Automating Your Sales Performance Build or Buy?

Transcription

1 SalesManagement.org WHITE PAPER Automating Your Sales Performance Build or Buy? The Sales Performance Automation Company

2 INTRODUCTION Let s say you have a Customer Relationship Management System ( CRM ); it does many things well, but serves many masters across the business and is no longer optimized for your business needs, especially those of your sales professionals and sales managers. You know it should be able to do everything you require, including the integration of your sales performance program, and right now you are at the point of deciding between building your own solution or buying in a proven software solution to sit within your CRM. That way you can make sure you reap the benefits of investing in sales performance best practice and get your people doing the right things month after month. Does this sound familiar? The TAS Group use the term Sales Performance Automation ( SPA ). SPA is a salespersoncentric approach that increases revenue, improves sales forecasts and metrics, and continually reinforces best practices. ncreased revenue is delivered through an integrated sales methodology that is automated and constantly used during salespeople s daily activities. Improved forecasting can only be achieved when guesswork is replaced by objective in-depth analysis of sales team s actual, continual performance with reference to the detailed and specific knowledge of what it takes to close deals. Objective forecasting is not only more accurate, but is essential for managers to effectively coach and support their salespeople early in the cycle, when warning signs become evident. Integrated into a SPA approach is sales-learning that is focused on just-in-time, or contextual, knowledge and skill acquisition. Building your own SPA solution is naturally an attractive option, as you will be able to make it exactly the way you want it and it will be yours, forever. But what is the true total cost of ownership? What is the opportunity cost of doing this yourself and spending time and resources away from your core competence, the thing you do which makes you money? This White Paper poses the questions you need to answer and fully cost before you to take the plunge and built it yourself. The questions are then summarized in a handy table, where we estimate the costs based on a 50-user sales organization, and give you a probable range of investment required depending on your requirements. Because the seniority and experience of readers varies, this white paper aims to provide something for a broad range of requirements. If you want to dig depper or move wider, we encourage you to contact the authors. Page 2

3 PROJECT Sales Compensation GOALS Plan Policies Your build or buy decision depends, of course, on the nature of your sales performance automation project. You need to assess all the needs of the sales organization against the background of your company and what it will take to meet those needs. You should adopt a Drivers Initiatives CSFs approach to your analysis. First, what are your business drivers? Where are you feeling the pain? What are the pressures on your sales team and where do they need help to create and win more high value opportunities? If you were to ask your sales leaders what were the three greatest challenges to growth, what would they say? What is compelling you to improve the performance of your sales organization through automation, and what are the consequences of not achieving this? Second, what initiative or initiatives will you put in place to meet these drivers? This is essentially your project, but you must make sure it addresses the drivers you face as a business; otherwise you ll not get the required organizational buy-in and alignment. Third, what are the CSFs for this initiative? What has to be in place to achieve the results you outline? What does success look like? Be as specific as you can, so you can measure that success. Is it revenues? Average sales person quota uplift? Average increase in sales person use of the CRM system? Financial objectives for the initiative will enable you to set targets for the return on your build or buy initiative investment. The TAS Group can you help with this exercise, and we d be glad to guide you though the process of defining and designing your requirements and recommending the best approach for your organization Sometimes the nature of the project makes the choice for you. Do you need a solution involving a highly specialized business function for which no commercial software exists? Then you should build that solution in-house. But this is unlikely if you have invested in sales process and sales methodology licenses or Intellectual Property from a recognized vendor. Sales process is about your customer s buying process and it s a question of where you are in the process and what you need to do next to progress the opportunity. Sales methodology is about how you re doing in that opportunity relative to the competition, and involves you addressing and fixing a number of key issues which pertain to the opportunity and which will determine your chances of success. The TAS Group distinguishes between process and methodology, and you should consider doing this as well as you gauge your overall sales performance automation objectives. Page 3

