Can enterprise software sell itself?

You are forgiven if you missed last week's most interesting IPO on the American markets - the debut as a public company of the Australian technology provider Atlassian, makers of popular enterprise tools like Jira, HipChat, and Confluence. For folks who might not be familiar with Atlassian, they have a kind of unique and really successful story.  And the uniqueness as a new tech IPO comes from a couple of distinctive elements in the Atlassian journey.

First, Atlassian is profitable and cash flow positive for something like the last 10 years. Lots of early stage tech companies never reach profitability prior to an IPO exit. Second, this success and profitability has enabled Atlassian to avoid taking (or needing to take), any external or VC funding in its history. Again, just about unheard of for any tech company, let alone a successful enterprise tech company. And finally, and what I really want to talk about in the blog, Atlassian has also eschewed another really common and almost necessary strategy for growing enterprise technology companies, namely the hiring and deployment of a large, expensive direct sales force.

What does this lack of a direct sales force mean for Atlassian, and indirectly, its customers? 

First some context from Atlassian's recent IPO filings:

Unlike traditional enterprise software vendors, who rely on direct sales methodologies and face long sales cycles, complex customer requirements and substantial upfront sales costs, we utilize a viral marketing model to target new customers. Through this word-of-mouth marketing, we have been able to build our brand with relatively low sales and marketing costs.

"We do not have a direct salesforce and our sales model does not include traditional, quota-carrying sales personnel. Although we believe our business model can continue to scale without a large enterprise salesforce, our viral marketing model may not continue to be as successful as we anticipate and the absence of a direct sales function may impede our future growth."

Atlassian spends about 21% of revenue ($68M on revenue of about $320M in their last full fiscal year) on sales and marketing. Does that seem like it is high? Well not for enterprise technology companies that you could include (broadly), in Atlassian's peer group. Salesforce spent around 51% of revenue on sales and marketing expenses in their last full fiscal year. Workday spent about 36% of revenue on sales and marketing in their last fiscal year.  And at the revenue levels these companies have reached, these kinds of differences are substantial.

One final thought about sales and marketing expense for software companies - it is the type of expense that drives the least amount of benefit to existing customers. Every dollar your vendor spends chasing the next customer is a dollar that is not spent on making the product you have purchased and are using any better. Keep that in mind when you review the annual financial statements of the companies that supply your technology.

So back to Atlassian and the question raised in the title of this post: Can enterprise and HR software sell itself? 

I think it only can if a few critical elements are in place. First, the technology has to be relatively inexpensive. Million dollar purchases, heck, even purchases of as little as a $10,000 often require (usually) skeptical customer executives to sign off. And very often these execs won't sign off unless they can speak directly across a table from some high-ranking sales exec from the vendor. It can be pretty tough to sign off on a really large purchase without that person-to-person interaction.

Next, the technology has to be relatively simple and fast for the customer to implement and begin using. When there is no direct sales/account management people on the vendor side, then that first point of contact for issues, bugs, problems, etc. simply does not exist, and the customer is left to deal with standard customer support to resolve issues. And that often is not good enough for many demanding clients.

Finally, the technology solution needs to be pretty widely adopted, and have generated a decent base of customers and fans. There needs to be a fairly substantial amount of publicly available information and comments from existing customers. When there is not a direct sales team to rely upon for information about the product, prospective customers have to be able to obtain satisfactory answers to their questions by other means.

Atlassian has built a profitable and growing enterprise technology business largely on the basis of great technology that is easy to adopt and deploy and has generated tens of thousands of customers and fans. There is really no reason why this kind of model could not work in the HR technology market as well.

In fact, it might be pretty cool if it did one day.

Have a great week! 

My one piece of advice for anyone trying to demo HR software

I get to see an almost ridiculous number of demonstrations of HR technologies as a part of the process of selecting the participants for the HR Tech Conference's "Awesome New Technology" sessions in October.

