3 min read

Bruce Stuart: What the sales transition to the cloud looks like

Cloud

In the cloud and SaaS sales business there is no sales strategy, just compensation strategy.

Assume the marketing professional(s) in your business can get your businesses lead generation and client acquisition engine producing at the rate it needs to be producing at.  What remains is the task of qualifying clients, proposing solutions, closing deals, maintaining deals and up selling clients or expanding the number of clients within the account.  The ability to get this job done in the cloud/SaaS sales business requires the right people, selling the right solutions to the right prospects while being compensated in the right manner.

With more and more partner sales forces embarking on the journey towards a recurring revenue driven cloud or SaaS business, it is becoming clear that the best sellers of on premise solutions may not in fact be the best sellers of cloud or SaaS solutions. In fact, you may have a group of salespeople in place that were perfect for your traditional business but they may not be the best fit for your recurring revenue driven business. On the bright side, you may also have some people on staff that are not currently in sales positions that may be excellent sellers of cloud and IaaS solutions.

In the traditional transaction driven reseller business, compensation systems have always been major drivers of sales force performance. Due to the annuity nature (recurring revenue) of revenue in the cloud and SaaS businesses, compensation systems are necessarily different then they are in the on premise business.

Historically sales compensation has been based on gross profit generated, payable when the end user customer pays the bill.  Not so in the cloud business.  Channelcorp is beginning to see, and design, compensation systems that resemble the types of compensation systems historically found in the insurance business and the financial product sales businesses.

Beginning to appear in the lexicon of cloud/SaaS compensation are terms such as load (the percent of the compensation is paid on contract signing), charge backs (what amount of the commission is “clawed back” from your sales person if a contract is canceled), maintenance fees (the amount of compensation paid to a sales person after year one of the contract to reflect the value of account maintenance activities by the sales force) and flat commission (the fixed percentage of the contract value paid to the salesperson over the life of the contract).  The systems required to account and pay people on these new metrics are also beginning to emerge (cloud-based, of course).

What we are all beginning to learn is the cloud sales behavior drivers are different.  In addition, the type of people whose behavior is being driven is also different in the recurring revenue world.  The key sales questions facing your budding cloud business are very straightforward.  Will your existing sales force respond to a new way of being paid, and if not, who will be your new sales force?  Where will your new sales force come from and how much will they cost you?

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About Channelcorp

Margaret and Bruce Stuart founded Channelcorp in 1989.  The firm is a global leader in the assistance of reseller, distributor and vendor clients. Channelcorp specializes in the business model transformation that is required in the face of the structural changes to recurring revenue driven business models in the worldwide IT business (www.channelcorp.com/services.php).  Channelcorp publishes and sells four industry- leading books and 12 white papers (www.channelcorp.com/publications.php).  This independent firm has delivered consulting and executive education to vendor, reseller and distribution clients in more then 40 emerging, developing and mature markets around the world. (www.channelcorp.com/workshops.php).  More than 25,000 channel professionals from around the world subscribe to the newsletter Channelcorp intelligence (www.channelcorp.com/newsletter.php).