Roundtable: Overcoming commission conditioning

Roundtable: Overcoming commission conditioning

The benefits that an on-demand, subscription-based software model offers in terms of recurring revenue are clear. But transitioning across does represent a complete rethink of traditional quarterly targets and compensation for sales staff.

According to MailGuard’s Michael Bosnar, the majority of major partners out there are still fixated on selling the box, and then paying their sales guys a commission for that. So how does an organisation wanting to sell a monthly, per user fee offering, compete?

For MailGuard, a change to compensation structures to attract the resellers was necessary.

“I think the business gets it, but the sales guys don’t,” Bosnar said. “In the real world, you’ve got sales reps in channel partners being hit by vendors and pushing them to pump a deal through because they need it for their end of quarter. The other side says what about the services and annuity? And the sales guys say it’s too complex.”

Macquarie Hosting’s Stuart Mills pointed out that on any quarterly day, stock markets are in a frenzy about Microsoft and VMware results. “That’s driven all the way down to the BDMs. They can’t make fiduciary decisions about five-year terms,” he said. “So it’s a tricky thing for the vendors to switch and let the market know that they will lose hundreds of thousands for the next four quarters while they make this change.”

NewLease sales manager, Warren Nolan, said it was the guys at the coalface that didn’t get the true value of software-as-a-service selling.

“I can remember when I sat down with a senior account manager within a large vendor, who wanted to sell a particular product to a client in a particular way which was non-compliant. I said to them that apart from it being non-compliant, at the end of three years they’re not going to have to get a big ticket renewal, but there will be ongoing business. And he said ‘what, you reckon I’ll be here in three or four years? I want the ca-ching now’.”

In a bid to move away from commission-based selling to a more customer-focused approach, Brennan IT uses mostly consultants.

“We sell at the consultant level, because the consultant will be with them on that journey,” Brennan’s Chuong Mai-Viet said. “Those consultants care about having a job down the line and selling value to their clients. That’s why we have…a team of 60 or 70 consultants that all get commission, but also earn money from billable hours. And you have a model that can push SaaS like you wouldn’t believe.”

Intrapower’s Rich Robards said more work needed to be done teaching sales people about the long-term value of earning $1 per day, instead of $10 upfront.

“If we were mindful of the needs of our customers and resellers, do we give them the option? You can either take your dollar a day, or take the money upfront. But if you sit down with them and work out the equations, you can show them that it’s very fortuitous for them to take the $1 per day,” he said.

Microsoft also recognised the need to get sales staff thinking about the long-term, Phil Meyers said.

“Steve Ballmer [Microsoft CEO] recently reflected on his failures as a leader because he didn’t establish sufficient long-term thinking in the employee base. So he’s turning back our business and telling us we have to think longer-term,” he said. “The financial downturn has made everyone think about longer term, rather than shorter term, gains.”

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