Enterprise
yongfook.com
yongfook.com
In enterprise, the customer is the customer and pays for something. Contracts, SLAs are in play. Who is the customer for Facebook?
In enterprise, the purchasing decision is not made by the end-user. You choose to use Facebook or Dropbox. Some middle manager, sometimes a C-level one made the decision to use Sharepoint for you.
In enterprise, support is expected. 2nd level, 3rd level, something. No support means no contract.
In enterprise, country borders are real. You want to roll out in Spain? You need licenses that cover this, need to define support, need a way to roll out there (requirements, implementation, etc.) and very often you need localization. And, if applicable, you have local data security laws in play.
Essentially, in enterprise:
1., You need sales people. Highly paid sales people that bring in their networks. Your website is worth nothing. 80% of your success in enterprise is sales. Your product is simply not that important.
2., You need to know how to build "product" for your initial target group - the people making purchasing decisions. Which can be diametral to what the end users actually need. You need shiny demo features which do not ruin your product in live use.
3., You need configurability. Nobody, ever, in enterprise uses something out of the box. The beast with many names (Accenture, CapGemini, Deloitte, etc.) needs to be fed with the blood, sweat and tears of hapless victims caught in workshops and UATs. The iPad has disrupted this cycle so profoundly it is amazing to watch. No pure software solution has achieved this so far though.
Dirty little secret: A team of 5-8 top-people can implement and roll out any global system. Reality? Hundreds of various consultants running around creating nothing but confusion. But why does this irrationality exist? Because global companies hire their consultants to be middle managers or even be C-Level IT officers. The business model of the big consultancies is practically HIV - penetrate the customer, infect the host, lower the defenses, repeat. The various alumni orgs of those firms form strong bonds. Look into the LinkedIn history of a IT manager and you know which consultancy is being hired, no matter how bad projects turn out to be.
As stupid as it sounds - enterprise is for grown ups. Garage start ups created by college drop outs have a competitive disadvantage as it is not the product that counts, but the right, expensive sales people. Seniority, experience, personal networks are critical.
And there are thousands of such niches. Millions, really. They're all around, everywhere. Find any office, anywhere, in any business. You will find some repetitive-but-business-critical proces being performed by someone following a yellow photocopied guide taped to the wall above the fax machine.
but, scaling up is difficult.
start in the wrong country and you have a big barrier. you need to start in the US, no way around it. single biggest homogenic market (language, culture, legal). your 3 sales people can cover a lot of ground. start in France and great, once you have France where do you scale out to? Germany? The US? Your French sales people are likely worthless outside of France.
You see this pattern in enterprise companies. Way fewer in central Europe than there should be. Germany's SAP made it, Software AG follows. Cegedim in France. UK has advantage of US-ties. Eastern Europe? Kill yourself (outliers: Skype, Kasperksy). Qliktech started in Sweden and nearly died. Only after it was re-located to the US it kicked off.
It's easier to move into the US market from Australia, for example, than it would be from France. Common language, lots of shared history, ease of travel, all that stuff.
I'm working on a niche business tool at the moment and it's at the back of my mind that upon moving into the middle tier, I'll need to think about having someone in the USA simply to act as level 1 support.
That said, Patrick McKenzie of patio11 fame pointed out that he's using a virtual assistant service to fill that role. That might be my first port of call.
/sorta-kinda-maserati-problem
I guess it would be the same with support. The only job I've worked in a tech support role in, only had enterprise customers in Europe.
To sell to corporates you should find close friends among those decision makers.
Another point, is that usually each company have diferent processes, and it's quite difficult to make a one-size-fits-all (as in facebook/twitter/google). Intranets, and biz software usually need people to make custom modifications on each company. Usually the people in charge of this changes are not as competent as the ones who write mainstream software and you end with a lot of crap, which is almost impossible to stop due to the fact that there are very few good programmers around to make custom changes to every company in the world.
http://chester.id.au/2013/01/05/on-selling-to-consumers/
The point is that most of the money in the world is actually in the hands of businesses. They are using it to do whatever it is they are responsible for doing in the overall structure of production.
And most of the software they rely on is terrible. Or non-existent.
The reason, though, that everyone works on consumer applications it's easy to put yourself in the place of the customer (for a similar reason it seems that by law every dozenth web app firm is peddling some sort of issue tracker tool). Plus all our hero figures are consumer-facing.
you, like me, are in a non-US-sized market so I wonder if that has something to do with it.
perhaps like me you've been watching local, globally-facing B2C startups fail over the last couple of years when there's tons of enterprise problems to solve right at home.