4 In the next section, we go into some of the following factors in more detail, but you should evaluate them carefully for your initiative: What is the availability of in-house resources, including development staff? What is the anticipated complexity of the project? What are the needs of your sales people and managers? What is an acceptable time to market? What is your target deployment date? Can this date be met by developing in-house? Is your development staff large and skilled enough in the technology and standards to do this? Is this your core competency? COSTS When you sit down to figure out the total cost, including opportunity cost, of an initiative, there are a lot of categories of cost to consider. We have split these into development costs, integration costs, true Total Cost of Ownership ( TCO ) costs, maintenance costs, time to market costs, training costs and finally sales management costs. Development Cost Development is complex and time-consuming, two factors which have a tendency to hurt financially. In general terms the completion or success rate of internal development projects is poor, and you can t afford to emerge from such a project without a viable product. You should budget for product management and specification, technical specification, software development and testing, and licensing of third-party code and tools. If you want to put the sales process and methodology IP into your software, the chances are your current licenses with your sales training provider do not allow this, so you should expect to extend your license from your sales performance provider. When you buy a 3rd party solution, you simultaneously buy into the historical sum of all development and customer input into that product, and you benefit from the wisdom of the crowds. All of the costs listed above are factored into a buy solution, but you can run far beyond your estimates if there are any delays during the build process or overconfidence during its planning. A bought solution like Dealmaker from The TAS Group has been developed by subject matter experts over 4 years and through hundreds of wide ranging projects across different sectors, geographies and market conditions. This has helped us to constantly refine and improve with the feedback and experiences of the whole user community. This knowledge alone is difficult to put a price tag on as this might be the first time your IT department has built a system like this. Some further questions you need address, which may seem not to carry overt cost implications, might be: Page 4

5 Does your IT team have the time and ability to take on a project of this size and complexity? How much time will it take for the sales team to learn the methodology and to understand form the sales team what they require Is your IT team motivated to make the highest quality product and is their reputation with the sales teams as high as that of a professional specialist? Is this your IT team s core strength and focus? Integration Cost Integrating a performance automation solution into your existing CRM systems can be a difficult challenge, especially if your CRM system has undergone a fair amount of customization. Integration projects with your corporate systems can also be subject to a fairly rigorous and lengthy schedule, as you should expect with mission-critical systems. You should budget for a pilot or sandbox arrangement prior to a rollout across the organization. Consider also the developer or outsourcing overhead, API integration and test system integration expenses. Integrating a solution yourself can be a tricky process, especially if the CRM is not part of your core competency. If the CRM vendor or consultant is employed to develop an interface between the two systems they must first understand the new application before building the required integration points. As part of the integration project a strategy must be put in place to maintain and update the integration points as either tool is upgraded or modified in the future. The TAS Group has many years of experience integrating its Dealmaker solution into the world s favorite CRM systems. It also has a solution which operates standalone, for those companies who have no CRM system or do not wish to integrate. The standalone option can also be a useful stepping stone to a fully fledged solution or a transition vehicle between CRM systems. Integration costs with a bought solution are clear, bound by Terms and Conditions and generally affordable, though of course they depend on the vendor or the 3rd party integrator being used. True Total Cost of Ownership Costs The true total cost of owning a solution can often be underestimated by companies looking to save on licensing fees and build their own solution. Unseen, these costs adds up quickly and can seriously dent your net margins. First you should cost out the likely impact on your network. To a degree this depends on your preference for how you deploy technology, whether it is on your premises, or hosted via your own data center. Cost headings to factor into your total price tag for a built in solution include: hosting or on premise costs, professional services fees, hardware purchase, storage costs, and data security provisions. Second, you should analyze the cost of putting your people on end user support for your solution and technical support for the solution itself. This is likely to be measured as a function of fractions or multiples of Full Time Equivalent (or FTE ) staff. Third, you should take a similar Page 5

