It's perhaps no secret that the enterprise sales model is broken. Software-as-a-Service (SaaS) and open source have picked the lock on the enterprise, enabling CIOs to try before they buy, disrupting the old model of paying far too much for demoware and roadmap dreams.
It's a welcome shift of risk from the buyer to the vendor, as Geva Perry highlights:
We're now witnessing an increasing trend of bottom-up sales. A casual decision made by developers on a day-to-day basis, not a grand strategy laid out by the CIO. Try-and-buy is the norm, and so are subscription payments and other models that take off the financial burden from the customer and places it on the vendor.
But it's not only a matter of a shift to subscriptions, as CMS Watch's Kas Thomas details: CIOs want pricing greatly simplified:
These days, buyers of enterprise software are looking for simplicity -- simplicity in licensing, simplicity in accounting, simple APIs, uncomplicated UIs. If IT experts have learned anything in the past five years (years that have seen fast/simple technologies like Ruby on Rails, REST, and AJAX overturn a lot of apple carts), it's that complexity is costly. And in the current economic environment, there's no room for excess costs.
Open source provides that simplicity. It enables enterprises to pay for only the value they need, something which Red Hat has been highlighting lately. SaaS also provides this simplicity, though it leaves out the customer freedom that open source affords.
In either case, however, they demonstrate where software sales are going: smaller, incremental deals rather than big upfront commitments based on little more than slides and vague promises.
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I woke up this morning to a special deal from Amazon.com on a TomTom GPS device. While its one-day, 33 percent discount almost certainly has nothing to do with Microsoft's announcement that it is suing TomTom for eight counts of patent infringement, the appearance of Amazon trying to clear its inventory of the TomTom One-S couldn't have better comic timing:
I don't want to prey upon TomTom's misfortunes, however. I'm going to be waiting for the "75 percent off" sale next week. :-)
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Somehow, CIO.com's Shane O'Neill divines that Apple's customers are dumping it in droves now that the global recession has kicked in. His evidence? A 6-percent retail sales drop in January compared to January 2008, according to NPD Group:
Apple, welcome to Earth in 2009, where premium pricing doesn't cut it anymore...We live in a time where cheap is trumping cool, and probably will until this economy turns around. That's bad news for Apple, which has no Netbook (that we know of).
This is a bold statement to make on one month's worth of data, especially when he also cites data from Hewlett-Packard, which endured a 13 percent drop in laptop revenue in its most recent quarter. Cheap(er) laptops are selling even less than Apple's.
This is the evidence that Apple is in retreat and that customers refuse to pay a premium for its quality? That its rivals are hurting even worse, as they try to sell their cheaper machines? I'm not seeing it.
The reality is that Apple already does have a "low end" Internet device to offer the market. It's called the iPhone. No, it doesn't offer a full computing experience, but then, neither do Netbooks.
The difference in the iPhone's favor, however, is that it comes with a host of applications unavailable on Windows- or Linux-based Netbooks: the App Store. True, most of these applications rarely get used after customers kick the tires on them, as CNET reports, but that's the magic: the applications are so cheap, they're disposable.
The real question for me will be whether Apple ever condescends to market the iPhone as a Netbook-type device: a comparable price tag with a nearly limitless (and cheap) application potential. I don't think that it will, and I don't think that it should.
I use a Mac for the same reason that I used to swear by IBM ThinkPads: quality. The quality was and is worth the price.
Now that I have an operating system that matches the quality of the hardware, I'll gladly pay for it. However, I'm not rushing out to buy anything right now, and I'm not alone, which is why both PC and Mac sales will continue to slide--but not in equal proportions.
I suspect that the recession will continue to hurt PC vendors more than Apple, because the PC vendors have little with which to differentiate themselves. Customers looking to buy a machine are going to increasingly look to the Mac, even in these hard times, because the Mac delivers value that exceeds its price tag.
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Greg Symon
(Credit: Red Hat)Ever since June, when Ed Boyajian left his post as Red Hat vice president of North America sales to become CEO of EnterpriseDB, Red Hat has been operating without an equivalent sales executive in North America.
Regional executives Ian Knight, Sean Doherty, and others have delivered the numbers under the guidance of Alex Pinchev, Red Hat's executive vice president of global sales. But the company needed to replace Boyajian.
Red Hat on Monday announced the appointment of Greg Symon as vice president and general manager of North American sales. Symon comes to Red Hat from Intel, where he has spent 22 years of his career, most recently as senior managing director and founder of Intel's Global Software Relations organization within Intel's Software Solutions Group.
Red Hat has close relations with Intel, so Symon will be intimately familiar with Red Hat's organization and should require little time to get up to speed in his new role.
Symon brings more than software sales experience to the table. He has depth in business development, a key need for Red Hat as it seeks to expand and grow beyond its Linux and middleware businesses. But he also fits the Red Hat bill with stints as worldwide director of Intel's Customer Solutions Group Influencer Sales Team, Americas director of the Architecture Management organization, manager of the Business Development organization, and director of the Strategic Relations Managers Group.
In short, Symon is not a one-trick sales pony, and he has the sort of breadth of experience and expertise that Red Hat has traditionally sought in its executives.
Boyajian was a great sales executive, and he remains revered by Red Hatters. By the looks of it, Symon is cut from a different cloth than Boyajian, but he should have the same ability to earn and eventually command respect within the Red Hat sales organization.