The specific number of different solutions that I see in the course of a year doesn't really matter, (and I don't try to count), but it is safe to say it falls on the higher end of the scale that starts with 'More than 99% of people I know' and 'All of them'.  And it is particularly busy this time of year as I try to narrow down the field to make the selections/invitations for the show in October.

So from all of these demos, and the ones that I have seen over the years when I was working in other capacities in the industry, I feel pretty confident as to how to answer a question that I get from time to time. Namely, 'What is the one piece of advice you have for solution providers to help them deliver a more effective demonstration?'

Here it is, and it is neither profound, complex, or some kind of a secret, but I do get surprised how often I feel the need to offer such advice after a demo that ends up less than satisfactory...

Tell a story that I can relate to in your demonstration, don't just show me a bunch of software features.

I know, it seems so obvious, but I can't keep count of how many demos I see that seem to be more or less a rundown of all the different buttons to click, and boxes to check, and menus to navigate, each one promising even more capability. 

All of that capability is great, don't get me wrong, but none of it means very much without context, particularly context and backstory with which I can easily identify.

HR pros don't really want to know ALL the things your software can do, they just want to know if it can help them solve their problems, allow them to better compete for talent, and make them look like the rockstars they aspire to be. 

And for me, selfishly, I want to see the most amazing, innovative, modern, and relevant technologies to showcase for my audience - those same HR pros who want to be able to envision how these technologies can fit and thrive in their organizations.

Features and functions remain important, no doubt. But they rarely excite anyone at least on their own.  

What is exciting is the ability to clearly see how a new technology will make my life better, and that is all about the story and has not much at all to do with how many buttons there are to click, or menus to navigate.

Forecast, Upside, Pipeline and Staying on Offense

I ended last week with a piece titled Playing Offense on Social Media, a story about how sometimes being aggressive, even snarky, but essentially leaning forward and playing offense in social media can be a good strategy for organizations, (and even individuals), that are active in social media and social networks.

To continue the 'offense' theme, I want to share another similar take, this one from the world of sales, (and even if you are not 'in' sales, let's face it, we are all selling something), titled 'Play Offense When Predicting Revenue', from the Feld Thoughts sales blog.  

In the piece, Brad Feld shares a simple way to change the way sales managers think about their sales pipeline, essentially instead of assigning a generic 'probable close rate' to every deal in the pipeline, e.g., 'We have 10 active deals, we think 75% will close this quarter', Feld recommends sales teams divide the pipeline into three buckets as follows:

Forecast - These are the deals we BELIEVE (in CAPS), will close this quarter. We are committed to them, and any deal in this group that does not close, will be subject to a detailed review and post-mortem

Upside - These are deals that MIGHT close this quarter. We are working them, but can't commit to a close this quarter.

Pipeline - These are deals that WILL NOT close this quarter, but are being worked. These should move into the Upside or Forecast buckets soon, or will fall out as lost opportunities.

According to Feld, the positioning of deals into these discrete categories, most particularly the 'committed' portion of the forecast bucket, creates more accountability in the organization, and provides a better mechanism for inderstanding the sales process, the customer decision cycle, and the skill and capability of the sales team.

Then the sales team and managers revisit this list each week. Sometimes deals  fall out of Forecast into Upside based on new information. Last week you thought there was a 100% it was going to close (forecast), now you no longer have certainty but there's still a chance. And, if there's no way it'll close this quarter, it should go in Pipeline.

This discrete planning helps allocation your efforts - most of your short term energy should be on Forecast deals, some of your short and some of your long term energy on Upside deals, and the balance of your long term energy on the Pipeline.

I kind of dig it, simple, keeps the team focused, and as we like to say around here, keeps you playing offense, not just sitting back and wiating for (hopefully) good things to happen.

Forecast, Upside, Pipeline - what other parts of your business could benefit from this simple breakdown?

Have a Great Weekend!

Change the players, or change the game

Yesterday on Forrester CEO George Colony's blog, in a piece titled CEO's Want Better Sales Forces, Colony shared some observations from tech company CEO's about the relative effectiveness (or ineffectiveness) of their sales forces.

