Selling software to enterprise companies
The dream of many startups is to sell products to the world's giants. Due to the scarcity of know-how on software marketing strategies, we wanted to put down on paper the experiences our team has gained.
Recently, the liveliest debate in the software sector revolves around the following topics: the sector trend in parallel to global economy, overseas options, and the premiums of being a global company. Nowadays, the enterprises having a few Fortune 2000 (the world's biggest 2000) companies in their repertory, when they post the company brands on their web sites by setting an incentive to other prospective customers, have the opportunity to increase their sales.
The purpose of our article is to convey the ideas, based on our experience gained from our practices, which global startups should pay attention to for ensuring more currency inflow and entering the foreign markets.
(The article is a little bit lengthy, so get your coffee or tea before continuing. Let's start)
To draft a more comprehensive text that is favorable to our target audience, let's make some assumptions for the topic in general:
- Let's name such "giant" companies for which we set sales targets, F2000 (the world's largest 2000 companies).
- The objectives of these firms would also be to procure your product with a 10K-100K annual figure.
- Your product would correspond to an actual need and be a globally available software with English support.
- You would have a small after-sales support team that may well be at your customers' disposal.
No criteria other than the above 4 assumptions matter for successful marketing.
Before proceeding with what F2000s require in their software selection, let's examine why these companies are so crucial in the software sales process:
- Once they procure your software product, they are relatively open to up-selling and cross-selling, allowing their company-wide departments readily to buy additional licenses in the same process.
- Even though the sales process is lengthy, after the sales contract is concluded, they do not easily cause you to have customer churn, and the contracted company sticks to the software for a minimum of 5 to 10 years.
- They sometimes choose to procure software with a perpetual license, thereby paying the cost of the license for 2.5 to 3.5 years in advance and offering an advantage in balance of income and expenses.
- They often mediate high-volume sales, thus covering up to 20% of your yearly sales quota alone.
After mentioning the assumptions of the article and the importance of the F2000 in the software sales process, it would be good to clarify some basic rules.
- Rule 1: ANYONE can sell to the F2000. I'm in on the sales process all the time, but I've never seen myself as a good, even mediocre, salesperson. I have learned just from my impressions that there are basic rules for this business, and that how the F2000's main requirements should be met. You can follow the same methodology (patiently) and make sell to a similar audience.
- Rule 2: Each companies' approach to the procurement process is basically the same; the exception proves the rule. Some steps may be omitted, some others are longer or shorter than the others. You could convince an SME to purchase any product in 90 minutes, but for a large company, this may take up to 2 years. Nevertheless, need analysis > test of supplier's market > negotiation > select the winning bid > procurement process rarely changes.
- Rule 3: The main incentive for concluding a contract with F2000 is not the technical competence but communication, connection, and support. If you meet any F2000 requirements even by your 5-person enterprise, you may find yourself generously awarded. Sometimes RFPs are issued, but their scoring (generally) doesn't matter, instead, that how much the sales and technical support team dealt with the prospective customer sticks in mind, and the winning bid is decided accordingly.
After quick glancing at these assumptions and the rules, let's examine primarily enterprise sales process in 6 steps.
Understanding sales process to enterprises
The following items explain the steps from the emergence of the need at a F2000-scale company to the concluding of purchasing process. If you are familiar with these steps, you can skip this topic and proceed to the next one.
1. The emergence of the need for software in the company: A team conducts needs analysis for software that is unavailable in the company and would gain particular favor if procured. After analysis, approval comes to proceed to the next procurement step. This approval was given by the team within the company that would own the software.
The biggest problem of the outbound B2B sales is to knock on the door of the company while it has no real need. In this case, if the prospective customer does not turn you down, you are likely to waste time until the real need for the software emerges or the budget is allocated. So, it is best to carry out a need/budget analysis during the sales process, and then to proceed according to the analysis results.
