If you are with a reseller, you’ve probably heard the dire warnings about the impact of “the cloud” on resellers. Among the warnings are:

  • Look out. Everything is moving to the cloud.
  • If your business is just selling products, your business is going away.
  • If you don’t have a cloud strategy, your business is going away.

Resellers are getting plenty of advice on how to transform their businesses to a recurring-revenue model. Here’s a recent sampling:

Last summer, I had breakfast with a friend; someone I have known for more than 20 years.  When we first met in the 90s, she was with one of the big systems companies, and I was manager of IT Procurement at State Street Bank. Now she is with one of that same systems company’s direct VARs.  For our breakfast, she arranged to have two people from a cloud-gateway company join us.  The company, apparently, had been pitching her current company on the benefits of reselling their gateway to the storage cloud, and she wanted my opinion regarding their technology.

As it turns out, nothing about the company’s technology really mattered. The technology could have been the greatest thing ever to hit the technology road, but she wasn’t going to sell it. What mattered was how she got paid. She had a sales number, and that number wasn’t based upon closing recurring-revenue opportunities. Selling a gateway plus a service was going to get her maybe 1/4 of what she would have gotten staying on her current path of telling customers that “the cloud is unproven and too risky.”

Cycle forward another nine months, and I just met with a local reseller. I was exploring opportunities for one of my clients that offers a software solution to a vexing problem of delivering affordable, highly-available applications in an environment that lacks on-site IT resources. After listening politely, this reseller told me, “Yours would be the last solution I would sell.” Again, it had nothing to do with the quality of the product, but rather, how he got paid. Turns out that he got better revenue and quota retirement for selling a service, than he did for selling a product. Management at this particular reseller was very focused on covering operating costs with recurring revenue streams.

This takes me, now, to a friend, who quotes this Bahamian saying:

Never mind the noise in the market.
Pay attention to the price of the fish.

The channel equivalent of this is:

Never mind the noise in the market.
Pay attention to how the sales reps get paid.


For the 3rd time this month, Mark Leslie was mentioned in a conversation or presentation. The most recent was at TiE Boston’s Annual VC Outlook Dinner. Actually, mentioned, is way too soft. He was cited, praised, quoted, and otherwise venerated. Mark has a remarkable story. He took VERITAS from 12 employees and $95,000 in annual revenue to over 6,000 employees and $1.5B in revenue, before the company merged with Symantec on July 5, 2005.

I first met Mark, when I hosted IDC’s StorageVision conference in San Jose in May 2000, a year in which we recruited Steve Luczo, then CEO, and now Chairman of Seagate, and Joe Tucci, then the newly appointed President and COO  of EMC.  Mark wasn’t the best dressed (that was Joe) or most poised (that was Steve), but he gave, by far, the best talk. The talk that was discussed three times this month wasn’t, however, his StorageVision speech. That honor goes to this talk: “It Always Takes Longer and Costs More.” On Page 15 of the presentation, Mark begins a discussion of the Sales Learn Curve (SLC), which is the sales equivalent of the Manufacturing Learning Curve (MLC). The SLC is critical, Mark argues, to knowing when to step on the gas with sales.

Almost every company I’ve talked to measures the cost of sales. But where organizations differ is in the costs that are included in the cost of sales. Mark includes:

  • Marketing
  • Product management
  • Product marketing
  • Product  support
  • Sales engineering
  • Sales

Some of these costs are more fixed than variable. Marketing, product management and product marketing don’t need to grow linearly with sales. Support, sales engineering, and sales costs are, however, more directly proportional to revenue.

Since more sales means that the fixed costs in the cost of sales calculation decline as a percent of sales, many startups are tempted to hit the gas early on deploying sales and sales engineering resources. But until they have gone through the iterative process of perfecting the sales process, this approach just burns cash.  Instead, he stresses the importance of  investing for learning in the early stages, making iterative improvements in the sales process. When the sales process is perfected, then, and only then, should a company put the “Pedal to the Metal,” making significant investments in sales and sales engineering.

The most provocative statement I heard at  The BD Event in Boston last week came from George Crump, when he said, “OEM agreements don’t work.  If a company wants the technology, they should man up and buy it.”  Mike Miracle and I chaired the Business Development Roundtable discussion where George made his comment, and I have to say, it sparked a lively debate.

Although I make my living largely by helping companies establish strategic partnerships, including OEM agreements, I thought it would be helpful to list some reasons why potential partners would say “No” to an OEM agreement. (more…)

I had a conversation with Megan at BzzAgent this week.  My interest was peaked, when a former IDC colleague, who now works at Iron Mountain Digital, mentioned BzzAgent. 

BzzAgent claims to have 400,000 “buzz agents,” who have agreed to review products and services and to share with their friends and colleagues their honest opinion.  BzzAgents get the products for free.  They test them.  And they create buzz.  The buzz could be good, or it could be bad, but it’s buzz.  I don’t know if Iron Mountain Digital uses BzzAgent, but I can see the fit, since, Iron Mountain offers desktop and server backup services to homes and businesses. 

