PLM, Viral Sales and Enterprise Old Schoolers

I was in the air during this weekend. Literally… Long flights to move from Russia to West Coast of USA. It is a perfect time to catch up on emails and social media. Today, I want to talk about the power of technological influence in consumer and business spaces. The world is changing very fast. The technology is a primary driver of all these changes. Think about the internet, mobile, cloud, social networks, consumerization, BYOD trend… The list can be extended. It is hard to find a place where people are not talking about technological disruption these days. However, here is the candidate – enterprise sales. Speak to enterprise sales people and you find yourself in a different world.

The following TechCrunch article can give you enterprise software startup point of view on enterprise sales – Forget Virality, Selling Enterprise Software Is Still Old School. Take a moment of your busy schedule and read the article. The author, Roman Stanek is CEO and founder of GoodData company selling enterprise software. The author is discussing challenges technological companies are facing when trying to apply modern B2C principles of technological startups to enterprise world. Here are few snippets from the article where author explains the difference between consumer and enterprise market.

There is much talk in the Silicon Valley community of lean startups and pivoting. The idea is that you get going, learn from your mistakes, and then evolve toward what the market needs. In the B2C space, this process can work because the marketing costs are low or nonexistent and there is an efficient path to massive scale. The goal is that the uptake happens virally and the figuring out takes place with a safe cushion of huge numbers of users… This model just won’t work in the B2B space. New products, especially those aimed at IT, must usually be sold. Gaining a toehold in the enterprise is a separate swim lane from engaging consumers or startups who never pay for support or consulting.

So, enterprise software must be sold and not bought. At the same time, world is not standing still. The move from selling to buying is one of the most visible trend in consumer space, but not only. We don’t like when somebody is hard-selling us stuff. One of the most popular new marketing models these days is called freemium model. In software industry, the roots of these idea is going back to 1980s and mostly driven by low cost of manufacturing. Software vendors distributed free floppy discs or CDs with promotion of full version. Internet and SaaS software provided additional boost to freemium model. Very often, freemium is combined with another new trend – viral marketing. In a nutshell, it is a technique combining usage of social network and online materials to increase brand awareness and achieve marketing objectives and product sales.

The discussion about about freemium and viral marketing in B2B and enterprise software is trending online and offline. You can find slides, materials and presentation about that. Established enterprise software vendors, consulting firms, enterprise IT, new enterprise SaaS vendors, startup companies are trying to understand if a new model will change the rules of enterprise.

I can recommend you 16 Ventures whitepaper – The reality of freemium in SaaS. Navigate to the following place to download the paper and see slides. Author brins examples of B2B companies that succeeded using freemium and viral marketing methods. In the slides it summarized as something called “Narrow-band Horizontal” with examples of Box.net, Yammer and Xobni.

I can see some traction of freemium and viral methods in PLM eco-system. Established software vendors and startup companies are innovating in technologies, marketing and business models. Here are some examples. Aras Corp is innovating in business model and offering so-called “enterprise open source” – you can use Aras Innovator for free and pay only maintenance and services. Autodesk, Dassault and some other software vendors are creating free mobile application that can be used by engineers and designers. GrabCAD established free social network for engineers and now developing collaborative applications that can be used by engineers. I’m apologizing upfront for not mentioning all companies innovating in this space.

What is my conclusion? TechCrunch article brings 6 requirements of enterprise software sales success. My summary of these rules – follow the rules of enterprise old-schoolers, otherwise you have no chance to succeed in enterprise software game. It might sounds like a good idea for startup company… However, you need to remember that all these rules were created by enterprise software market on both sides – software vendors selling to enterprise and enterprise ITs buying enterprise software. Both sides are interested to keep the status quo. In most of the situation, I can see how freemium and viral applied to compete with “enterprise old shcoolers” from the marketing and distribution cost standpoint. However, large enterprises have no problem with money – they have problem with time. In order to change the rules of enterprise sales (PLM included), you need to look on the solution as a combination of cost of sales, value proposition, ROI and (most important) time. One of the combinations will be winning jackpot. Just my thoughts…

Best, Oleg

Disclaimer: I’m co-founder and CEO of OpenBOM developing a digital network-based platform that manages product data and connects manufacturers, construction companies, and their supply chain networks. My opinion can be unintentionally biased.