Will cloud computing kill enterprise sales?
An interesting debate is brewing about the validity and future of the traditional enterprise technical sales model. Are the days of multimillion dollar deals built over the course of 6-18 months history?
My co-host on the Overcast podcast, Geva Perry, has published a very compelling post arguing for the demise of the traditional enterprise sale--the deal brokered by the highly extroverted, commissioned sales rep with the help of a team of sales engineers, marketers, consultants, and so on over the course of 6 to 18 months.
Geva established his case by relating the observations of venture capitalist Charlie Federman:
I met today separately with two successful CEOs who, unprompted, told me they were de-emphasizing their marketing/sales efforts to enterprise accounts; one company is in the application arena, and the other is in the infrastructure space.
Each told a similar story:
They don't have the "patience or resources to go through the hoops" required in committee sales. Translation: they don't want to fund the direct sales force/field engineers for the traditional six-month sales cycle, where they have to commit the equivalent of hundreds of thousands of dollars upfront before a decision is made. Moreover, if the decision is positive, it's normal to wait a few more quarters for implementation to move forward.
Each stressed that the opportunity cost is simply too high when many alternative channels are present that are open to a "fast test/fast purchase" decision cycle. Today, their biggest issue is prioritizing their time/resources in an environment where they receive near-instant market feedback from traffic, trial, and conversion statistics. Direct enterprise sales (as opposed to business development) is being extracted from their company DNA.
Geva then goes on to break down the decline of the enterprise sales empire:
The history of the trend away from the enterprise sale is easily traceable. It starts with free-trial CDs; it really picks up steam with downloadable enterprise software (salute to the WebLogic folks). It becomes downright mainstream with open source: Linux/RedHat, Jboss, MySQL, and the rest. And now, we come to cloud computing: the final nail in the enterprise sale coffin.
There is some truth to this. I worked for six months at open-source enterprise content management vendor Alfresco, and their model was fascinating: with the exception of a single direct sales representative, the entire business was run over the phone, Adobe Connect, and Skype. Deals were small, but numerous. "Try then buy" was the norm, and it worked--at least at that scale.
Could an indirect-only model work at a much larger scale, though?
Most of the enterprises I am dealing with are looking at public cloud infrastructures as being an enabler for outsourcing suitable applications or services. What is key for them in doing this is using software that they can use in-house as well as being able to be used on the cloud. Same skill sets, in some cases the same code, so that the transition to the public cloud is seamless. To get companies to engage on public cloud infrastructures right now requires a direct sales model, certainly until some form of tipping point is reached, and even then I believe that for certain classes of public cloud software, direct sales will always be needed.
In many ways, cloud licensing is an evolution of licensing models that include single user/single license, multiple users/shared license, temporary or fixed period licenses, pay-per-use licensing, subscription licensing, perpetual licensing, etc.
On top of this we have the private cloud in which companies use software and infrastructures to provide public cloud-type features available in-house. Make no mistake that the majority of this will be enterprise software with some major enterprise players in this space such as VMWare with VCloud and Citrix with C3, as well as companies such as GigaSpaces, who in many cases will partner with such companies and provide additional innovation. There will of course be room for innovative open-source software, such as Eucalyptus.
Liddle concludes with his belief that "enterprise license models, for certain vendors, are changing; for others, existing models have a new buddy, but I see this as evolution rather than revolution."
I'm not sure where I stand in this debate, but I have to agree that enterprise sales is a huge, difficult, expensive pain right now, and that cloud computing has the potential to bypass much of this pain. Then again, I know most enterprise IT organizations want accountability and responsiveness from the vendors on which they build their business. Direct sales puts a name and a face to that in a way that indirect sales or "do-it-yourself" never will.
Another possibility, I suppose, is that enterprise sales shifts from software to services, just like everything else.
I put the question to you: Is enterprise sales dead? Has your organization stopped looking at the multimillion-dollar licensing or hardware deal? If you are a commissioned sales representative, are you nervous about your profession's future?