© Saxum Commerce
© Saxum Commerce
Before Cloud, Saas, Social Business or any of the myriad of buzzwords currently common to our business day came Apple Inc. with their consumer orientated devices, iTunes and AppStore and changed the buying and consumption habits of people around the globe ... forever. This in turn, has impacted heavily on the expectations of these same consumers when transacting in their business lives, the result of which has substantially affected the commercial models and operational complexities of the business software industry.In this paper, we will explore the impact that this has had on the software industry and how the disruption the industry itself is trying to create is in fact disrupting them at the same time. We will also look at how the internal systems of software vendors need to be enhanced to cater for this disruption so as to keep them relevant in this changing landscape.We call it the 4 Pillars of Disruption and is centered around the following broad factors:New and multiple sales channels being usedDeployment of new license types and revenue modelsChanges in buyer engagementThe “Unanticipated” elements
Pillar 1 - Multiple Sales Channels
Whereas in the past the sales channel was a simple chain of events – it would typically go from vendor to distributor to reseller and finally to the end customer but that has now changed. While the legacy approach still exists, there is now also on-line, in-app and mobile transacting both directly with the consumer and indirectly through the supply chain. Then there are new go-to-market channels continually being created - consider that Google now offers a “Buy” button on search results.These are all great for getting products (cloud or on-premise) sold but how do you manage these sales and how do you enable and engage your resellers and distributors across all those channels ?Pillar 2 - New License Types and Revenue ModelsGone are the days where you simply went out and bought a license to use a piece of software and installed it on your in-house computers.Today there are a myriad of options including mobile licences, on-premise licences, subscriptions licences, cloud licences and hybrid licences with a growing scenario of having part of the license on-premise and part in the cloud.The revenue models supporting these various license types only add to the complexity. Consider that in a single customer you could have on-premise products that are sold as subscriptions together with a cloud solution that is sold based on a multi-year contract (much like the legacy license model) and there could also be a cloud solution sold as subscription from an ISV.So not only are there mix and match license types but also a range of revenue and billing methods to go with it.This does provide choice for the market but how is this all managed in a way that protects the vendors product and revenue while engaging the supply chain and maintaining a quality and simple customer experience ?Pillar 3 - Changes in Buyer EngagementIn the past customers would have typically engaged with their trusted advisers early in the sales cycle to work through their requirements, have solutions demonstrated and to have proposals presented.Fast forward to today and what we find now is that customers engage much later in the sales cycle – they shortlist and do all kinds of investigation long before they start talking to the salesperson.There are numerous reasons for this change in buyer engagement dynamic including the fact that millennials are taking up decision making roles and are comfortable with the new approach to selection together with the fact that the information available today is easy to reach and rich in content and social networks provide instant feedback. Not to mention that the process does not require a “pushy salesman”.How does the software vendor track, understand and engage prospects and repeat customers before they pick up the phone to call the sales team ?Pillar 4 - Unanticipated ChallengesSome considerations vendors may not contemplate in this changing landscape, include ...Solution buildingThere’s an interesting statistic from IBM that 25 percent of all salespeople’s time is spent on solution building – trying to find the product/s that will enhance the core to deliver the customers solution. IBM also discovered that more than 65 percent of deals that are lost are lost because they could not find the solution.Considering Pillar 3, if it is this difficult for a salesperson, then it is likely to be substantially more difficult for a customer.Building the ideal customer solution would comprise the vendor products plus 3rd party (ISV) products and services (Partners). For cloud, this requires the ability to easily procure, provision and use multiple products from multiple vendors and ideally these should be included into unified