One of the biggest differences between selling software to small businesses versus selling into the Enterprise space is the price. Most people think that it has to do with how well the software scales and it’s ability to do its job on an “Enterprise” level, whatever that it supposed to mean. Others will say it has to do with the feature sets and whether you bought the Micro-ISV edition or the Enterprise Edition. Simply not true.

The one and only difference is the total price on the bottom of the bill. And it is this total price that dictates whether or not you need sales reps to sell your software.

First, let me quantify roughly what I consider to be the different market segments. This is mostly based on my experience as a Symantec partner, so your definitions may vary but I want to give you an idea of what I’m talking about. In my world, up to 1,000 client computers is considered small to medium business(SMB), up to 5,000 is the Enterprise, and above that is Large Enterprise.

The Problem

At any given company, managers and directors have a certain level of purchasing authority. Below a certain dollar amount, they have free reign and can buy whatever they feel is appropriate and within their yearly budget without getting a signature from their manager for approval. So $50 isn’t a problem. Spending $50,000 isn’t quite as easy.

The problem of selling “Enterprise” software comes about because of the size of the company making the purchase. If I’m selling widgets for $50 each, I can sell just one to an Enterprise level company and they won’t even think twice. But what if they want one for every employee?

Suddenly the price tag for your widgets went from $50 to $50,000 for a 1,000 employee company, and to $250,000 for a 5,000 employee company. These companies make millions, or even billions but they’re not stupid. They put spending controls in place to ensure that people aren’t wasting money on frivolous things. It’s just common sense.

Unfortunately for the vendor, this prolongs the sales process from what might have been a few minutes on the vendors’ website, to one that takes several weeks or even months to complete. This is why sales reps are hired to sell into Enterprise accounts. The sales process needs to be managed from beginning to end.

What does the sales rep do?

Well, they buy dinner, they buy drinks. They make sure you get drunk and have a good time at whatever event they happened to convince you to come to. Eventually, you like them enough, or are drunk enough to blow thousands of dollars of money that isn’t yours and everyone is happy.

I’ve seen that happen, but most companies don’t really work that way. Mainly, it is the job of the sales rep to manage the sale and try to close the deal. That means determining if there’s an opportunity for a sale, and then driving that sale to its Natural End. Note that I don’t say to completion. The Natural End of a sale can be one of four things.

1. You won the deal
2. A competitor won the deal
3. The sale got pushed into the future
4. The sale died somewhere along the way

Winning the deal or losing it to the competition are self-explanatory. Sales get pushed to the future for a variety of reasons. Some are budget related, some are concerns over the product or vendor, etc. We’re going to focus on the last outcome,  which is that the sale died.

When a sale dies, it typically happens because you weren’t paying attention to something important. This tends to be the most painful outcome. If you are head to head with a competitor, at least you had a shot at it. When deals get pushed, you still have a shot, but you won’t receive a PO anytime soon.

The biggest problem with deals that die is that you wasted your time, money and effort chasing something that you never had a chance at winning. Everything you did was for something that wasn’t ever going to happen. Unfortunately, we’re all too human and think that because the customer is talking to us, we have a chance at winning.

Let me break you of that habit right now. Just because a customer is talking to you and likes you doesn’t mean they’re going to buy anything from you. In fact, it might be your best friend in the whole world on the other end of the phone who completely trusts you and it still might not happen.

Sales reps are typically compensated by the volume of sales they make, not the relationships they have with the customers they talk to. To be successful making sales at the Enterprise level, you need to spend  your time working on deals that have a good chance of landing, and avoid talking to customers who are either unwilling, or unable to make a purchase. So how do you tell the difference? Enter the sales methodology BANT.

BANT

BANT is an acronym which stands for Budget, Authority, Need, and Timeline. Without all four of these things, any deal you’re working on is going to die before you get a PO. This methodology technically is applicable to any sale, regardless of the price. But it becomes a lot more important at the Enterprise level where you are spending human resources chasing a small handful of customers. A sales rep can only talk to so many customers in a day, but a single website can “talk” to millions of customers all at the same time. So what do these terms mean and why are they important?

Budget – Make sure that whomever you’re talking to has a budget for whatever you’re selling or that they can get one. And remember that just because someone says they can get the money, doesn’t mean that they can. You can have all the ROI justifications you want in your back pocket, and if they don’t have the cash to spend, it’s just not going to happen. Spending $1 million now to save $10 million sounds great, but if they don’t have $1 million, it doesn’t matter.

