The Changing Software Sales Cycle
The software industry is changing and that is impacting the software sales cycle. Instead of one-time-license monolithic software packages, vendors are offering subscription licensing, a menu of component-level licensing, or Software-as-a-Service (SaaS). Other software vendors are choosing to continue with the traditional software license model, but also offering a hosted or subscription option to broaden their customer base and grow sales.
Check out our section about software business models and deciding which business plan is best for your company.
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Customers Have More Choices
In addition to the options mentioned above, business customers have other possible ways to solve their needs, such as open source software. Others are outsourcing much of their IT operations. This changes the playing field for decision purchases, with a lot more choices for the customer, and can significantly impact the software sales cycle.
The Traditional Software Sales Cycle
Imagine for a minute that you are a sales person with an end-to-end software solution that you have been selling successfully into a certain niche in the business marketplace (perhaps this is you!). You have a good handle on your market, your customers, your competitors, and your software sales cycle. You know that it takes time to go through the traditional steps in the cycle:
- Identify & establish relationship with target customer
- Understand customer requirements (meet with / interview a number of stakeholders etc etc)
- Communicate your software value proposition
- Refine requirements
- Present proposal (which may start with a pilot...no revenue yet!)
- Customer agrees to move forward with (free) pilot
- Complete installation/customization, gather team to conduct pilot
- Run pilot
- Review results of pilot with customer
- Present final proposal & quote
- Customer has internal reviews with various stakeholders & finally decides to purchase
- Software installation & customization (usually starting with a small base of users, then rolling out more broadly)
A familiar picture to many, I am sure... This has been the traditional sales model for enterprise software for many years. And each of these steps can take weeks to months to complete... depending on your software product, it could be many months or even years from the start of the sales process to the end when the customer is fully deployed.
The Rules of the Game Have Changed
Now suppose you find out from the customer that they are also considering some other competitive options: they have identified a SaaS provider who can provide a web service that meets their needs at a fraction of the cost, or perhaps they have identified and been piloting "under the radar" some open source software. How does that impact the software sales cycle, and your sales strategy?
Suddenly, you realize that the rules of the game have changed! Your value proposition that you know by heart may not be valid in this new playing field. And unless you can figure out a way to shorten your sales cycle and get to "customer understands specific benefits to their business" before the end of the pilot, you may have lost the business before you even get there. Now what?
This scenario is a very real one in a number of software segments today, and is only going to become more commonplace as software services become more broadly available and adopted. Of course, there will be niches that will not be impacted by service offerings over the web (eg, very proprietary data or certain types of mission critical applications), but those will be few and far between.
How will this impact your software business and your software sales? You should be thinking about the scenario above - how would you change your sales strategy if this were to happen to you? How could you shorten your sales cycle? You may need to figure out a way to let your customer get their "hands on" and try your product earlier in the cycle. It's hard to beat a user pilot/trial with a Powerpoint slide deck if that's only as far as you've gotten in your sales cycle.
Of course, regardless of how your business is impacted by SaaS or open source (or even if you offer SaaS or open source), the 6 key elements to keeping your sales strong are still critical.