2. Preparation of the assessment document by business units: If the product is simple and would be used only by the business units, the approval for the product is readily given. Should the software be a kind of product that may be needed simultaneously by product/marketing managers and developers, comments of these varied business units are collected, and their approvals are sought; the budget is then allocated (or it was agreed at the beginning of the fiscal period). If your enterprise is shortlisted during this process, your chance to win the bid considerably increases (estimated time period for this is 1 to 2 months).
At this very moment, not-invented-here syndrome (NIH) may occur. NIH is the denomination for the mindset that companies avoid using or buying external technologies and have the tendency to favor "internally-developed" products. This syndrome usually begins with a manager; he/she thinks his/her team is able to invent or develop a similar product in less time at a lower cost, thus creating a good opportunity for his/her promotion.
3. Preparation of suppliers' list: first long, then short supplier list (= shortlist) is prepared by qualifying the candidate suppliers. RFI (an open-ended file if the market is unknown at all), and RFP (a file that have estimated desirable features and that suppliers are expected to respond), then RFQ (a file prepared and communicated to suppliers when the needs become clearer and no longer change) are sent to suppliers respectively. Most processes progress only with RFP. Here, determining whether the company officials who contact you are also the members of the budget-managing team allows you to receive clearer information about the target company and to reach faster your aim (estimated time period: 1 to 2 months).
If you are asked to issue an RFP at your first contact with a company, it is very unlikely that you would win the bid. It is because another competitor has already issued the mentioned RFP and that the company procurement team has only been trying to complete the procurement procedures which require market survey with at least three suppliers.
4. Software testing process with the suppliers: Shortlisted suppliers are contacted and requested a full version of the software for a specified time period to test it. During this step, the software is tested in depth. The buyer company would require at least 45 days, but you may also come across such companies soliciting 6 months test period. This step is lengthy and the most troublesome part of the process, as it is a matter of operation, safety and (partly) cost calculation. If you pass this step with success, congratulations; this means that you are 99 percent likely to sell your product (estimated time period: 2 to 4 months).
5. Contract process: It continues with the procurement team usually adhering to their contract. Especially on the banking related issues, the buyer companies either ignore the contract or send it for your approval by amending seriously. The most critical points to consider are punitive sanctions, software indemnifications, who holds the intellectual capital rights-especially in case of tailor-made software development (=intellectual property rights), who can use the product/service within the organization and, most importantly, the coverage of the service offered. Also pay attention to withholding tax, VAT, and who should pay the contingent taxes (estimated time period: 1 to 3 months).
The contract process may sometimes have a seasonal effect. Especially the companies approaching their end of a fiscal year may choose to use their remaining budgets. However, as it takes months to reach an agreement in the B2B sector, the effects of these seasonal periods may not be seen directly in the bank accounts. Since the end of the fiscal year may be the last month of any quarter (e.g. March 31, June 30, December 31), most B2B software enterprises experience fluctuations in their profit and loss account statements of 10 to 20 percent.
6. Software Installation process: You become relaxed after the contract signature and your mood lifted. Unless there is a very important problem, your customer now has sold the product inside, infused it into all stakeholders and is ready to use it. Whether your product is a SaaS or on-premise software, the completion of this process means a very intensive and painful work series has also been completed. Pursuant to the contract, trainings are provided (via Skype or on-site), the integration process is supported, and the test process is finalized. Your customer celebrates this with the message that the project manager has sent company employees, saying that the project is finalized, and accordingly, you receive a thank-you email.
In this step, as the implementation grows little more serious, the demands that never appeared during the test may suddenly emerge. Especially in companies having conducted a weak need analysis, new requirements come to the fore when the product is actually started to be used in the field after the installation. Remember, in the above paragraph, when drafting the contract, you have listed professional services as a man/day unit, so you may define the additional features that you have analyzed together, and may process the change requests by making out additional invoices.
Customer's (technological) expectations
In the first part of the article, we first mentioned about the assumptions and basic rules of selling to F2000 and then learned the related processes. Below you will find the possible demands during the sale of your product to an enterprise.
