It's a surprisingly simple, yet very accurate test for the potential of any enterprise software.

You can read my take on channels –
http://www.yanivnizan.com/2009/08/referrals-res…

You can read my take on channels –
http://www.yanivnizan.com/2009/08/referrals-res…

Btw, my understanding was that the word “enterprise” had evolved to include any organization – for-profit, non-profit, government, startup to smb to large corporations. Could be wrong!

2. you'd rather have a small number of very profitable deals at very high price points for exactly the reason @cdixon mentioned: companies only buy their top 2-3 priorities each year – when you find yourself being in the top 3 for a company, you want to capture as much revenue as possible. The higher margins allow you to reinvest in your product.

3. you have to tackle something difficult and valuable (both) to defend your price-point. Its easy to find difficult problems with no value, and its easy to find valuable problems with lots of solutions or lack of difficulty.

Depending on the solution, the sales cycle is often the same length – if you are investing months in securing new logos, the focus points should be clear – again, depending on your objectives – if early on, you need to build your reference base out quickly.

I'll then dis-agree with myself straight away! and refer back to my previous point – re Sf.com and rightnow, both landing and expanding successfully..

I also find that the SaaS approach is good at eliminating some of the buy in you may need from busy or non supportive stakeholders – however proceed with caution, rogue departments rarely win, you may get a short term win, but it may not support yo in the long term unless you can build momentum in other departments.

I've seen companies get traction in enterprises by selling (or giving away) a few seats. Then a few months later, they sell ten thousand seats at $50 each to the same customer with little incremental effort. The key thing was that it *made sense* for the enterprise to buy a few seats and try things out; the application worked in that mode just fine. Then it was easy to just sell more seats for a slightly discounted price.

This is just one pattern that can work.

Adwords is one more positive example. It's easy/cheap to try. And it's easy to scale up the spend as ROI is proven. The model scales up nicely. This is great for a new, unproven product type.

There are anti-patterns too:
There isn't a clear path to scale small initial sales up to larger revenue figures, but the effort to sell is high and you have a new kind of product that is unproven. Each sale is a loss, and you get clobbered with support costs to make the customer happy and prove success.

I imagine that CRM sales were a bitch when CRM was a new product.: Everyone in an org. has to buy in and it's hard to try things out on a small scale. Now that this is an established category with “must have” status in large organizations, things are more tolerable.

First, corporations buy significantly more than 1-3 new enterprise products in a year, and there is plenty of room to sell your solution into that. What do you need to do? You need to find the pockets of budget and justification in order to get your solution in. Then, you need to include an upsell path to get that project in a larger way. That may be the user adoption method that is descriped in some of the comments, but there are many, many other ways to do it. I recently wrote a post touching on this: http://www.quotacrush.com/index.php/2009/12/10/…

Second, Your product does NOT… I repeat NOT… need to be on their priority list to be considered. In fact, when you go after the RFP, committee decision projects, you will more often face death (as Chris alludes to). Find the off the path solutions that you fix, and there will be budget and there will be an easier decision path.

Third, it is absolute fiction to believe that unless your product is a six figure product, you can't do direct sales/enterprise sales profitably. I've, over and over again, done the successful route with a moderately priced product. The comp plan needs to be designed correctly, the travel considered, and all the other costs brought into play, but when you consider a software product, built for easy customization and integration (or requires no integration), that requires little on-site selling, there is no reason that it can't sell for less than $100,000 and be profitable for the company. And, if you can sell on volume (and combine with some channel/biz dev deals as Chris alludes to), it certainly can be done. I'm not saying this is easy… but give me a “valley of death / push a string” challenge any day because at that price point, its an easier sell into corporations, and, as evidenced by the comments in this post, a lot of people run away from.

http://en.wikipedia.org/wiki/Enterprise_resourc…

In my career, I first heard it applied to ERP software, then gradually it came to be applied to any software of that scale.

My 1st startup was in this market. It was a tough go for many of the reasons you mentioned (in fact 10 years later they are still trying to make a go of it).

Building a direct sales team is expensive. And very hit or miss.

I now work almost exclusively with web services companies. And for the ones targeting business users, we use a back door or “maverick” sales approach. We let individual users who want new stuff to bring us in. When we have enough individual users in one company or department we can then approach (or get approached by the controller) about volume pricing.

http://codemonkeyism.com/6-reasons-why-my-vc-fu…

We tried to sell enterprise software, our main problem was missing sales (duh!) and the very long sales time of several months. Companies do not buy enterprise software with a decision time of a week.

Cheers
Stephan

Not big enough to support a services arm or don't want to? Find a good services company to become a channel partner.

Notice the gap? There's no software priced between $1000 and $75,000. I'll tell you why. The minute you charge more than $1000 you need to get serious corporate signoffs. You need a line item in their budget. You need purchasing managers and CEO approval and competitive bids and paperwork. So you need to send a salesperson out to the customer to do PowerPoint, with his airfare, golf course memberships, and $19.95 porn movies at the Ritz Carlton.

In other words, there's a natural price delta between end-user software and “enterprise,” or whatever you want to call it, software. People seem to keep rediscovering this over and over again.

And yes, the product certainly needs to fit the sales model – but if it doesn't then either the selling model needs to change, or the product does. giffc makes a good point above about the SaaS model playing a big role in that change.

That said, in a Carrier grade/space solution you'll want to avoid ever referencing the Enterprise space in anything other than the toehold against how you set up your pricing model.

Re: your comment on inside sales, clearly you can get some great efficiencies if you can build that kind of machine. However I would also add that products that will sell well as inside sales need to be designed for that kind of sales model. In other words, if you are selling a behemoth enterprise software package that crosses multiple IT siloes and takes $400k of consulting to implement, it will be very tough to sell via inside sales only. However, take an easily downloadable software tool that has a quick time to value, with a low pricepoint, and maybe you have a good fit.

Someone mentioned VMware before as a great example of network effects within enterprise sales models, but I actually think they are an even better example (full disclosure: I worked there from 2003-2006 so I am a bit of a fan boy) of what kind of bottom line products sell. VMware's ROI business case was a slam dunk-buy our stuff and you can massively reduce your IT CAPEX over the next several years. OPEX reduction was just the gravy on top, and even if the customer thought the OPEX numbers were inaccurate, the CAPEX savings was so clearcut that it didn't matter.

You can easily be breakeven at almost anywhere along at price scale — and always could — unless you are also trying to grow rapidly enough to create VC-scale returns. If you take institutional funding and have too low a price point, you become VC living dead. And that's their worst scenario.

Vitamins don't sell as well because the absence of getting sick is difficult to detect.

But I would argue that many enterprise customers will buy from a startup for advantage, because they know their competitors are buying older, often last generation, products.

I would add a couple things:
- in my experience, what is a “top priority” is not what you would think out of hand; this is where a great salesperson is a tremendous advantage; unlike what many people think, sales aren't about pitching, they're about *listening*; what makes a great salesman isn't delivering a great pitch, it's *identifying the other person's needs*; selling an enterprise product is therefore all about finding these opportunities.
- outside of being a “top priority”, there's another class of enterprise product that sells: products that directly add to the top line or the bottom line; of course everyone packages their product as saving money or making money, but if you can make a credible case that your product does so directly, you're 90% of the way there. Of course such products are rare.

And the best source of leads was not the sign-ups, but support email. people would download the 30-day trial off our website, then asking questions on the support list. Based on the questions, we knew who was using and who was not.

At a firm I worked, my team started using their free trial (10 employees or fewer) without any corporate buy-in. After we outgrew the trial, the employees who started it on my team had to justify the tool's cost based on our experience with the 10-person trial.