I'm in the middle of a fascinating study by Robert Breza of RBC Capital Markets entitled "On Demand Evolution, Volume II: Insights and Best Practices at Leading On Demand (SaaS) Providers." The research details the characteristics and best practices of successful sales operations and R&D at SaaS companies. I share some of its central findings because many of the same principles apply to open source, as both leverage subscription-based business models.
Just as barriers to open-source adoption continue to go down, so, too, do barriers to SaaS adoption. Indeed, some of the same factors may be driving increased acceptance of subscription-based software purchases. Forty-four percent of RBC's survey respondents indicated "no major concerns with SaaS adoption," which is up from 35 percent in a similar survey from Q1 2008.
But someone still needs to sell these products/services. One suggestion from the report is that subscription-based vendors should segment "hunters" (new license salespeople that are paid a higher commission) and "farmers" (renewals and upsell salespeople, generally paid a lower commission) early in the company's growth. Such vendors should also focus more on the long-term value of a customer, not the short-term initial contract payout:
The company is more concerned with farming the customer than they are with negotiating that initial contract. An effective and "sticky" product coupled with an efficient sales model should be able to drive customer retention above 90% while revenue retention is at or above 100%. (10)
Many of these companies (Omniture is a prime example) opted to start with "mid-grade" salespeople early on (Think: inside sales), later moving to "high-grade" sales people once the market opportunity was better defined. The idea is to start with more junior, hungry salespeople to prove out the market, and then bring in more expensive headcount to "reap" in the market once it has been established.
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Zimbra keeps on growing
I was on Zimbra's site today looking for the latest update to its excellent Desktop product, and came across the news that open-source Zimbra now has 11 million paid mailboxes. This might still be small potatoes compared to IBM's Domino and Microsoft's Exchange, but it signals tremendous growth from Zimbra, as a quick Google search confirmed.
Back in October 2006, Techcrunch reported 4 million paid mailboxes for Zimbra. By January 2007, the number had jumped 2 million to 6 million paid mailboxes.
In the space of a year, then, Zimbra has roughly doubled its customer base. Let's correlate this to sales.
The company expected to hit $20 million in 2007 (and was on track to do just that as of September 2007, when Yahoo! acquired Zimbra), the year that it probably bumped up against 9 million paid mailboxes ($2.22 per mailbox). It did $6 million in 2006, the year that it had 4 million paid mailboxes ($1.50 per mailbox).
... Read moreThe music industry seems to be taking one step forward, and then promptly taking one thousand steps backward. In Universal Music Group v. Augusto, Universal Music Group (UMG) is suing someone for putting its promotional CDs for sale on eBay, seriously altering the standard view of what First Sale doctrine means.
At issue here is who owns the promo CDs. Universal argues strenuously that it never transferred ownership when it sent them out and that the discs are merely "licensed" to those who receive them. Each disc includes text that makes clear that "this CD is the property of the record company and is licensed to the intended recipient for personal use only." According to Universal...
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The past few weeks my youngest daughter has been in full potty training mode. While some experts (read: Dr. Phil) suggest having the trainee call their favorite superhero, having done this a few times we have Lily call someone much more reliable:
Greta, my third child.
Greta seems to be a natural caregiver (and busybody) who has taken a keen interest in helping her younger sister to be potty trained. We've accentuated this desire by offering chocolate chips to Lily and Greta. When Lily has no desire to visit the restroom (which is often), Greta has an insatiable appetite for chocolate. She convinces Lily to "go potty" and everyone is happy.
More and more frequently Lily goes on her own, but Greta still demands payment. At first I resisted (something in me doesn't like the idea of someone getting something for nothing), but then I let it slide as it reminded me of a lesson I had learned in the past two years about compensating salespeople.
How so?
... Read moreIBM says that it isn't dropping SUSE Linux as a key part of its retail point-of-sale strategy. It's just adding Windows (WEPOS, or Windows Embedded Point-of-Sale). But for a company that has everything to gain from Linux and everything to lose from Windows (except some near-term cash), this reeks of capitulation.
IBM saw Linux POS systems spike in popularity, but that has subsided. Now it's voting with its feet:
As a rival to Microsoft in many other parts of the IT market, IBM had held out for Linux over WEPOS as long as it could. But the deal to support the Microsoft operating system should cement Linux's fate as a niche offering that is attractive mostly to grocery store chains and similarly sized hard goods retailers, such as Pep Boys or Circuit City, [market research firm IHL president Greg] Buzek said.
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Talk with John Roberts, CEO of SugarCRM, and he'll tell you that his website is one of his most valuable business tools. It's often the beginning point to a customer relationship and is also often the source of a deal closing. Few understand web strategy as well as SugarCRM.
(Credit:
JBoss/Red Hat)
JBoss might well be among that few. I was reading through an internal presentation from JBoss and continually find myself impressed by how well Marc, Rob, Bob, and the others grok'd the importance of the web to their business. JBoss knew who was hitting its website, what they were doing there, and how to nurture that initial interest into a sale.
Take a look at the slide to the right. IBM is the master of selling to the CIO and pushing its technology down into an enterprise. Open source generally works in the opposite fashion. You start with the developer/architect and "bottom-up" adoption of technology until it's pervasive enough to catch the CIO's attention...and her wallet.
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