Authority - Is the person you’re talking to the guy or gal who makes the final decision? Does he put his name on the PO? If not, you need to find out who does make the decision and talk to them instead. It’s ok to ask to talk to this other person. If you’re afraid of offending the person, then you’re in the wrong business. Always try to talk to the person in charge. You can convince every single one of his minions that what you’re selling will really help them out, but at the end of the day, they’re not the ones who have the authority to make the decision. Without speaking to him or her, you won’t know if there are other projects that take precedence.

Need - Is there a genuine need for what you’re selling? At the personal level, luxury items like chocolate and nice cars are not absolutely necessary. A Honda gets you to the same place as a Ferrari. It might be slower, but it gets the job done. Find out if what you’re selling is a necessity, or if they can get by with the way things are today.

Timeline - How long can things go on the way they are without addressing the issues that your product or service would address? If you sell RFID tags which help companies do inventory, ask how long they can do their inventory manually. If they can go forever, move on to the next lead. Remember that you can’t push a rope.

Summary

It’s important to make sure that the people you’re talking to have the ability to move forward and make a purchase. If they don’t have the ability to move forward, it doesn’t matter how badly they want what you have to offer. It’s a little unnatural to avoid calling people whom you’ve started to develop a relationship with, but it’s necessary if you want to make the best use of your time.

The fact of the matter is that this methodology applies whether you’re selling Enterprise software or dish detergent. Understanding the methodology behind the sales process is the key to being successful, no matter what it is that you’re actually selling or who you’re selling it to.

Do you have a favorite sales methodology that works for you? Leave a comment and let us know.

I happened across this little tidbit a few days ago and was a little surprised that someone as high up as the CFO of Microsoft might actually think this way.

Microsoft CFO Chris Liddle had this to say on a conference call after their Q3 earnings report.

Businesses’ reluctance to upgrade PCs, he said, has to fade eventually. “This can’t continue forever,” Liddell said. “Eventually those PCs wear out and have to be replaced. We hope and expect (the refresh cycle) to be next year.”

I realize that picking on Microsoft is like trying to hit the broad side of a barn with a rock, but this is just so easy I can’t help myself. Really Chris? Are you kidding me? I’m sure that as the CFO of Microsoft, you probably think that computers break every three years like magic. The warranty on the hardware expires and *POOF*, the computer dies and is thrown in the recycling bin, along with all the Microsoft software that was installed. Naturally, this happens in every company around the world, and naturally they all rush out and buy a brand new computer and brand new software for every employee as soon as the first one breaks.

The reality is that it just doesn’t work that way.

Skeptics who read my blog are going to point out that he said “eventually”. I’ll concede the point that “eventually” everything is going to wear out, but he “expects” that to be next year. Computers tend to be different than most other physical goods and if this recession has shown people anything, it’s that doing a full hardware refresh for the entire company every three years is no longer necessary. In fact, I would argue that it hasn’t really been necessary for the last three years. So what makes the next three any different?

The answer is absolutely nothing.

Companies across the world said loud and clear “We’re not going to upgrade our operating systems to that piece of garbage you call Vista.” And you know the kicker?

NOTHING BAD HAPPENED!

Amazing. Just absolutely amazing. People still bought new hardware though. So, lets talk about why.

Corporate Hardware Refreshes

Companies have a tendency to replace PC’s every 3 years because they want to, not necessarily because they need to. From around 1995 – 2007, companies were conditioned to buy new computers for every employee every 3 – 5 years because the hardware was so dramatically improved in the course of 3 years that they could see instant productivity gains. At the time, buying newer hardware was a relatively inexpensive way to get great productivity increases out of workers for relatively low cost. Moore’s law essentially held true and every 18 months, processing power would double. This loosely translated to doubling the speed of computers every 18 months.

Then the speed of silicon hit a brick wall and it wasn’t cost effective to get faster processors. But Moore’s Law persevered for a bit longer and on May 25, 2005 Intel released the Pentium D. With that release, multi-core processors started to take over the market. Instead of faster processors, you have more of them in a single chip. And the business world was content with the Pentium D, Core Duo, Core 2 Duo, Athlon MP, Athlon XP, and all the other multi-core processors that came out.

