Thursday, August 22, 2013

How to Sell to the CIO, Part 3: Closing the Deal


This post was published in the Wall Street Journal's CIO Journal.

After almost two decades of selling enterprise infrastructure to IT organizations, I have spent the last two years on the other side of the table as the CIO/CTO of CBS Interactive. This is part three of a three part series on how to sell to CIOs.

In part one, I provided tips for getting into an account and in part two I discussed how to navigate the sales process. Now it’s time to close the deal.

Timing

Deals are going to take as long as they take, and there is really not much a vendor can do to make all the stars align within a big enterprise. A sophisticated vendor understands that large enterprises have a lot of processes in place to close deals and an aversion to new vendors. There is generally no shortcut through legal, finance and other internal approvals.

When a vendor asks for deviations so that they can make a number or close the deal in Q4 as they promised the board, it makes them seem weak and engenders doubt. It leads everyone internally to ask, “Are they really so desperate that our $150K is a make or break for them?”

While there’s no way to tactfully ask for a deal to get expedited, a vendor should understand a company’s process and track that the deal is going well. We had a deal with VMware Inc. that slid for two quarters for various reasons. They were so patient and diligent that in the end, we took them out to dinner.

Pricing

Sometimes vendors agree to a price range at the beginning of a sales process and then change the price when it’s time to close. Agreeing to terms during contract iteration and then shifting parameters around and returning something completely different for each subsequent iteration makes a vendor look untrustworthy and unreliable. We once got very far along with a vendor, showed them how to pitch to our business units, had everyone lined up to switch to this vendor, and then they started playing tactics like this and we walked away.

When the reasons behind pricing are not clearly communicated, the vendor gets blamed. We once requested a tiered price instead of a flat fee for a deal to access segmentation information ad hoc. It was a reasonable request that the vendor accommodated, but unfortunately a rumor spread through our organization that we were paying by the impression to access our own data. The pricing was so customized that we had a hard time getting buy-in. As word of the pricing debacle spread, it reflected poorly on the company. So if the pricing model is customized in order to close the deal, be sure that it is very clear why this is the case and that the information is disseminated widely.

Deals always seem to get hung up on indemnification. While everyone seems to know where a deal will end up, it often takes weeks of back-and-forth between legal and a couple of ultimatums to close. If I ever run a software company again, I will be sure to have two pricing tiers: greater indemnification at a higher price, less indemnification at a lower price. You pick, and we all save ourselves a big headache.

Reputation Matters

The biggest surprise I had upon running a large IT organization is the level of information sharing and collaboration between CIOs at different companies, particularly about vendors. Most CIOs and IT VPs are all very accessible, candid, and frank with each other about what products they are using, how the vendors are doing, and how they make internal decisions.

Vendors should be aware that their performance quickly makes the rounds, both in a particular vertical and across different verticals. This type of diligence accelerates as more players across finance and legal get involved in a deal. “I heard they completely screwed up at Company X” will kill a deal even if it is on the verge of signing. Vendors need to make sure that they have happy customers.

In addition, executives often transition between companies in a vertical such as media or finance. One of my biggest internal stakeholders for a video platform had a bad experience with a potential vendor at his previous company — a cable channel without a large video-streaming offering. The vendor CEO’s reasoned that the previous company was small, and that we would be treated a lot differently as a large customer. Wrong answer. A much better approach would have been to figure out exactly what went wrong at the previous account, remediate it, or at least offer a “lessons learned” on how they have improved service.

Reputation is also important globally. If a vendor does a global deal with a company but doesn’t provide good service to the satellite locations, the international offices will go out and find their own vendor, causing a lot of thrash throughout the company. A global deal is not done until it’s delivered well internationally.

Account Management

Once a deal looks like it is about to be signed, there is typically a hand off to account management. A lot of vendors fail at this step. Salespeople need to be incented to ensure that there is a clean handoff. Vendors would also be wise to ensure a single account management point of contact, especially for larger organizations. Handing us an organizational chart with different contacts for professional services, technical issues, and billing makes us feel like we are not getting what we paid for.

And finally, a note of caution about growing organically within an organization: Although it can look like a vendor has traction because they are used in multiple departments, they can still be replaced. For example, in the cloud file-sharing segment, we were running Dropbox Inc., Box Inc., Google Inc.’s Google Drive, and others. When it became clear that we needed one official cloud storage vendor, our corporate IT folks took all the vendors through a rigorous process and picked a single vendor. Soon after, the other vendors were blocked at the firewall level. To stay relevant, a vendor should stay ahead of the customer with new features, provide excellent service, and be proactive if there is downtime or failures.

Sell to Yourself

The best thing a vendor can do is have staff who are domain experts at what they are selling and also staff who have worked in a decision-making capacity within enterprise IT. Sometimes that’s not possible, so I’ve shared my experiences to give vendors the inside look on how enterprise IT makes purchasing decisions and how to optimize time for everyone involved. A clear, straightforward pitch, a salient case for how your product will help the customer, and a good deal of patience go a long way when it comes to selling to the CIO.