February 8, 2018

New Sales Hurdles, New Sales Opportunities: The Path to Club May Be a Little Less Steep This Year

Your technology sale to a Fortune 1000 customer has been on the forecast for several quarters. The solution is expected to be an on-premises perpetual license (capital budget), including maintenance and professional services (usually operating budget items).

The opportunity has been moving steadily through your sales forecast internally from lead to qualified lead toward close. It has also been making its way through the customer’s approval processes.

You’ve forecasted the deal to close, and the end user has budgeted a reasonable amount in the current year’s capital budget to make the acquisition. Enough budget to get you to Club.  Hello Cancun!

What could go wrong?

Your customer informs you that their corporate strategy team has mandated an accelerated ”move to the cloud.” Now, instead of an on-premises perpetual license, the solution needs to be hosted. Can you prepare a hosted or cloud proposal for their CIO to review? How does this impact your sale?

You may well find your customer’s budget dollars are a stumbling block. The customer’s original capital budget allocation probably won’t work—most cloud solutions are largely paid for from operating budgets.  Here are some questions you might ask to bring the deal home:

  1. Can the customer simply re-allocate budget dollars? Your customer can leverage the operating budget set aside for the maintenance and PS (traditionally operating budget costs) on the original deal to procure at least part of the hosted solution. You may end up selling a one-year license instead of multi-year, but you are in reasonable shape for an order. The big questions are: do you and your customer break out the license vs. the maintenance and support on the cloud order?  And is the order going to be large enough to get you to the beach where you can be drinking margaritas?
  2. Can the customer use capital budget to acquire the hosted solution? There are instances where cloud solutions hosted on dedicated servers may be capitalized.  It’s rare, but not unheard of.
  3. Are there other ways you might close the deal? Usage-based solutions might be a possibility. What if your customer signed a hosted usage-based contract with fixed minimum commitments, capitalizing one (or more) years of the fixed commitment, and then used operating budget dollars to pay for the variable usage over those minimum commitments? It’s been done successfully. New accounting rules are forcing customers to capitalize more and more of their fixed commitments regardless of deal structure.

With new accounting rules and new licensing and delivery options, you may find your sales more complicated than before, but you have a new set of tools to overcome customer objections. The sales playing field has never provided more opportunity—the beach in Cancun might be crowded this year!