Single Sign On (SSO) and LDAP (centralized authentication): The customer may demand authentication from a single protocol when using your software. To give an example from Countly experience, we all aware that many of our customers who use the product have created hundreds of accounts by tens of different teams in the company. It's quite difficult to create them manually and manage all their passwords without LDAP, so if your product has such a feature, you can have a great hedge on your rivals.
Audit logs: These are centralized logs that keep records of employees' software related activities. Every F2000 company desires to control the logins, log-outs, and software activities, and to restore the recorded activity if needed. Suspicious activities, and past actions needed to be investigated in detail should be recorded in these audit logs. In addition, all internally-used software must keep audit logs for large companies or institutions to obtain ISO-27002 certificate.
Role-based access control is simply the availability of the infrastructure to allow employees using the software to access only the points they need to access. The minimum requirement is to identify users with different levels of access. A more advanced requirement would be to group these users and develop mechanisms to restrict access authorizations in detail.
Security: You should have a detailed "Security in My Company" PDF manual describing how to manage password, what encryption methods are used in storing data, how to comply with GDPR, authentication and security clearances, etc. For example, you can take a look at the security page of OpsGenie, which was recently purchased by Atlassian.
Installation options: If you continue to read these lines, you most probably know the terms of single-tenant, multi-tenant, on-premises, and private cloud, and/or are already offering these options in your own software. If your software can be installed on-premises, the product database and the application server tier should be stored on separate servers, and database replication be readily done. Docker and Kubernetes options which have recently become popular make things easier. Disaster management and backup is another issue that should be on your agenda, and that is questioned in depth by your customer.
API: According to the Forrester / Liaison Technology Report, 96% of teams are having trouble with integrating their data with other products through APIs. To avoid this problem, your product needs an advanced API service to communicate with other integration points of corporate customers.
SLA and support options: are one of the most basic corporate needs. When companies procure products having over-costing items, they expect these items to be eliminated within certain time intervals and within certain provisions. SLA (Service Level Agreement) means that the following time or time periods are specified in the contract: the minimum uptime of your software, waiting period for responses to customers' support questions and the time required for solving the questions.
The list may seem exhaustive, but you will realize in time that you overcome the following demand chain more easily as long as you create a repertory.
Contract management is the most important pillar of a contract. The customer may require you for additional documentation on a variety of issues ranging from a confidentiality agreement to a product trial and usage contract, and from corporate security policy to GDPR. If you are working with business partners, you should also keep business partner contracts and product request forms available.
Depending on the nature and the size of your business, you have the options of (A) making a quick search of these contracts on the Internet and modifying them according to your needs, and of (B) preparing the contracts with a lawyer. If I had just started such business, I'd look for option A, and five years on for option B.
Here's a list of the contracts and/or agreements you should prepare, in order of importance and priority:
- Software License Subscription & Maintenance Agreement: is an agreement signed mutually by the customer and the producer (i.e., you), which defines the conditions under which the product is used by the customer.
- Software Evaluation Agreement: is an agreement signed by both parties if you release the product for customer's use within the specific period for testing purposes.
- (Mutual) Non-disclosure agreement: is a confidentiality agreement which the customer submits you after their communicating with you, and which postulates that the information transmitted to you shall not be shared with third parties. This agreement is generally reciprocal and has non-discriminatory clauses for both parties.
- Partnership agreement: is an agreement that specifies the conditions under which your partners shall sell your product (reseller and OEM, etc.).
- Statement of Work (SoW): is a document that outlines a certain job description and that specifies the production time and costs with payment principles.
- Pentest, ISO, security, and other reports: Customers may require security and privacy-related certificates, pentests (security tests) reports, and other obtained licenses. Especially ISO27001 is an absolute must in some projects. You may not be in possession of these documents and/or certificates in the first place, in particular, pentest is quite costly ($5K - $20K) - so do not rush and try to obtain them over time.
