Question

Topic: Strategy

Software Licensing Sales For A Services-based Comapny

Posted by Anonymous on 3/28/2004 at 3:31 PM ET 50 Points
It’s easy to do lots of things that don’t generate results.

BACKGROUND: As an IT consulting firm, the previous 12 – 16 months have been spent crafting and executing strategy/tactics that avoid technical skill commoditiztion in the marketplace. Our compelling message in the marketplace has shifted from the provision of specific technology skill-sets to a solution-centered sale.

Adopting this approach also required communicating solution value to the right people. In our case this has meant a migration away from technical sponsors (IT Director) to business sponsors (CFO, Sales/Marketing Director). Combining Corporate Performance Management (CPM) with a technology solution message has generated significant opportunities for the furtherance of our organization.

PROBLEM: A significant % of annual revenues are collected from annual maintenance fees from our eroding software product division. With the advent of BI/OLAP tool marketplace consolidation, this product has experienced a significant licensed-client defection rate. Our firm intends to continue to remain a small family-style service organization versus a software product firm.

Recently, top management has tasked me with the responsibility of growing software license sales. This action begs a complete shift of solution strategy - as the software tool does not provide business sponsors with a compelling value proposition (zero functionality differentiation).

Instead, I have been encouraged to drive a technical implementation value proposition with technical sponsors (IT Director). Following this recommendation reverses all previous sales team, marketing messaging, and company positioning efforts from the previous year.

QUESTION: How can a sales and marketing effort be designed to deliver on this mandate? What are the important factors that must be considered before this effort is mobilized? Is there a suitable counter alternative to this mandate? What is a fair amount of attention and resources that should be assigned to this effort? How do I encourage the software division – whom provides zero sale contribution efforts (outside of providing functionality demos) – to take on an active role in increasing license sales?
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  • Posted by telemoxie on 3/28/2004 at 6:38 PM Member
    WARNING: SHAMELESS PLUG FOLLOWS:

    It sounds to me as though you have a problem I like to call the "Orphaned product".

    Here's a strategy: suggest to the CEO that you outsource the marketing for the product soup to nuts, on a test basis, without staffing up for a possibly declining market.

    There are a number of good or OK things which might happen, and two bad things which could happen.

    First, the CEO might reject the budget figures for the new test program, saying that it is too expensive, and cancel the idea. This is a win for you - you avoid the work you don't want to do, and you stay the course.

    Or, the CEO might approve the project. If so, the new project could be wildly successful, be a total bust, or (most likely) could fall somewhere in between.

    If the program is wildly successful, you win again. You have brought in a great resource to do the job, and now that you have a working model, you can staff up to move some of these things in-house.

    If the program is a total bust, when the disaster is brought up at a staff meeting, you slam your fist on the table and announce your plans to fire the outside company. This insulates you from the failure of the project, and shows the team that you are decisive and bottom line results oriented, and that is, of course, a win for you as well.

    If the program just limps along (which is the most likely scenerio), you may win, or you may lose. But you have responded to your CEOs request, without tying up lots of your time and internal resources, and you keep your nose to the grindstone, doing what you need to do. If these efforts pay off - both you and your company will be winners.

    There is, however, one situation in which you will lose big-time. It may be that your CEO remembers the good old days when you made lots of money selling software, and has never really bought into your program to change company direction. If so, your decision to place a low priority on this new request to focus on software sales could be perceived quite badly. To avoid this situation, before suggesting any outsourcing, you need to take advantage of this opportunity to ask some questions to better understand his or her perspectives on the "services vs software" issue.

    Another way that you could lose (and unfortunately the most likely outcome) is that your CEO will give the go-ahead to pursue the project, but will not give the project enough resources or time to succeed. Software takes time to sell, and you can't have a baby in a month by impregnating nine women. You will need to be sure you "go to the well once" for these resources (e.g. a proof of concept followed up by a 3 month pilot program might give enough time for success.

    For more info, check out my profile and web site, and give me a call. Good luck.
  • Posted by telemoxie on 3/30/2004 at 8:16 AM Accepted
    I agree with your CEO.

    The decline of your software division could create a worst case scenerio - a requirement to support users in the long term, without sufficient resources to cost justify the work, or the likelihood of long-term success.

    Your CEO is correct to take action to remedy this. If I were in your shoes, I would start by having a third party interview past customers to find out why they left. From your comments above, I believe this will result in some negative comments from former customers, therefore I do not believe you should do this work in-house.

    I would then put forth a valiant, creative and determined effort to market the software. If I am hearing you correctly, you believe that the "software" is more accurately a development platform, which you plan to use internally. Perhaps it could be licensed as such.

    Good luck.
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