license or subscription billing.Brand ManagementThird parties generate substantial revenue off the back of popular brands, however, the brand owner has little visibility of this and does not get to share in the revenue.There is an argument to be had that it is because of these third parties that the brand is successful in the first place but based on our research, the investment made by the brand is exponentially higher than the contribution made by the third party ... in essence, while useful to have the third party involved, the brand would survive perfectly well without the third party.Given the constant conflict between budgets and investing into the channel, vendors need to consider taking a share in the brand revenue and using that to re-invest into the success of their channels.Building Repeat Website TrafficIt is far cheaper and effective to sell to an existing customer than to find a new one. However, once a customer has purchased their solution there is no ongoing compelling reason for them to visit the corporate website. Spam and privacy rules are also making it really difficult to send outbound hooks and in the B2B environment, social networking does not drive traffic in the same way that it does in the consumer space.In a study completed by CallidusCloud ... “Facebook and twitter do not bring in Leads” ... So to bring them back, new marketing and customer engagement strategies are needed.E-commerce and Payment ProcessingE-commerce is fundamentally changing B2B commerce. Businesses are continuing to shift resources from brick-and-mortar and other traditional sales channels to an e-commerce environment.A recent study conducted by Forrester Research shows that 89 percent of B2B providers said adding e-commerce to their business increased annual revenue by 55 percent. Meanwhile, 81 percent said selling online drove up their average order value by 31 percent.The benefits of E-commerce selling are big however doing this while offering multiple license types, different revenue models and extended sales channels needs a complete rethink of the operational systems of the organization.E-commerce also brings with it the need to have every transaction paid. However taking into account multiple payment methods, multiple payment geographies, local legislation, risk and fraud management, PCI compliance and a multitude of other challenges, highlights the need to ensure that this is all made easy both for the vendor and for the customer.
© Saxum Commerce
In most cases, a multi-channel B2B Commerce strategy actually grows sales in a company's sales channels. However, to ensure that your channels adopt and promote your B2B Commerce initiatives, here are a few best practices that can assist in taking your channel along for the ride.
Let your dealers and distributors offer the best pricing. This is probably the #1 way you can avoid channel conflict as a B2B company. Undercutting on price is a huge no-no as it positions you as competition for your channel network. Refuse to undercut your local channel on price. Give your channel network the edge on price--they keep their foot traffic and you make up the difference in increased margin on online sales.
Promote your dealers and distributors on your B2B Commerce site. Your commerce site is going to catch a lot of attention from search engine crawlers and new customers alike. While B2B Commerce is a growing shopping method for a lot of businesses, there are still a fair number of who research online but still want to see a product in person before buying. Help those customers find a dealer near them and pass the leads on to your channel partners for follow-up.
Create special dealer- and distributor-only promotions--and then promote them online. While it might seem counter intuitive to promote in-channel sales and discounts on your B2B Commerce site, it's actually a good commerce practice for avoiding channel conflict. Your physical locations get the boost from real-time only offers and promoting it on your site lays the bait for those "researchers" who might otherwise defer their purchase until a later time.Provide the systems needed to effectively run a multi-channel on-line business. The B2B Commerce platform you use to run your marketplace and to deliver the features and functions needed by your channel and end-users is essential to ensuring that the decision and purchasing process delivers a great experience and so that you can properly manage your entire value chain.
B2B Commerce holds great opportunity for you and your channel if implemented properly. But one things is for sure, any software vendor that does not have a multi-channel B2B Commerce strategy will find their sales coming under increasing competition and if they do not take there channel along with them, they will lose a substantial part of their sales and service capability.
