Even today, Enterprise Software is Sold, Not Bought!
M.R. Rangaswami or MR, as he is fondly called in the Silicon Valley, is an enterprise business software guru. Presently the Managing Director of the Sand Hill Group, MR is widely known for his work in the $600-billion enterprise software and services market. Having cut his teeth in the earliest days of the enterprise software era, MR has held global leadership positions at Baan Company, Avalon Software, and Oracle Corporation. As founder of the “Enterprise” and “Software” conference series, MR, and his SandHill Group, has been credited with uniting the software business ecosystem of executives, entrepreneurs, investors and professionals around the globe. MR was profiled on the front page of the Wall Street Journal and has been named in Forbes’ “Midas 100 List” as one of the most influential investors in technology. We caught up with MR to hear his story and discover what makes him such a transformational leader.
In the recent decade, the phenomenal success stories in the tech world, of the likes of Google, Facebook and Apple, have been predominantly consumer-facing. With the ‘consumerization’ of the enterprise, it is now widely believed that the next big wave of entrepreneurial success is going to come in the enterprise software space. And this is what MR had to say to all those who are making, or planning to make, their mark in the enterprise software world:
Ride the technology wave
MR calls out a key take-away from his extra-ordinary career — the priceless experience of working for companies in startup mode, or just established mode, and scaling them; there is indeed no better way to understand and to ride the technology wave, says he!
In 1982, when MR landed in Silicon Valley, the word ‘startup’ was not as storied as it is today! MR joined an upcoming MRP product company, called Madic, to test their software and business applications. Madic made applications that ran on minicomputers rather than on mainframes and promised significant cost savings to enterprises. MR experienced the highs and lows of a startup going from zero revenues to 20M USD in a few years… and then blowing up!!! Then, he moved to a ‘small’ but established company, Oracle (!), which was adding business application software to its product portfolio of databases. MR witnessed the meteoric rise of Oracle from 125M ,to 250M, to 500M, and to a Billion dollars, in just a few years. At this juncture, MR itched to get back to a ‘small’ company environment and joined Avalon, which built more flexible ERP applications on diverse databases. He oversaw the building of Avalon from scratch to 30M USD in 3 years.
At this juncture, MR got a call from another just-established ERP company, Baan, that was looking for leaders who can help scale the company, and go IPO. He jumped at that opportunity and joined them as its CMO. Soon, he went on a grueling road-show for IPO, and 25 cities-3 continents-25,000 miles-70 presentations later, Baan listed on the stock markets valued at 1 Billion USD on the first day. We certainly didn’t have the word ‘unicorn’ tossed around in that era, but Baan was truly one! After Baan, MR co-founded Sandhill Group in 1996 and has made successful investments in several business software startups … and has continued to ride the Technology Wave in his own inimitable way!
“Over the years, the predominant technology kept changing — mainframes to client server architectures to marketplaces, and internet based applications to cloud and to mobility. Each successive wave of technology has resulted in successive disruption of the business software companies,” says MR.tweet
A blended approach to sales & marketing of enterprise software products is essential!
Doing a trial of software in the earlier days was very challenging, says MR. One had to literally take computers inside premises of enterprises, load the software, hook up with the systems, and train the users. Nowadays, the software is available on the cloud, no need for training the users and enterprise users can even experience the software free-of-cost for a limited time. In these times of SaaS, cloud, social and mobile, do business software companies still need to invest in ‘sales’ people to reach out to customers?
MR believes that one thing that has remained consistent across technology shifts has been the need for enterprise class sales people to connect with customers, once a certain scale of operations is reached. Even on the marketing front, MR believes that a blended approach is required. He recounts that in an era when Facebook & Linkedin didn’t exist, he started a conference business to connect with his customers on a periodic basis.
“Even today, software is sold, and not bought. A large customer won’t just buy 10M worth software. You need to work the system. We cannot forget the past completely. Blend the good things of the past with the new & productive technologies of today,” says MR. tweet
Disruptions in the enterprise software industry is happening, albeit silently!
Is the enterprise software business getting disrupted the same way that the retail industry or other industries are getting disrupted? MR believes that big software companies are increasingly buying startups these days, to keep their innovation flow uninterrupted. This could be one reason for not witnessing some overt and cataclysmic disruptions in the enterprise software industry.
He also believes that ‘Cloud’ is silently disrupting the industry. He recalls something prescient that Bill Gates said about how “we tend to highly over estimate the adoption of new technology in the early years and under estimate the adoption in the later years”. MR says “If you look at reports from 10 years ago, the predicted size of the mobile phone market was in the millions…Today India has over a billion phones; China has over a billion phones. The same will happen with the Cloud!”
The effects of the Cloud are somewhat masked, he believes, because the commercial models of a cloud business and an on-premise business are very different. Unlike the traditional software companies charging several million dollars upfront for a software implementation, the cloud players offer their software at much-reduced upfront prices, and earn over a much longer period of time.
“You should not look at Sales Force as a USD 6Bn corporation. You should see it as a USD 18Bn corporation! There is a 3X to 4X difference to traditional software companies,” says MR. tweet
Building an enterprise software company needs discipline!
MR suggests a six-step process for entrepreneurs looking to build an enterprise software company from scratch.
“Show benefits quickly — get one department started quickly, and there is no need to get the entire enterprise to adopt your software at once,” says MR. tweet
The Changing Role of CIOs in Today’s Enterprises
MR believes that the CIOs role has significantly changed over time. The CIO’s role was more powerful when IT was more centralized. But with the advent of cloud, business divisions are able to take decisions on experimenting with business applications on their own. With large enterprises becoming digital companies, the budgets for digitization are changing hands — bulk of the money is in the hands of the CMO and the business heads, rather than the CIO.
As a result, the CIO has to become more of a business person, and an innovation person, to stay relevant. The CIO can no longer afford to be just a manager or maintainer. And that’s good news for enterprise software startups!
MR is today, leveraging his deep understanding and connections in the enterprise world to help emerging market leaders in the space with strategic management, investment and marketing advice. His Sandhill Group hosts CIOs and CTOs regularly to introduce them to emerging startups in the Valley and elsewhere. The firm also publishes SandHill.com, a premier online destination for strategic information on the software business whose site and newsletters are read by thousands of top software industry executives every week. It periodically publishes lists like the Big Data 50, Cloud 50, Enterprise Mobility 25 and IoT 25 which have become hugely popular.
MR is not only plugged-in with the startups in the US …he is now also actively connected with the Indian entrepreneurial ecosystem as a co-host of the the NASSCOM Product Conclave, and actively advises and mentors promising software product companies to succeed on the global stage.
Originally published at www.anupartha.com on February 8, 2016.
