Shifting IT spending drives sales-force changes – Notebook

Looking at how company’s arrange their sales (and marketing) organizations is an interesting view into the effect of “cloud” on how IT is used and consumed. This week Microsoft is re-arranging it’s sales force to make it more cloud-friendly, people say.

From what I can tell with my dilettante analyst, Microsoft’s theory appears to be that:

  • sales people need to be more technically savvy on cloud,
  • have more vertical knowledge (how does cloud apply to my industry?), and,
  • target larger accounts (where the top and bottom line revenue is worth having a big sales venture, and to bring in volume and cash to public cloud).

Also, with 75% being outside of the US, it’s a dramatic change internationally.

Here’s some excerpts from coverage:

Summarized by Nicole Henderson:

The company said it is implementing the changes not to cut costs, but to improve how it handles sales; specifically, it said it will use employees who are more knowledgeable about specific verticals so they can sell bigger packages, CNBC reports.

As Microsoft vies for more enterprise cloud clients, having better trained salespeople, who are knowledgeable about a specific vertical, will mean they are better equipped to meet client needs. To that end, Microsoft said in an internal memo that it would split commercial sales into two segments – one targeting the biggest customers and one on small and medium clients. In addition, Microsoft employees will be aligned around six industry verticals – manufacturing, financial services, retail, health, education and government.

See also coverage from CNBC, and The Register’s coverage, e.g.:

With recent changes to its enterprise agreement to exclude smaller companies, Microsoft is focusing on bigger deals that require fewer staff, while everyone else gets shifted onto a per-person consumption payment model for Microsoft’s cloudy services.

We also discussed this briefly in this week’s Pivotal Conversations.

Shifting spending

Meanwhile, while this doesn’t capture all of the market-shift (you’d also want to see the shift from COTS to SaaS, infrastructure software, and then *aaS spend), some recent charting from IDC shows one of the motivations for changing up your sales approach, i.e., IT infrastructure (hardware) money is shifting around to public and private cloud stacks:

In the above, you see the blue bar slowly decreasing in the out-years meaning less “traditional” spend and more “cloud” spend. The pricing dynamics and units shipping in public cloud are all whack compared to private cloud (Google, Amazon, and Azure’s hardware needs are much different than private cloud needs), but looking at the red bar gives you an interesting perspective on new build out at enterprises. And, thus, you can get a sense for shifting buyer behaviors in IT…and why you’d want to re-arrange how you sell to them. See more recent details from IDC.

Link

“It was just dumb”

This a good parable on what can go wrong in large organizations when incentives are not working as planned.:

But the reality seems to be messier and more boring: Wells Fargo wanted its employees to push lots of real accounts, it asked too much of them, and the employees rebelled by opening fake accounts to get the bosses off their backs. The fake accounts weren’t profitable for Wells Fargo, and no rational executive would have wanted them, which is why Wells Fargo kept telling the employees not to open them. But the employees did anyway because they felt like they had no other choice. It was not an evil high-level plot. It was just dumb. It was a form of employee resistance that was channeled into fraud by bad incentives and bad management. There is a limit on how many times you can ask a guy in a hearing “this thing you did was pretty dumb, wasn’t it?” Though look for the Senate Banking Committee to test that limit.

Knowing very little about the details, back in IT-land problems like this usually mean the culture needs some tweaking.

Check out some more commentary.

Amazon Prime Day is biggest day for online retailer ever

The online retailer said worldwide orders rose more than 60 percent compared with the previous Prime Day.

Looks like things worked out well.

Some of the more popular “deals”

Source: Amazon Prime Day is biggest day for online retailer ever, sourced from my wife!

The new software sales model?

From Gavin Clarke’s piece on Microsoft’s head of sales leaving:

But the sales model had changed; it was becoming less about shipping more boxes at fat margins and more about persuading people they should download your service, buy on a subscription, pay for what you use.

The world of Nadella and the current reality of Microsoft couldn’t be more removed from the world of Turner. Today it’s a more complicated sell: on-premises remains the core of Microsoft’s income – desktop and server – but Microsoft is desperately trying to grow its cloud and data businesses. Neither involves destroying the competition; rather, it’s a more nuanced sale, a sale you don’t win by simply trashing the rivals.

The notion that enterprise tech sales have gone beyond zero-sum is tantalizing, but hard to imagine. Let’s hope so.

Also, the quotes from sales meeting keynotes are so, so sales-y that it’s almost “ugh” feeling.

The flywheel go-to-market model

The Flywheel Model differs from the Traditional Model in one fundamental regard. The enterprise sales team is exclusively inbound. They are explicitly denied the option of seeking business outside the customer base, and must gin up business from only existing customers. The enterprise sales team is an up-sell and cross-sell team. In fact, so is the mid-market sales team. Only the SMB marketing team is permitted to acquire new leads. In short, the Flywheel flips the traditional idea of enterprise people as hunters and others as farmers.

Also, some constraints on market match, such as:

Flywheel models work very well in sectors where the ultimate buyer has is very difficult to sell or market to, (e.g., product managers and engineers). The high customer acquisition costs of these customer types are driven by their software evaluation and product purchasing behaviors which differ from the norm. These customer segments often prefer educating themselves than relying on a salesperson. Engineers don’t buy software the way marketers do.

The flywheel go-to-market model

How the pull nature of open source changes your partner strategy

In answering what Red Hat has to offer partners, CEO Jim Whitehurst says:

So when we talk about containers, we talk about, here’s how, if a customer wants to implement containers, you can offer solutions to help them do that. And when we want to talk about OpenStack, well, here’s how you can offer an OpenStack solution in a supported way to run production applications. Here’s how you can actually deliver products and services around DevOps with our OpenShift and PaaS offerings.

This is in addition to “curating” open source and doing the usual commercial support backing. That is: selling know-how and services, I suppose: meat-ware. The further angle is giving partners an answer to the never ending questions about cloud and containers:

Well, we actually now have things they can go sell, to say, “oh, you want to implement containers, I can bring you a solution to do that.” There’s a lot of things people are buzzing about. We actually have tangible … products that can let our partners go out and meet our customers’ needs.

Also, this in timing when demand will hit for the new fangled stuff:

[O]ur partners need to invest now to build, for instance, OpenStack skills and OpenShift skills, so as their customers over the next year, 18 months, say, “Hey, I want to do this,” they’ll be ready to go.

It’s a little bit, I think with some partners, the thinking is, “If I don’t see the demand now, I’ll wait till I see it to develop the capabilities.” But if you wait till that happens, then it’s kind of too late to develop the capability at that time. So it’s kind of getting that right sequencing.

Also, some interesting effects of the pull nature of open source. When you let demand grow in open source and then commercial it, you have to spend less time selling the problem that validate the product (the solution) you have:

And so, we are less out there trying to validate these solutions to meet a problem, which is what traditional vendors are doing when they write something. We are much more saying these solutions clearly solve problems and they are doing it for leading-edge companies today. We offer versions that are consumable for traditional enterprise. It’s very much, not just solve the problem, it is, “Here’s how we can help you solve a problem that we know is there, using a technology that we know is the right technology.” That’s the power of user-driven innovation.

As you might guess from a company that had a partner conference, parent selling is a big deal:

In the last year, we were 68 percent channel, and we certainly hope and expect that will continue to expand this year.

How the pull nature of open source changes your partner strategy