Why enterprise software startups are kicking ass

If you’re still selling enterprise software circa 2010, you’re in for a rude awakening.

As a former sales exec at one of the big old school tech vendors, I can still remember the voice of one of my twenty seven sales managers (because for some reason, that’s how many sales managers you need to report to) tell me: “Remember Rajen: in the land of the blind, the one-eyed man is king.”

Translation: Don’t worry if you’re not a product or industry expert, it really isn’t a necessity to succeed in your job as a sales rep. Chances are your prospect doesn’t know too much about your product landscape, and as long as you know just enough, you’ll be the domain expert in the room (i.e. during a sales meeting). That should be enough to convey the general value proposition of your product and close the deal.

Okay I admit I’ve left out some of the details here; like having a good sales engineer to help get the ‘technical sale’, and having an expense account (for fancy dinners, hockey games and golf rounds) to help with “relationship building.” But for the most part, that’s really the broken world of enterprise software sales. Or at least that’s how it used to be just a few years ago. Now there are few big changes taking place, which is why I’m more bullish than ever on enterprise software startups.

“Trusted” tech vendors are no longer trustworthy” — Big name technology vendors built long term business relationships with the Fortune 500 by creating real value for their customers. HP, DELL, and IBM all had a time when their technologies were innovative and solved real problems. The product I was selling, was really considered a premium brand at the time: the “Apple” of enterprise software management space if you will, a name that customers had trusted for years. But then in 2009-2010 I started seeing this new company named ServiceNow show up everywhere with a different sort of value proposition: it was Service Management in the “Cloud.” While customers do expect some price fluctuation between vendors, when the total cost of ownership of my competitor’s solution was a fraction of mine (composed of hardware, software and services), I became less trustworthy. This was 4 years ago. Now, HP seems to be in a constant state of restructuring, Dell’s gone private, and IBM’s just revised down it’s 5 year EPS. Being a trusted vendor is infinitely more difficult when all you can hope to do is not let your existing customers down.

Buying products that actually work is finally the norm — Having one throat to choke was a popular sales phrase (and benefit) for choosing any one of the big tech vendors (IBM, Oracle, HP, EMC etc), but that doesn’t work anymore. With SaaS, there isn’t a need for hardware. With well designed products, there shouldn’t be a need for extensive implementation services. And really, why should any customer have to “choke” any vendor in the first place? This is predicated on the idea that you will need someone to choke, because the product will fail at some point. Instead of settling on the best of the worst (i.e. old world), customers should buy products that just work (i.e. new world). And guess what, they finally can.

The Yelpification of software has levelled the playing field — With the rise of social media, there are more people talking about software features and reviewing software products (similar to restaurants or business establishments on Yelp). Finally, real users are sharing what’s working and what’s not, publicly on the internet. As a result, large vendors can’t resort to lobbying industry analysts and hide behind Gartner reports anymore. I don’t care how big or how complicated a product portfolio is, if you can’t find public reviews of the product on the internet, that’s a big problem. It means there is nobody talking about the product and it’s likely becoming obsolete. Doing a few searches on products I’ve sold in the past, it’s pretty tough to find any meaningful reviews to help me as a customer. Advantage startups.

Relationship selling (on its own) is dying — After you come back from your tech conference in Vegas, take a look in the mirror: do you feel like Don Draper from Mad Men? Did you just spend $1500 wining and dining a prospective customer to try and help build the relationship? Unfortunately, the decision maker that bought from you because of the “relationship” you had built using your AMEX over the years is fading away. Here are a few reasons why:

• Today’s decision maker is rarely in her role (or her company for that matter) for more than a few years. The smart ones will care more about business results rather than the perks.
• Today’s decision maker has far more than just a handful of vendors to work with and far less time for relationship building. In fact, there’s a very good chance that he doesn’t want to invest in building any one vendor relationship, to avoid being locked in long term.
• Today’s decision maker listens to her team because she recognizes the value of a bottom up technology decision to increase adoption across the organization. Again, in this case she’ll care less about building a relationship, and more about getting a product that really works and that her team will actually use.

Just to be clear here, I’m not suggesting that relationship selling doesn’t work. I think that making an investment in building long term relationships with your customers is absolutely good business. Solid relationships can help reduce churn and increase customer success, but it fundamentally has to start with creating value.

Try to be good business partners that eventually become friends, instead of trying to force a business partnership out of a fake friendship.

Conclusion

Are you still selling enterprise software circa 2010? Do you find it difficult to keep up with all the new names popping up in your space? Yup I’ve been there, and yes you should be scared. These new names might be a joke to you now, but they’re going to start eating your dinner too (because they’re already eating your lunch). Enterprise software startups, the ball is in your court — go make the sale. The Fortune 500 that used to laugh at your makeshift garage operation, is finally ready to see what you’ve built and hear what you have to say. Your giant competitors have built massive marketing machines centered around buzzwords like “innovation,” but in reality they’re too busy dealing with internal problems of epic proportions to actually compete with you.

Enterprise software startups: this is your moment, pick up the phone and go kick some ass.

P.S. The last time I heard the quote referenced at the beginning of this post was around January 2011 when IBM’s stock was trading at ~$164. At the time of publishing this post (November 27, 2014), IBM’s stock was trading at $161.95.

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Image Credit: Cloud — By Paula Bailey