In this very thread people are griping about the "difficulty" of selling to businesses. I don't know what to make of that.
When you sell to a business you still sell to a person, it's just that said person feels like they are paying with monopoly money. They have a psychological distance that a consumer just doesn't have.
I'm interested about your observation on the size of our domestic markets changing our thinking. Possibly. It would be interesting to see where the Chinese startup scene are focusing their efforts; they are already dealing with a USA-sized middle class and it will only get bigger.
Hence my "monopoly money" remark.
I think you have correctly reflected that a purchasing decision may have input from many different parties. But these people matter from a sales perspective only so far as they influence the decision of the person with the chequebook.
I think this is an excellent post on why startups should start exploring more B2B opportunities. However, do you think that since many startup founders are still relatively young with little working experience, they may not have experienced the state of enterprise software and the enterprise sales cycle?
Being based in Singapore too (let's meet up for kopi some day.. =) ), I feel that there is a lot of opportunity in exploring industries that are considered non-mainstream and traditional by B2C. For example, marine, logistics, healthcare, fashion, PR, construction, interior design, food & beverage..I built an MVP, showed it to a friend whose father's company pays 300k/yr for a 130-site license. It took me about 3 weeks. Even though it worked he told his son that he didn't think it was possible that I could build something in 8 weeks that could match the software he's paying ~28k/mo to license.
I built the MVP as an exercise in learning a language so I wasn't very attached to it. I dropped it and went to working on my current startup.
There's lots of opportunities out there in unsexy industries.
Care to elaborate on this? I'd be very curious to know.
It is possible that he didn't believe you could have done the software in such a short time because he knew from experience that the business was dominated by thousands of corner cases that would need to be addressed in order for the software to be viable.
If you had shown him, he might have been able to give you examples of these.
I think that sums up the enterprise space well. It's all bought by people who are not using it and want to be as hands off as possible. That is the core problem - you have to look good on paper (read: big feature list) to get attention. It's a space for heavily-bankrolled startups or people who are creatively repurposing existing software. Mostly the latter.
More and more business people are tech savvy enough to know what they want nowadays, they might get IT in to do some initial work (vendor screening etc), but any real business impacting decisions are made by the people who use/benefit directly from the software investment, unless of course you're selling IT management software to IT departments.
Embrace the sales team. You won't get far without them.
In my experience, small to medium sized business, experiencing growth, are a great place to start.
Typically they have started out using some sort of closed source industry standard product (Access, Hosted Webshops, eg.) and are now starting to bang their heads against the wall.
Usually the business owner is affected personally by these headaches, so is much more proactive on getting them solved. Also you can get into a nice research/development/feedback/training loop, directly with the handfull of users, who will be using your work.
The problem is: they will hate it no matter what. Realizing this is the most important step - IMHO - to understanding why enterprise software sucks so much, and nobody does a thing to fix it (or isn't able to).
When you build Facebook, your users are voluntary. If they hate it, they don't use it and you end up with only the ones which happen to like it.
When you build an accounting application for some corporation, your users must use it to perform their jobs. So... since most of your users would rather be doing something else - anything else - than using your application, you see why they have absolutely no good feelings towards your application, no matter how good it is, no matter what you do. At the very least, for the nicest of your users, it means work... it means no fun at all.
This is why all enterprise software sucks... People simply give up trying to build something nice because, in the end, it doesn't matter. Your users will never love your application, they won't even choose it.
Too negative? Well... just look at any given corporation and cry.
The company in the example could probably have had massive cost savings and greater efficiency by simply switching this system out for any one of the open source CMSs and hiring a few people experienced in developing on those platforms. Of course I appreciate that such things are not so easy in practice.
Common business requirements are often exactly the sorts of things that are economical to develop as open source. For example over my business career I have developed all kinds of mini frameworks , jquery plugins etc for businesses where these is really little reason (i.e competitive advantage to the company) for not making these things open source.
A big hurdle in selling to business is also "what happens if the three man team behind this product get hit by a bus, go bankrupt etc".
An active open source project or a product from a large vendor like Microsoft gives them peace of mind.
It was so bad that people who were working together would have one person check out the code, then create a temporary git repository over it, and everybody would branch off that. When they'd finished working, they'd merge all their changes together into one ginormous commit into the "main" SCC.
Actually dealing with merge conflicts and building the software was outsourced, so nobody cared that these enormous commits (usually made months after the initial checkout) took dozens of hours to resolve.
It was the most bizarre thing I've ever witnessed.