© Saxum Commerce
As global markets change and become more "local" so the demands on B2B will increase to meet these new opportunities. However, do it right and the reward of increased sales can be achieved. Consider some of these ...25% of a salesperson's time is spent doing research - not only is this a massive resource cost on a collective basis to businesses around the world, but were you to provide comprehensive information that was easy to find and on which to make a buying decision together with an easy purchasing process in a single place and rather than scouring the world, the salesperson will see your commerce site as a preferred source.Google does not generate B2B deals - Google will direct a lead to your commerce site, what happens at your site is what will close deals. The better the decision making tools, the better the information provided and the simpler and friendlier the user experience, the more likelihood there will be of a deal being concluded.Only 35% of B2B social branding generates sales - Business makes buying decisions based on information, solution building, price and numerous other factors. If you consider that 65% of the sales are generated by these factors, then your B2B Commerce site and systems must provide the features to deliver the relevant content to your visitors.BRIC is growing rapidly - Use your B2B Commerce platforms to expand your business to the largest growing economies (Brasil, Russia, India and China). While your B2B Commerce platform needs to support localized payment, language and service needs, B2B offers you a way to enter these markets and to generate new opportunities.Use Multiple Channels - It is a global multi-channel road ahead to reach more customers through more touch points. Expanding your B2B allows you to go-to-market using traditional and emerging sales channels like resellers, on-line stores, subscriptions, in-product consumption, AppStores, social purchasing and mobile commerce.
© Saxum Commerce
Apple has beyond any shadow of doubt proved that a monetized marketplace delivers great returns for them, an awesome go-to-market opportunity for their developer community and passionate customers.B2B software vendors, however, are slow to take advantage of this phenomenon. There are numerous reasons for this but that is another topic. Here are some reasons why software vendors SHOULD be looking very seriously at building their marketplace … even if it is only a small one.The Most Important Reason - Generate More DealsUltimately it boils down to two facts above all as to why software vendors should have a marketplace included in their multi-channel sales and marketing mix …It generates more core sales; andIt builds a great echo-system!
How is this achieved … see the list below!Customer ExpectationsThe user experience expectations of customers is shifting and being driven by their consumer experiences at marketplaces such as the Apple AppStore, Android Markt as well as their purchases from on-line stores such as Amazon and Zappos.This is increasingly adding demands on software vendors to provide a similar user experience to their customers when they are looking for, evaluating and purchasing business software.Functionality Critical to Closing DealsNo single product can provide all the functionality needed to deliver the complex systems required by the modern business. Independent Software Vendors (“ISVs") form a vital part of the solution chain by adding those features and functions needed to close deals.Further, on average salespeople spend 25% of their time seeking out information to build customer solutions. This time is expensive and could be better spent on lead and deal generation activities.A marketplace that promotes both core and add-on software makes products and related information easier to find and evaluate thus making it quicker and easier to build solutions while also making the software vendor more competitive, customers happier and the ISVs motivated to continue investment into developing vital add-on solutions.Earnings to Invest Back Into The ChannelBudgets for channel development are always under pressure and yet for the average software vendor their channel is critical to revenue growth. So which comes first – investment into channel or revenue?A marketplace can and should be a profit centre where the extra earnings generated could be used to top up the lagging budgets for channel development, which in turn would have a positive impact on core revenue generation.Increased Internet Marketing – For FreeGaining high rankings in search engines together with the demands on software vendors to use social networks to promote themselves on the web is a time consuming and costly exercise.A well constructed marketplace that provides an environment for the vendor’s echo-system to congregate, communicate and transact would result in large volumes of traffic, links and in-bound content being created for the marketplace.As opposed to paid search, on-line advertising and paid staff to create blogs, tweets and other social network updates, this can be achieved at zero cost through the marketplace and the echo-system.Enhanced Service DeliveryThe web is a low cost and efficient way to deliver new or enhanced services to a software vendor’s echo-system. These services can include skills sourcing, project resourcing, training and support.This service delivery can improve the effectiveness of the channel and provide a convenient way for customers to consume products and services.The marketplace is a great way to deliver these services and as a by-product the traffic also creates the opportunity to on-sell additional products and services.
© Saxum Commerce
With cloud, mobile, social and big data advances all happening at once and at lightning speed, how will shifts in technology impact the way software businesses are run?Ginni Rometty, CEO of IBM, recently made a prediction that three key areas will change everything. These three areas are:
- Data analytics will drive business decisions- Social Networks will impact on value delivery- Individuals will no longer be aggregated
Here is a look at how these may affect the modern software vendor.
