It was an early morning in November 2011, in chilly Reston, Virginia.
Bill stepped into my office proudly displaying a large Oracle logo on the side of his fleece jacket.
“Please take a seat, Bill. Mahmood, our VP of IT Operations, will join shortly.”
I had started my Chief Information Officer position at LightSquared, a multi-billion dollar telco startup, a few months before.
“So my predecessor bought 17 Oracle apps. Our logs show that only 8 of them are used. We’re going to cancel the other 9. Can you please reduce our Annual Maintenance Fee accordingly?”
Bill looked surprised for a few seconds, then recovered and stated defyingly:
“Your fee is going to go up.”
Mahmood stepped in:
“You must have misunderstood. We’re reducing from 17 to 8 apps.”
“Yes, your price is going to go up. You had a bundle deal. If we unbundle, you will go back to list price for each of the 8 apps, and your fee will go up.”
Mahmood and I looked at each other. Oracle’s reps were incentivized to stuff as many apps as possible down their prospects throats.
The “back to list price if unbundled” was in the fine print. Hence Bill had no incentive to renegotiate; we had to continue paying for 2 more years for 9 apps sitting on our shelves.
We were fucked, Larry Ellison-style.
(Photo credit: fakesteve.net)
How things have changed in 7 years.
Apps are now in the cloud, with zero deployment cost. They come pre-integrated and ready to be assembled like Legos.
Customers call the tune as vendors play musical chairs – more than two thirds of the business of Marketing Automation vendors come from customers switching from one to the other, as opposed to greenfield deployments.
Businesses have access to online reviews, recommendations from their social networks and free trials before committing to a vendor. “Buyer is in the driver seat” returns 23 million results in Google search.
What should we, software vendors, do? Find new ways to stay in our position of power or go along with the buyer-in-power world?
As The Clash used to sing,
If I go, there will be trouble,
And if I stay it will be double
Game theory advises against staying in the old way of doing business. In the old world of asymmetrical information and high switching cost, non-cooperative strategies between sellers and buyers were dominant.
In other words, screwing your prospect was a good idea. This gave the Sales profession a bad name and Alec Baldwin one of his best movie roles.
In the new world, opaque vendors will experience churn, bad reviews and declining stock prices.
Candid vendors with weak offerings will die even faster. But candid vendors with strong products will thrive like never before – see how Slack became the fastest growing SaaS Business ever.
The rules have changed, the game has changed. The Sales tech stack needs to change.
This is why we started Chili Piper, and why we’re so excited to lead a new movement that we call Buyer Enablement. It’s about taking transparency to the next level and do everything to make the Buyer’s life easier. The decisions will be clearer and faster, everybody will win.
Our first milestone in this journey is our Concierge solution, which lets inbound prospects engage with vendors on their own terms. Check it out!