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. And with all this, the cost of making one
successful sale is going to average about $50,000. If you're
sending salespeople out to customers and charging less than
$75,000, you're losing money.
The joke of it is, big companies protect themselves so well
against the risk of buying something expensive that they
actually drive up the cost of the expensive stuff, from $1000
to $75000, which mostly goes towards the cost of jumping all
the hurdles that they set up to insure that no purchase can
possibly go wrong.
The second paragraph is the key. Alex, these people aren’t trying to piss you off, they’re being driven by what BigCo wants from them. BigCo won’t let a manager try some software and declare that it meets their needs. BigCo demands that vendors respond to RFPs and RFQs, and if one vendor puts no-nonsense pricing on their web site, all of their competitors will undercut them by a penny or so and they won’t get any sales.
I could go on, but Joel has made the point: These annoying vendors have evolved to sell to those annoying customers. It isn’t the vendors that need to go extinct, it’s BigCo. BigCo buys cloud services in 2012 the way it bought time sharing in 1972, so the vendors are still using 1972 sales processes in 2012.
Joel is using a tool called "exaggeration" in this piece to make it more poignant and funny. You might have heard of that ;-)
Seriously though: many of those software licenses are still below say $5000 per license/head/..., and they are very standardized run of the mill software. The article still holds: if you're running a dev shop on MS technology, you won't need manager approval and a sales process to buy Visual Studio or MS SQL, and the same goes for MS Office or Adobe products in a design company.
I'm familiar with the tool, and I enjoy it tremendously. In this case, however, I think we're dealing with the sometimes hard to distinguish "spouting nonsense" tool. :-)
After a certain price point (say 10,000 for CAD packages and the like, where you're actually paying for some seriously specialized and advanced software) it's no longer about the software, it's about the customization. That's what those overpriced sales people come to talk to you about. Not only that, but once they're done you'll get and army of project managers and senior devs that come to visit you to figure out exactly what it is you need and by the time these people are done and all their salaries are paid, yes, you'll have paid somewhere upwards of 75,000 dollars but it's not a piece of software you've bought, it's custom development tailoring a specific package to your exact (hopefully) needs.
The price of one license doesn't matter. What matters is the dollar amount of a sell, and I promise most of those products are being sold in the <$1k or >$75k range. The exception is Smart Bear, but they are one of the few "doing it right".
While Apple recently modified their bundles and lowered the prices for Final Cut Pro and Logic, they were both within this range and did more or less what Alex described.
SQL Server was in that range for many forms of licenses, and so was Windows Server when I worked at Microsoft. Actually I could think of a lot of software in that range.
Today, I was looking at UBS in South-East Asia..... A basic system may be a bit below $2k, but a functional system is probably about $4-5k.
Also a basic functional system of Sage ERP for smaller businesses is often well above $10k and below $50k
SQL Server was $50k per socket (going to core) for the Enterprise Edition as a list price. The typical SQL Server sale was >$100k, easily. Also, sales were negotiated and Microsoft licensing is totally fluid, especially if an Enterprise Agreement comes into the mix (where the cost is spread out over a few years). People citing MS licenses here are blind to how the majority of MS license in Enterprises get sold--huge deals with multi-year subscriptions that cost lots of money. MS will typically "true up" licenses at the end of an EA.
Right on! This should be titled "How not to sell software that costs under $1000 in 2012" because the do/don'ts obviously are wrong for non-cheap software.
I will add PLM/PDM software to that. What many people do not know is that most core CAD product companies have a PLM product as well that can contribute upto half of all company sales. I used to work for one and know this for a fact.
The theory doesn't hold for commodity software, which makes up only a small part of the market (maybe not in dollar terms, but in amount of offerings).
"There's no software priced between $1000 and $75,000."
Although there are annual licences sold within this range (nearly all of our contracts are). Companies grok SaaS, whereas they probably wouldn'y have in 2004.
We do all of his wrongs, but we don't sell to small companies.
>We do all of his wrongs, but we don't sell to small companies.
I have no real experience with big companies. Could you educate me on a few points? In particular, it strikes me as odd that these would be any different from consumer to small company to big company:
Don’t hide your pricing behind a sales process
Do people shopping for solutions for big companies not have any idea what their budget is? I understand there are always details to work out in the sales process on deals like these, but it seems to me that immediately knowing that your product costs five times what I'm supposed to spend would save your sales people some time.
Don’t make me read a whitepaper in order to get essential information about your product. Put it on your website. In HTML.
A web page with a URL that isn't a mile long seems like about the easiest way there could be to read about a product and share what you've read with other people in your company. Why would you not do this in 2012?
Don’t make it hard for me to talk to a technical person at your company about the nitty gritty details of how your product works.