Data Analytics – “business decisions and opportunity creation”
As potential customers use technology more and more in their assessment and purchasing processes as opposed to traditional face-to-face sales relationships, so the use of data will become more important to understand markets, drive content delivery and to predict futures.
© Saxum Commerce
People and businesses with a diverse set of skills make up the software vendor’s ecosystem or supply chain and these skills are critical to the successful sale, implementation and support of systems for end users.
Having visibility of these skills on a global basis provides an invaluable tool for ensuring that the vendor remains competitive by knowing where skills can be deployed or where training and recruitment may be required.
For service providers wanting to promote their specialist skills and for customers needing these skills, a web search engine cannot provide the fine grained results showing the availability of approved skills resources quickly and easily.
Where new projects are being resourced, simplifying the process to promote the project and invite responses for the provision of the services required for the project would make the customers life a whole lot easier.
A Skills Market would provide a substantial solution to these issues and would ensure that:Projects are efficiently resourcedChannel partners, with the appropriate skills, can be found and contractedThe customers can quickly and easily find appropriate resources to assist with their projects
© Saxum Commerce
For Business Software Vendors, the need to implement a more encompassing ecommerce solution is becoming more prevalent every day.
This is being driven by a changing landscape in which the industry is seeing new sales channels, new deployment methods, new revenue drivers and new business models which in turn are affecting the rest of the business operations including marketing, channel management and accounting.
Once the vendor has recognized their need for an ecommerce solution to manage their changing business, they then face the challenge of figuring out which of the myriad of options out there best suites their business.
This is especially difficult for vendors that have an established and complex ecosystem of resellers, ISVs, end-users, distributors and skilled resources as the ecommerce solution selected needs to keep these entities involved in the transactions.
The following chart shows the types of ecommerce features needed by a channel focused vendor and the ability of different types of systems to deliver them.
© Saxum Commerce
While the promise of new and large revenue streams for business software vendors is driving huge investment into developing cloud strategies it seems that there is much being overlooked in the process.
Building the cloud product strategy is just the starting point with a number of areas being sorely neglected and which will come back to haunt technology executives in the near term
As a part of a comprehensive roll-out, the following represents some of the items that should be addressed …
Most vendors will have existing legacy customers that will take time to cross over to cloud and there will still be a substantial demand from new customers that wish to stay with on-premise solutions.
The challenge here is how to build a hybrid sales channel that caters for both cloud and on-premise customers and where the customer can engage in an individualistic way.
© Saxum Commerce
Software businesses are being affected by the growing demand for:Subscription billingMulti-channel sales models including In-App, Web and ChannelMultiple product deployment types such as SaaS, Mobile and On-PremiseWeb merchandising, marketing and promotionDelivering a better customer web experience
To achieve this, software vendors need an integrated ecommerce, marketplace and operational platform that would provide the relevant functionality to:Support multiple sales channels including on-line, direct, through partners and In-AppSell, track, manage and deploy on-premise, SaaS and mobile productsIncrease Sales through turning traffic to your website into customers by delivering a rich environment where prospects can find, review, test and purchase productsCreate new sales opportunities by using "big data" to identify trends, user interest and merchandising effectivenessProcess subscription billing and payment collection for your SaaS and Hosted solutions together with billing your legacy Annual Maintenance FeesCreate a Marketplace ("App Store") of both your products and those of your ISVs to assist your channel and customers in building comprehensive solutions quickly and easilyProvide a rich Resource Library of technical, marketing and downloadable contentAutomate Notifications for support, marketing and merchandising events delivered directly to your ecosystem as well as to social networksGive your ecosystem the tools they need to make transacting with you simple yet comprehensive through highly functional self-help portalsKeep your partners engaged by ensuring they are involved in relevant sales transactions no matter which sales channel drives the deal and automate multiparty splits on these transactionsMake it easy for your customers to find suitably qualified systems integrators, consultants and staff while creating new business opportunities for your channel through a Skills Market