Other than the above items, customers may also have questions that you are required to respond. Such queries may have more than 300 questions and take a few hours to respond. Be prepared for a variety of questions ranging from your standard operating processes to yearly income, and from the number of your customers to the CVs of the support staff. Moreover, these questions may be redirected from time to time. The team may even have a contract & compliance manager to fill out and manage such question-loaded documents.
Some other issues that may lead to success during pre -and- post sales to F2000
Below, you will find some points that couldn't be included in the above headings while mentioning them have an added-value. Some of these points relate to the basic fears of customers, though they do not reveal, and the methods of how to overcome these fears.
- You should have eligible case studies to convey to your customers. Banks want to know what other banks are doing, and telcos do so for other telcos, and they all want to adopt success stories. Therefore, you should communicate with two different customers from different sectors and prepare a case study covering real figures (for example, "end-user satisfaction increased by 12 percent in last 6 months for customers using our great product, and corporate revenues leveled up by 5 percent in last 4 months"), and you should convey this case study before mentioning your product's technical specifications.
- When you sell services/products around the world, you actually sell them to the person who tells other stakeholders about you and who wants their support on behalf of you. This person may leave the job, and your counterparts may vary. Their needs for your product may also be reduced. These very moments mean a piece of your product marketing is missing. In such cases, you should work hand in glove with your internal "champion" and contribute to strengthening his/her hand against senior management to eliminate the possibility of the reduced need. The proper way to find out who is your champion in the company is to understand (1) who has a high level of influence on others and (2) who comments on budgetary issues.
- Since you would sell to a populous team, additional training may be needed. Having provided on-site or distant training to your customer, you should offer every 6 months to provide again the training you had provided earlier, because test time for the product may take time, and the team composition in your customer may change (this point has importance).
- You don't need a project manager or product manager to market your software. Only one person, who knows the product well, who understands the customer's needs, who feels and knows their fears and positioned himself/herself according to possible responses as a salesperson, and who answers the technical questions as quickly as possible (in the beginning, you would be the one to do so) is simply enough. It is therefore unnecessary to rack your brains on the organizational schema, after all, most F2000 companies wouldn't mind your schema.
- The price of a product is rarely posted on the website of a company selling software to the F2000 (except SaaS). If you are marketing at such level and quoting on your web page, you run the risk of losing money in advance. F2000 companies are demanding, so just from the second week, you become aware of not being able to sell at those prices, and of not being able to continue to implement the contract which lasts for one year. My humble advice is therefore either to delete your figures underpricing firstly or to post a new page under the name of "Enterprise" to redirect your prospective large customers to that page.
- Your distinctive feature should be your support. Technical competence comes after support for F2000 companies. You should make sure that you stand by the team you are communicating with and continue to be at their elbow. Furthermore, in disadvantageous positions, to create a considerable effect, you may cry:
"Yes, we have such a shortcoming, but since we are a customer-oriented company, we would love to cooperate with you and import your requests into a road map. We may be a small company, but our sole aim is to win your hearts resolutely and enthusiastically and to maintain our cooperation. Our other major rivals would not do so, because creative working in a boutique style is not in their tradition. So, choose us and bring the greatest benefit."
- Record and send your meeting notes after each teleconference and respond to the possible questions without any fail. Even without maintaining face-to-face contact with your customers, you can win their hearts, thereby eliminating your concerns by duly managing the process. Note that, at Countly, we had face-to-face meetings with only 10 percent of all customers.
Selling is a long-term business
The selling software to corporate companies, despite the low percentage of success which is a bitter truth, the length of time, and reciprocating progress is an event that produces tremendous pleasure when it is achieved, that takes your enterprise one step further paving the way for other sales with the references it provides.
Companies that recognize corporate needs, meet them clearly, and stand by their customers' pre- and -post sales would experience the most significant gains. You can market your software to the most prestigious companies without being hindered by "but"-loaded reservations.
-- Balsa Team