Some of the complaints that these CEO's cited were speed, sales reps were lagging business strategy; selling too low, i.e. reps not connecting high enough in the buyer's organization to reach the decision makers; and inability to articulate the product/service value proposition effectively, and therefore selling mainly on price.

I suspect these CEO gripes about their sales forces, while real, are not that much different than what CEO's 10, 20, or even 50 years ago may have expressed. A sales rep having trouble making contact with the buy side person with authority to sign off on the purchase has been an issue in B2B sales pretty much forever.

The post continues to share some of the remedies that the CEO's Colony talked with are planning to attempt to improve the performance of their sales forces.  Strategies like improving the technology available to sales reps, hiring 'smarter' people in sales, and urging the sales teams to get 'more customer focused'. Again, these seem like the same kinds of sales improvement strategies CEO's would have pursued any time in the last few decades.

But the reason I wanted to mention this piece was not the content of the post really, since it is kind of obvious, but rather a bit of wisdom shared by one of the commenters, Walter.  From his comment:

The biggest new wave is that salespeople are simply not needed in the same way as before, and not at the same points in the cycle, as they were due to the social web and the information available. The buyer's cycle has changed faster than the seller's cycle.

The idea is that the 'game', the process if you will, has changed so much on the buy side that simply tweaking and fine tuning your existing sales processes, (and really your entire marketing, communications, and support as well), will not be sufficient to meet the challenges and the demands presented by buyers that are moving much, much faster than most selling organizations have been able to move.

The key question is - can you survive by simply getting incrementally better at playing the game you have been playing forever, or will you have to more radically alter the way you educate, qualify, and sell; with the full realization that the game you are playing is likely an entirely new one.

You can change or improve the players, or you can change the game. Knowing how to make that call is the tricky part.

You Can't Keep Ignoring That!

Last week New York City got blasted with yet another winter storm, one that dropped about a foot of new snow on a city that has already seen more than it’s normal share of the stuff this season, and who’s capacity and tolerance for dealing with the aftermath or repeated storms was clearly on the edge. 

Really busy and crowded city + limited options for snow removal + slightly warmer temperatures the following day = one big mess.Going to walk through that?

Just walking around the city, especially downtown and on the less-traversed side streets was an adventure in snow piles, slush, and navigating deep, dank, cold puddles on almost every corner. A mess, and a real pain for workers, merchants, and tourists alike.

But in all things, hardship for some means opportunity for others. On Sixth Avenue an enterprising provider of shoe-shining services had set up his stand near one of the many high-rise office buildings and proceeded to exhort passers-by, mainly men, to stop for a few minutes and have their leather dress shoes or boots shined.

The shine guy had a great pitch, as the businessmen passed by he shouted -

‘Look at those shoes!  They’re full of salt! Come on over and I’ll fix you up!’

The shoe-shine guy had correctly observed that the vast majority of suited men had shoes that were in dire need of a shine.  The snow, road salt, water, and general grime of the city had proceeded to coat most leather shoes with a caked-on, disgusting outer shell or grossness.

But still, in spite of the clear need on the part of many of the pedestrians for the shoe-shine service, in the few minutes I watched, no one took up the shine guy on his offer.

After a few more minutes, and silent rejections of his standard ‘Look at those shoes’ line, the shine guy seemed to get a little frustrated.  Why weren’t people taking him up on the offer? They absolutely needed the service, it was convenient, inexpensive, he had no competition (at least on that corner), and he was a pretty engaging and interesting character.

As I turned to walk away, I heard the shine guy give one final pitch to a well-dressed man in leather boots that looked like they had been dragged along a river bank. The shine guy implored the suit:

‘Look at those boots! Come on! You can’t keep ignoring that!’

But the man in the dirty boots carried on down the street, even though he must have known he was making the wrong decision.  I guess it can be kind of easy to ignore the obvious, especially when the message comes from an unexpected source.

Eventually the well-dressed man will get the boots cleaned, I mean the shine guy was right, he couldn’t keep ignoring it.  It was so apparent. Perhaps he was the only one who couldn’t see it.