I know a lot of times, technical people aren't the ones making the buying decisions, but is it rare for them to be involved? It seems like some easily accessible technical information could really speed things up when the purchasing guy asks the tech guy "will this actually work for us?", or is that not how things are done?
I can think of sensible reasons people would violate the author's other demands when smaller companies aren't the target market, but these seem universal. Since I might some day make things I want to sell to bigger companies, I'd really like to understand what I'm missing.
You're thinking about buying "big business" enterprise software like buying a cell phone or any other off-the-shelf commodity. Don't do that.
It's more akin to buying a house. You've got to find one of many that satisfies your unique needs. You've got due diligence to do. You've got negotiations. You've got an entire purchasing process to follow that is externally imposed. You may have renovations to make before you can move in and need estimates on that.
A website can cover generalities, but the reality is that enterprise products are big, complicated, and (generally) are not purchased by technical people, although technical people may be involved in part of the review process or requirements analysis.
The only process more complicated is selling to the government.
I don't think I'm missing that point. To use your analogy, if I was buying a house:
1. I want to see prices when I browse listings. This is fairly normal in real estate, even though prices end up being somewhat negotiable. Why not in enterprise software?
2. I want a decent amount of information before I even pick up the phone or write an email. If you were listing houses for sale, it would be foolish not to include some photos, the location, the size and number of rooms, etc.... I don't want this information in a mixture of PDFs, MS Office files, flash animations and such. I want HTML pages that are easy to read, copy data from and email to others.
3. If I'm buying a house, I probably want to see such things as inspection reports and maintenance records. These things should be fairly easy for me to get even if they're not on the public website.
Someone explained to me that one reason companies selling enterprise software are so eager to get someone on the phone to sales rather than browsing the website is that they then feel they have something invested in the process and are less likely to back out[0]. Having always been the nerdy type, this idea was very foreign to me, but it seems to be true from what I know of the average person. I also learned from an early age how to recognize and respond appropriately to salespeople trying to use emotional and psychological tricks to manipulate me. I sometimes have an unreasonable expectation that others will do the same.
tl;dr summary: The original article mostly applies to the subset of products/services that can be sold online. Many successful companies choose to sell using different rules for good commercial reasons.
I said:
>>We do all of his wrongs, but we don't sell to small companies.
I should have said "some" not "all", however you have chosen three examples of things that we do indeed do "wrong"...
Background: we are a 6 person company with 100 clients selling to entities with 10's of employees to 1000's of employees i.e. we don't sell to large entities. We mostly charge per user per annum (plus initial setup costs of up to one years fees - cashflow needed for longer sales cycles). The company was bootstrapped, and is profitable (in the real sense of the word - not ramen profitable).
> Don’t hide your pricing behind a sales process
Our clients have a budget, and that budget varies by an order of magnitude. I think this is normal for larger entities. e.g. a government department may pay 10 times more than a company with tight margins, like a retail client. We removed pricing so that we could vary our prices according to the client. Variable costs are mostly covered by our initial setup fees, so increase in price goes straight to bottom line. Not signalling pricing was a good move.
> Don’t make me read a whitepaper in order to get essential information about your product. Put it on your website. In HTML.
We have some information on the web site, and some in PDF's. Due to variation in the client base we are careful how we disseminate much information E.g. don't advertise a feature that is confusing to some clients, or a feature that is too expensive to configure for a cheap/small client.
> Don’t make it hard for me to talk to a technical person at your company about the nitty gritty details of how your product works.
Probably doesn't apply since our sales people are technically competent. Most customers are not technical people, so shouldn't be interrupting developers. When judged appropriate, customers do have access to any of our staff.
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Perhaps another useful way to think of it is that many of his rules apply when your target market is more than say 10000 clients? Or maybe they apply in a highly competitive market?
Re Joel's article: Maybe it is a false dichotomy between small and large sales (although as a very broad approximation it may be a useful idea). I believe there are a huge number of SME/medium sized companies with a variety of sales processes where cost of sale is somewhere between $0 to $50k i.e. the stated $50k minimum hurdle doesn't exist. Sales in that range may be your sweet spot, depending upon what you are selling.
The second paragraph is the key. Alex, these people aren’t trying to piss you off, they’re being driven by what BigCo wants from them. BigCo won’t let a manager try some software and declare that it meets their needs. BigCo demands that vendors respond to RFPs and RFQs, and if one vendor puts no-nonsense pricing on their web site, all of their competitors will undercut them by a penny or so and they won’t get any sales.
I could go on, but Joel has made the point: These annoying vendors have evolved to sell to those annoying customers. It isn’t the vendors that need to go extinct, it’s BigCo. BigCo buys cloud services in 2012 the way it bought time sharing in 1972, so the vendors are still using 1972 sales processes in 2012.