That VCS system sounds a lot like just plain CVS (though perhaps under a different name), I remember checkouts under CVS taking an age.
In enterprise B2B, nobody's going to give the time of the day to a startup whizzkid just because his solution is technologically better or faster or whatever, without connections and financial backing (stability).
Enterprise is more about who knows who. Painful sales cycles. Talking to loads of people across many business layers (while greasing the right pockets, dinners, gifts and whatnot).
Anonymous B2C is popular with startups for a reason.
They would want to change because "somewhat works" is exactly that--somewhat works. The software that I mentioned in the post above took 45 minutes to export a single site report. The reporting was so bad that they actually had accepted that they would need 6 full-time positions in accounting just to reconcile the reporting and make progress sheets for their 500+ investors.
They are desperate for an alternative solution but they are already dealing with the least-worst software available.
The scenario then is this: is it easier to achieve the massive scale needed to make a B2C startup profitable, or is it easier to spend time breaking down the iron curtain?
Seems to me the latter problem is solved with domain expertise, which you can hire. There is no silver-bullet to the former problem.
Your last point is valid but misses one point I was trying to make. The low-hanging fruit in the enterprise world is not solving problems that have already been solved shittily (like creating a competitor to LotusNotes, which is almost universally hated). I agree, that's a tough sell.
The low-hanging fruit is solving problems that haven't actually been solved yet. Sure, you need to spend time in middle or back office at a big company to see these problems but so what? Go out, get a job, discover problems.
You can't expect to dream up solutions out of thin air.
Don't believe me? Good. Treat them as hypotheses and test them. You will be astonished.
(Except for the last bit about why businesses buy; you're right there. The reason that big company decision-makers buy is not that the new product is "technically" better. They buy because they are convinced that the new product will deliver a better return on investment and also convinced that the decision will not blow in their face and get them fired.)
I guess I must have misunderstood, because this is not worthwhile advice :)
How would you test this? Yes, one way is to build B2B products without any input and then try to sell them. Many people try to do this. This is, as you pointed out, a really terrible approach.
A much better approach is just to hit the streets or the phones and talk to potential customers. Maybe you think they'll blow you off (and in my experience, yes, some of them will). But what I'm asking you to test experimentally is that 100% of them will blow you off. I have actually tried this, and the surprising result is that this is simply not the case.
But don't believe me. Try it for yourself.
Once you have people who will talk to you, then you can find out their problems. Once you know what their problems are, you can see if other people in that position have similar problems. Pick the most painful one of these problems, and, with your new industry insider friends to guide you, build an awesome product.
My big point here is that one should not simply accept limiting beliefs about what is and is not possible without actually putting them to the test. Do the uncomfortable thing. Grow.
Look at GitHub, who presumably have giant enterprise accounts by now. But they started by making something great for hackers. While enterprises might seem like cold places devoid of humanity, a lot of people inside the enterprise want to get stuff done as much as anyone else. They will pay out of their own pocket and claim the cost as an expense later. They will fight internally to adopt products, etc. And once an app is used by a team, if it's good, it has the potential to spread virally inside the company.
Other examples: Evernote (who just launched Evernote Business), Google Docs (the word processor came from Writely), Yammer, Atlassian's Confluence. I expect Trello is already used all over the enterprise and will be turning profits on that too.
Otherwise, just talk to people at parties. Everyone works with some horrible system.
People talk about the "information revolution" as if it's over. Look around at the amount of paper forms still being pushed around -- it's hardly even started.
Talk to people. Friends. Family. People who have jobs. Who can intro you to their managers. Ask questions. Listen listen listen. Spend your time out of the office, out on the streets, doing customer visits. Read and learn everything about an area you might want to solve. Succeed.
The best way to sell products is to sell your time to the company, assess it's problems, and then help to solve them with software you've written.
Per 9000 HN posts to this date, you don't want to be someone who writes software, you want to be someone who solves problems.
Customers want their problem solved in a specific way, they don't care about the OS or language of the month.
here's the larger version of that pic:
http://d3br966ilz90nq.cloudfront.net/assets/images/me.jpeg
the thing almost poking my eye is part of the plastic hoops that form the handle of the bag. and it's just the perspective - it's not particularly close to my eye :)
B2B is hard in a different sense. You need to be involved enough with an industry to learn the way it works and get to know people who you can contact to sell a better product. If you're just starting out, it's going to be very difficult to get medium sized companies to take you seriously. It becomes easier if you already know the decision making person.
But it's hard. And it ain't fun.
