn Distributors away who have plans to invest in as if you spend money with them it's highly likely you can get better leverage through to the channel. Every pound invested here may save 2 or 3. Spend it all building your own sales channel - it will cost more as you have to achieve the same scale as before.

There will be time wasters, of course. There will be those who just posture. The trick is to engage, share knowledge and jointly invest in a well thought through, focused joint plan around education and enablement.

Those who believe the Cloud will solve itself will get left behind. The channel is the opportunity to get scale. To unlock it will take investment and that means incentivisation. It takes time and effort to sell software in the Cloud and if there is no profit in selling software in the Cloud, it won't get sold. You don't have to be a rocket scientist to work that one out.


- Posted using BlogPress from my iPad