Suddenly,  it’s 2007 and Microsoft releases Vista and it bombs hard core. People still refresh their PC’s because they think they need to, but they choose not to upgrade to Vista, instead choosing a 5 year old operating system for their brand spanking new hardware. Now here’s the problem.

All these companies bought dual processor computers with beefed up hardware specs because that’s what it would have taken to run Vista. Compliments of Wikipedia, below are the minimum hardware requirements to run Vista.

And here are the specs for Windows 7:

You’ll notice that the hardware requirements to run Windows 7 are basically the same as they were for Vista.

No business in their right mind bought a computer in 2007 that had a 1GHz processor. Not even notebooks were that lame and netbooks didn’t exist yet. At a minimum, they were at least 2GHz and had dual-core processors because that’s what it took to sell computers in 2007. Computers today are not significantly better than what was available in 2007, as much as Intel, AMD, Dell, HP and all the other computer manufacturers would like to have you believe. All of this means that the hardware refresh rate can be extended for those PC’s bought in 2007 with virtually no ill effects.

Some pretty smart companies over the past few years figured out that if you can extend a hardware refresh from every 3 years to every 4 years, the company will achieve a substantial 25% yearly savings. If you extend it from 3 years to 5 years, it becomes a 40% yearly savings. That means that a company with 1,000 employees using computers with an average cost of $1,500 are going to spend $500,000 on hardware alone every year if they do a complete hardware refresh every 3 years. If they are able to extend it to four years, they’ll save $125,000 each year and extending the hardware refresh to 5 years, saves $200k every year.

When the guy in charge of the IT budget is being forced to do more with less each year, he’s going to quickly realize that buying new hardware for every drone in the company isn’t going to help him do his job. He’s going to find places to cut the budget which doesn’t involve the lost of his employees. The hardware refresh cycle is the perfect place because there’s very little downside and a huge upside.

Why Companies Refresh Hardware

There’s a short list of reasons why companies use a 3 year hardware refresh rate.

1. They have money to burn
2. They’ve always done it that way
3. The hardware today is so much better than it was 3 years ago
4. The warranty on the hardware has expired

That’s about it. Until a few years go, the first three were true. They’re not anymore. As for the fourth, it’s called a warranty. Most major computer vendors offer 3 year warranties on computers for their corporate customers. Depending on your vendor, you may be able to swing a 4 or even a 5 year warranty for just a fraction of the cost. Replacing parts is a heck of a lot cheaper than replacing entire computers, so they’ll save buckets of cash by extending the hardware refresh, whether they get extended warranties or not.

Back to Microsoft

The latest hardware refresh has obviously been delayed for quite some time and it is impacting both Microsoft and the major computer vendors. As the economy improves, we’re going to see a lot of companies that initially pushed out their hardware refresh commit to it and spend the money. Microsoft will probably still sell millions of copies of Windows 7 and Bill Lumbergh’s stock will go up 1/4 of a point.

Unfortunately, many of these companies are going to realize that the latest hardware refresh didn’t do them a bit of good beyond renewing their hardware warranties. The next hardware refresh will get pushed out even longer as companies realize that it just isn’t necessary. When that happens, Microsoft is going to be in real trouble, as are the PC manufacturers whose major revenue source is selling hardware.

Earlier this year, Dell bought Perot Systems in an effort to boost their lucrative services arm and compete better with HP and IBM. Smart move. I think they see this coming and realize that the virtualization trend isn’t the only thing working against them. Moore’s law has been undergone a transition such that it now applies to overall computing power, not just raw speed. Past a certain point, 99% of corporate employees just don’t need more computing power. It’s going to waste. So why should you upgrade those PC’s?

The smart answer is: You don’t.

Microsoft needs to start looking ahead beyond Windows because it’s not going to be a cash cow for much longer. The fact that people are still using an operating system that is bearing down on 7 years old is telling, especially when it’s in preference to a more recent release. It means that customers don’t see a compelling reason to upgrade. This is part of the reason that Apple is doing so well with the Mac.

Without a compelling reason to upgrade, customers aren’t buying new licenses or upgrading old ones and Microsoft isn’t making nearly as much money. Microsoft uses the money they make from Windows to fund other business lines, so if the margin on Windows starts to falter 5 years out, they’re going to have to make some hard choices. It makes me wonder if I’ll even care in five years. Will you? Let me know your thoughts by commenting below.