Some comments as a biz dev guy (and very ordinary coder):
1. Don't feel you need to hire a sales gun with a network. A sales person with an awesome attitude and belief in your product is quite sufficient. I sell to mid-market companies (100-500 employees), that is a pretty huge segment of the AU market and I expect is the same in many other countries. It's literally impossible to expect to hire salespeople who have great connections across such a broad space. The best you will find is they can line up a few "first meetings" in one vertical. Maybe good connections at 1 company, maybe 5, but realistically 15+? Forget it. Any salesperson who tells you differently is talking themselves up more than they should. The job is about cold calling, running events, lots of demo's and lots and lots of discovery, to find real solutions that work for rational business buyers who won't sign off on something until they see its benefits.
2. Have a look at some of the faster growing software firms. They are moving up to enterprise, but often started in SME and the mid market. Start in the middle rungs and you'll find a big hole - comments on some of these threads seems to suggest the decision is binary - either small SME's or large enterprises. The gap in the middle area is huge. You can also generally skip the complications big consultancies bring with them too, most customers budgets and corresponding demands are too small for them to get interested in.
3. B2B buyers care more about fixing their problem than the underlying technology. IT buyers always prefer to find a "platform", and take bite size chunks out of the real business problems in a phase 1,2,3,x over months/years. I know big companies using Mailchimp, because it was initially purchased with a credit card by a marketer. A good demo targeted to meet the customers needs (which you have explored previously) gets you much further than trying to build the perfect solution for IT (unless you are Oracle, SAP, salesforce etc).
4. If you're selling SaaS, it's not about a shiny demo with no product substance underneath. Perhaps if you're asking for $50 per month you can get away with it, but after a month or two you'll lose your renewal. If you're asking for $10k per month at least one person's job will be on the line internally, they will do their research to make sure there is substance to your claims. Same goes for $1k in a smaller business, it is all relative, especially in this post-GFC age.
One final comment. Sales people aren't expensive if you structure their plans right. Their bases should be low, their bonuses should be high. Make it so if they sell $1M they earn about $250k, you can get away with a sub 100k base.
Sales people are expensive if you pay high bases to unmotivated, un-passionate people who are just good talkers.
Knowing this, either make a call that you will build a successful business without salespeople (aka Mailchimp, Atlassian), or ensure your value proposition and price points are tested enough to support a full timer. Elastic which might work as a nice "middle" option as well (I'm not affiliated). https://elasticsales.com/
The worst thing about trying to sell to the Enterprise is that it's mind-bogglingly slow. The feedback cycle is not there. With a consumer app, you can start with a rough demo, A/B test it, roll out new features, and scrap ideas that the market rejects. You don't give a damn about reputation issues because whatever people say about your product will be buried in 3 months. If the market rejects what you are building, it will be merciful enough to do so immediately. Build something else.
When you deal with the Enterprise, expect prospective clients to take months to make up their minds. Half a year isn't atypical. Getting paid on time can be difficult, too. You also have to worry about bad-faith clients who'll use their social connections (to nominally "competing" firms) to black-ball you if they don't get what they want. In B2C, that's some idiot mouthing off on Twitter. Who gives a shit? At scale, there's no such thing as bad publicity. In B2B, it can be lights out.
I worked for an enterprise startup that failed. One of the most frustrating things was that, at the time, I could not evaluate whether the CEO was making the right decisions. I still can't. "The client needs <X>". Well, then <X> is what we do. I wasn't in the room with that client. When you build for consumers, there's enough consistency in aggregate humanity to get a sense of, if nothing else, whether you're doing a good job. With the Enterprise, the feedback is slow, opaque, and polluted by invisible political forces within the clients, so you never know for sure.
This leads into one other thing about the Enterprise. You will hate the word "requirement". It will make you want to throw chairs. Why? Because 90% of so-called requirements are nonsensical features that damage the project's conceptual integrity beyond repair. Ten percent are actually vital, by which I mean you aren't doing your job if you don't address them. Good luck figuring out which are which. Start here: http://steve-yegge.blogspot.com/2008/08/business-requirement...
I am not saying that the Enterprise is a bad place to be. Clients are probably less obnoxious, on the whole, than investors. The client needs you to solve a problem, while the investor sees you as a social inferior (a poor, a prole, a hustler with a hand out). However, I am going to say that the rapid feedback cycle that you might expect in an entrepreneurial environment is not going to be there. You can wait 6 months on a deal, only to have it fall through because of some external event that had nothing to do with you (such as your contact getting fired, moved, or promoted into a less hands-on role).
If you're going to sell to enterprise, be OK with 2 year sales cycles and ensure your salesperson is running lots of leads.