© Saxum Commerce
Yosemite, Mountain Lions and Software Vendors I recently visited Yosemite National Park and was at awe with the immensity and beauty of it all. It was also a touch daunting at the thought of how big it seemed and how small I felt against it.I then came across an article in the Yosemite Guide publication, which got me thinking (please read the article “What should you do if you meet a mountain lion?” attached) … In our insignificant world of enterprise software we have our behemoths like SAP, Oracle, Microsoft and IBM. They are all-powerful and will be around forever, taking control of the world below them. You just have to look at the struggling HP to see how these entities can survive massive disruption.These organizations could be seen as the Mountains of Yosemite.However, our world of business software has Mountain Lions who can hunt and by being agile, smart and hungry can find a space where they can flourish and build great success. By embracing change and in many cases creating disruption of their own, they carve out of the rock a sector that they can own and grow. Some great examples of this would be Salesforce.com, Box, Xero, Atlassian and Splunk.Then there are the small un-funded software businesses with great people and ideas but are still finding their way. These businesses can be successful by following in the footsteps of other startups and by transitioning from the “hunted” to being a Mountain Lion. These small businesses need to do everything they can to be perceived as being stronger than they are. The web has delivered to them the best opportunity ever to “fight back” and to be seen as a relevant entity.By using the ecommerce (subscription billing, marketplaces, portals), social marketing (LinkedIn, Twitter, Blogs) and web hype (“if it is on the web it must be true”), any business can create a presence and attract new opportunities. Just look at the explosion of subscription and mobile solution demand and it is easy to see how a small software vendor can take advantage of a disruptive environment.Besides creating great products, smaller software vendors can use technology to grow their own businesses and should be actively embracing those web tools that can help them achieve it.Of course many of these ideas will still fail because not every idea can be a winner and because not everyone can effectively execute but even those that fail can still have their moment of fame through the web.From a different perspective, for this exact reason and from the consumer perspective, they have to be careful how they select their “web” suppliers … but that is a different topic.
© Saxum Commerce
For those vendors that rely on their channels to go to market, there is the challenge of motivating them to adopt new business, deployment and revenue models.
In this post, we look at some of the challenges being faced and solutions to them.
In the past a license would be sold, the customer would pay a lump sum fee and the partner would take 30% of the proceeds.
The license fee, if we were to ignore annual maintenance fees for this purpose, represented the lifetime value of the deal and all parties involved would share in it.
© Saxum Commerce
Business software vendors like Sage, Microsoft, SAP and most others are slowly growing their direct-to-consumer model. It just so happens that these consumers are businesses. A few of the factors driving this shift includes:Consumer experience – businesses are run by people and the experiences that these people have had with their consumer purchases is driving their perception and expectation of business transacting.Technology - it is much easier today for a vendor to deliver a rich experience through new technology like SaaS and mobile.Revenue and margins – these new technologies open the opportunity to migrate existing customers and to attract new customers into recurring revenue models, which deliver substantial margins.
However, to continue to deliver enhanced functionality and high levels of local services, it is essential that the vendor keep their current ecosystem of value added resellers and independent software vendors (“ISVs”) engaged. Were this not to happen, the vendor’s business could be substantially negatively affected.
To deliver a direct-to-consumer model and at the same time deliver a consistent experience for the customer and keep the ecosystem fully engaged is going to add substantial demands on the systems used by software vendors as legacy systems generally do not have the features needed to achieve this.
Consider that if a customer needs a SaaS solution that comprises the vendor product plus two ISV products to build a solution and they are using a reseller to assist with the project to take the system live.
Then, if a suitable system is not in use by the vendor, the customer would need to make purchase decisions on multiple websites, have 3 different recurring billing transactions (if the ISVs have acceptable systems as well!) and have 3 different payment transactions. What about the reseller that is entitled to a commission on the sale?
© Saxum Commerce