At the $80,000 entry price that Megan mentioned, you’ll want to get a lot of buzz for the investment, and you’ll want to have enough confidence in your product to expect that most of the buzz will be good.   In the consumer products and services area, I see a great opportunity to leverage BzzAgent.  It’s hard to see the fit for the kinds of enterprise IT infrastructure providers with whom we are working. But, Megan suggested I check out their Frogpond offering, which I will do when I get a chance. 

In the meantime, after listening to the pitch from Megan, I decided to sign up myself.  I am now officially a BzzAgent.  I’ll let you know how it goes.  For now, I’ve just filled out a bunch of surveys about my drinking habits (softdrink and otherwise).  Fortunately, the fortunes of Coke and Pepsi don’t depend much on my soft-drink habits. If they did, the companies would be broke.

I did a couple of customer-satisfaction interviews today.  I won’t tell you the company or describe the product.  It’s not important to the discussion, but in case you are wondering, it’s not one of the companies or products I represent.  It is important to note that both individuals that I interviewed want the product and the company to succeed.

In the first survey, I got a lot of feedback.  Almost an hour’s worth.  There was some very positive feedback about certain components of the offering, but I heard many more negative comments, such as:

  • They are barely keeping up with free alternatives.
  • The leadership was great for a startup, but needs to step aside if they are to get to the next level.
  • They are not listening to their customers.
  • They treat everyone the same, and don’t listen to the different needs of different customers.
  • No one thinks their product or their service is adequate.
  • I have to go to a third party to fix the problems they aren’t addressing, and I know other customers who are doing the same thing.
  • I shouldn’t have to pay someone else to do the job that they should be doing. (more…)

When I was growing up, my family would occasionally take what we called “Penny Walks.”  We lived in western Colorado, where the towns were mostly laid out on a North-South, East-West grid.  A penny walk involved taking a walk, penny in hand, and every time you got to a corner, you flipped the coin. Heads you go right. Tails you go left.  You never knew where you were going to go, but you knew you weren’t going to get caught in a familiar routine.  With penny walks, you ran into different people or different things. You had variety. Penny walks don’t work as well in Massachusetts, where I live now, because the streets are laid out in the rough equivalent of a meandering cow.

My random walks these days are as likely to occur on the World Wide Web, as they are to occur in my town.  Did I mention we have almost no sidewalks? So here on the internet, thanks to a link from Jason Rakowski, I was lead on a random walk through his blog, to another blog by someone named Dejra to a service called Pingomatic.  The service helps writers/bloggers raise the visibility of their sites by updating search engines.  I’m trying it out today.  I’ll let you know how it goes. 

Given Dejra’s focus on affiliate marketing, I’m wondering if she knows my brother, Ken?

Dejra? Ken?

Don’t ever challenge my mother to a game of Jeopardy.  She answers every question correctly almost before you can get the question out.  You’ll leave the game having lost all confidence in your ability to remember highly-specific details or the picayune.  She’s pretty good at ping-pong (sorry, table tennis), too.  At least for an 81 year old. The people that Myndnet has recruited to answer questions for clients are a bit like my mother.  At least that’s my recent experience.  They seem to be able to answer anything.

StorMagic recently used Myndnet to identify IT directors at K-12 schools, at colleges, and universities. The question went live on February 15th and by Tuesday, four days later, they had fulfilled the 200 or so budgeted responses.  If you go to Myndnet, you’ll notice that the question is still up and you can still respond.  StorMagic has the right to reject leads that don’t fit the criteria, and StorMagic might want to acquire additional names, if the first ones work out well.  So why not keep it open for a few days? (more…)

OK, first the disclosures.  Tek-Tools is a client.  I’m telling you that, because you may think it’s important information, when you evaluate what I write next.

In the early years of a company, product development is often driven by influential sales managers.  Sales-driven development usually comes from a sales rep saying, “If we had this feature, I could win this deal.”  It is the polar opposite of what I have often advocated to sales execs, which is “Sell what you’ve got, and stay out of the development road map.”  I think sales should have a voice, but no vote.  Instead, I advocate market-driven development, which involves the assessment of market opportunities, product differentiation, and product gaps, rather than sales-driven development, which often leads to a confusing and sometimes conflicting web of development priorities. (more…)

A recent blog entry by Denise Shiffman on Viral Voice referenced an article in InsideCRM entitled The Facebook Marketing Toolbox.   I’ve only been using Facebook for a few months, so this article was a great find, with links to tons of resources and recommendations.  Thanks Denise.  This article is required reading for my new client, StorMagic, and my nephews who continue to grow their restaurant, Black and Brew, down in Lakeland, Florida.  Keeping getting the word out!  For all others, reading is optional, but highly recommended.

I had a call yesterday with a guy (I’ll call him Julio, because that isn’t his name) that is responsible for storage decisions at a very big company (I’ll call the company Acme, because that isn’t the company’s name).  I can’t name the company or the guy for reasons that are obvious to anyone who works in a large public company.   But I can share the gist of our conversation.  The part that is interesting to startups is the conversation we had around supplier management, environment complexity, and supplier support.

Julio’s at the end of a purchase decision cycle, and he told me which way he was going.  “We’re going with Sun, at least for now,” he said, “because they provide great service, we’ve worked with them for years, they understand our environment, and quite frankly, I don’t want to add another supplier.”  (more…)

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