Sales is the 2nd oldest profession but lately it feels more like the 1st. The professional salesperson is still the primary link between most IT channel companies and their customers – and one of the most expensive. Being so essential to the primary purpose of the business; to acquire and retain customers, the seller has always been under intense pressure to perform.
I would never want to make excuses for lazy, unskilled or under-performing sales people but it seems to me they are taking all the flak, when often the blame lies elsewhere.
Everyone from social media evangelists to Harvard professors seem ready to write off sales people, citing new forms of communication to artificial intelligence, as reasons for making the traditional sales process obsolete. Within the VAR (Value Added Reseller) business itself, executive managers, frustrated by the slow pace of evolution to an MSP (Managed Service Provider), have been quick to state that successful infrastructure sellers are unable to make the switch to selling managed services.
I don’t share this view. Good sales people are good salespeople, no matter what they are selling. Most sales transactions are a transference of feeling as much as an exchange of cold cash for product and humans are still better at this than robots. Same as with the world’s oldest profession (so I’ve been told)!
I am biased. At heart I am a salesperson and I love selling, but why are salespeople today under so much pressure and what can be done to alleviate their plight?
In their defence
Back in 1995 when I started in sales, according to the OECD, the IT market was worth $527.9 billion, far less than today’s estimated value of $3.7 trillion. Smaller yes, but it was growing at 9.5%, twice the GDP rate, and the supply to demand ratio was skewed in favour of the seller. In July of this year Gartner cut IT spending growth projections to 2.4% from 3% and data centre systems, the mainstay of the traditional VAR, essentially flat at 0.3%.
If the total IT market in 2018 is still below the $3.8 trillion level it reached in 2014, it stands to reason that today’s IT sales professional is trading in a more competitive market than twenty years ago.
Fighting for a share of that market are a lot of other experienced sales professionals. In the USA alone in 2016 there were an estimated 133,114 IT channel companies as well as 200,000+ self-employed contractors who could be related to the channel.
All but the biggest VARs are owner managed so they need to make cash and profit to continue to trade. In a world awash with credit, fuelled by the easy monetary policies of the world’s central banks, your typical VAR is competing with venture capital backed start-ups where huge losses are tolerated as long as their revenues increase.
It’s like bringing a knife to a gun fight.
While the VAR seller vainly leaves their pitch on voicemail systems, the “hot” start-ups invest millions in coordinated marketing and PR campaigns. The disparity will continue until policy makers tighten liquidity and low yield bond holders stop looking to put their money in riskier assets.
So what’s to be done?
In a nod to Jerome McCarthy’s 4Ps of the marketing mix, here are my 4Ps for CEOs of your typical IT value added reseller.
Purpose
Decide what you want to be. I know some very successful resellers who throw off a lot of cash and have no appetite to evolve their business from a VAR to an MSP. You might decide that you are a few short years from retirement and therefore lack the desire for a transformation journey lasting several years. Conversely, I know other owners who are very much drawn to the high valuations which come with growing sustainable recurring revenues. If you decide on the latter, you need a good plan in order to protect your cash balance while you make the transition. It can be hard to run one model well, running two is doubly difficult.
Portfolio
If your client offerings are “me too” then prospects are unlikely to walk through your door for any other reason than price. Your sales people will find it difficult to book meetings and no amount of spam content or email promotion is going to change that. As the CEO, it’s your job to set the vision and strategy and to build products people want to buy. I see a lot of VARs broaden their portfolio with more technology vendors or they latch onto the previously mentioned “hot” start-ups which promise the next big thing. This is a perfectly good tactic but without exclusive distribution agreements any competitive advantage will be fleeting.
If you want to evolve, you need to focus more on your organisation’s value, not that of your technology partners.
Positioning
Salespeople are always hungry for a good story to tell. Lame slogans like “we put our customers first” or “we care about your business” are not going to cut it in today’s highly competitive sales landscape. How much time are you spending on positioning rather than simply vomiting “creative” content on your client and prospect base? Teach your sales people to have a perspective, or a point of view, which is relevant and will engage your carefully targeted audience.
Pay
It is around the subject of pay where I see the biggest discrepancy between what CEOs say they want and their actions. All too often the big transaction deal gets the rewards whilst the multi-year service contract gets a measly commission pay-out. Often the reason your sellers are not winning managed services deals is not because they can’t, but because they don’t want to.
Here are a few likely causes:
It’s not as profitable for them in the short term.
Often commission plans only pay out on invoice value, so for a seller they are far more motivated to sell upfront transactions. To compensate why not think about extending “credit” to your seller, just like a bank or investor might? If you can pay out, up front, on the annual contract value or even the total contract value, you will motivate the salesperson to change their habits. But wait, I hear you cry. What if the contract fails or the salesperson leaves the company? My response to the former is, make sure your delivery engine gives such great service that your customers have no reason to leave. For the latter, if you have a sales leaver, no problem, the business still owns the “asset” (contract) and that asset has shareholder value. You have also reduced the risk of business walking out the door with the “absconder”.
One could argue that if a customer cancels a contract, it is a bit like a debt default. In which case either the creditor (the business) takes a haircut or forces the debtor (account manager/seller) to repay all or some of the outstanding debt.
They don’t trust your delivery capability.
The mindset of most salespeople is often, quite rightly, about protecting their personal brand and integrity, not yours. On the whole, as a tribe, they can be very reticent to sell solutions that will fail or disappoint their customer. Contrary to popular myth, they have a long-term approach to build customer relationships and customer value. I’ve seen salespeople refuse to sell a new managed service offering, not overtly but quietly, simply by not promoting it or coming up with a convenient excuse because they don’t believe the business can execute.
Fear of loss of account control.
Never said out loud but always lurking under the surface. There exists a fear in the mind of the seller that their services will be superfluous if he or she sells a multi-year managed contract. In my experience, a salesperson still has plenty of value to add after the ink is dry. Furthermore, the customer relationship is more strategically managed, creating opportunities that under the previous model would not have transpired. Ultimately though this is about the trust between the seller and their organisation’s management team.
In short changing your business operating model is always going to be hard. However, not having your sales team aligned with the change just makes things even harder. I’ve seen that taking the time to understand their challenges and motivations can often make the difference between success and failure.