6 approach to charging individuals to make sure your solution stays compliant with legal and regulatory provisions around data security in line with corporate governance and safe harbor agreements. Less easy to qualify are the opportunity costs associated with doing something which is not core to your business. You may have to postpone or cancel a project which is core to your customer development or retention. In addition there are hidden costs and challenges that come with managing a complex system. It is highly likely that your costs are higher than those of a specialist provider who can bring to bear expertise and economies of scale. It is often better to take the complexity out of your network and outsource this to specialists. Maintenance Costs Maintaining systems and software is no easy task. Added to this are the inevitable enhancements and new functionality requests that have to be logged, processed prioritized, specified, developed, tested, deployed and managed. These costs are almost always underestimated and compounded by business growth and the need to keep software current year after year. How will you ensure that the software is kept current and remains a priority among all the other maintenance projects vying for your internal department s resources? Will your IT resource maintain a well engineered, robust code base that has longevity or do quick-fix software hacks and patch as they go, sacrificing a costly medium to long term for the short term? Furthermore, depending on the size of your development team, the risk always exists that a lead developer of the system might leave your business, taking with them the key knowledge required to maintain or update the system. Time to Market Costs Any business project assessment involving Net Present Value or Internal Rate of Return will involve calculating the Time Value of Money. The same should be true for TCO. Time is money and every day spent waiting for a solution to become live, whether it is bought in and or built in-house, represents money down the drain. If you have invested in sales performance initiatives that are not being reinforced by automating technology, then a day wasted is a day s loss of increased revenues. The average sales performance initiative that is properly reinforced results in a revenue uplift of 17%, so add 17% to your revenues and divide by 240 working days a year to get the opportunity cost per day of delay. Sales VPs expect to see an immediate improvement in their sales performance. In many cases, you re only as good as your last quarter, and if you have a sales initiative going you want this quarter to be good, not wait until the next. With a bought-in solution like Dealmaker, waiting time should be minimal, allowing you to capitalize as soon as possible. In-house solutions can take months to build, integrate, and launch culminating in months of lost revenue that could have been won had the solution be in place earlier. As you can see from the table that concludes this White Paper, the cost of delay to your top line revenues represents the biggest cost, and it stays hidden if you don t acknowledge it and attempt to qualify it. Page 6

7 You should also consider the potential difference in the solution s efficacy. Will an in-house solution built by IT teams used to working on a range of projects be more effective? You need to stay focused on the objectives, which should include the productivity and sales success of your selling organization. Training Costs Take a moment and consider how many people in your organization you will be responsible to train for an in-house solution. There are development heads, user support staff, product management, and salespeople and sales operations. With respect to people in the sales teams, it should not be a one-time event, but an on-going process of training and reinforcement. The Dealmaker solution from The TAS Group has sales methodology application and reinforcement workshop webinars built into the license fee, And what about monitoring adoption of the new systems by your sales people? The Dealmaker solution is geared to fostering adoption while and provides reporting tools for managers to monitor adoption, with no additional form-filling by their teams. In other words, the system does all the work. Adoption is key, and in our customers experience, the more the salespeople adopt sales performance best practices, the better they sell, and the more opportunities they win. Sales Management Costs Sales Managers are at their most productive when they are focused on proactive coaching of their sales teams, since this has the biggest impact on revenue growth. They are less productive when they are chasing figures and reports. If you decide to build your own sales performance automation solution, you need to consider the cost of managers being diverted from their chief role. They will have an active interest in the home-grown solution, and will need to contribute to the business requirements and design. They will also want to keep an eye on progress and may well unwittingly delay the project with additional requests, resulting project or scope creep. All this diverts them from coaching your coaching teams to win. PROJECT BUILD OR BUY COSTS SUMMARY TABLE Before you begin any sales performance automation project, it s critical that you and your organization are clear on the objectives, outcomes, and timing of the project. With that information in hand, you can then more accurately plan and assess the pros and cons of building versus buying a solution to meet those objectives. The tables below are designed to help you better frame your project, and ask the questions you need to address and estimate to arrive at a realistic build or buy comparison. We have attempted to this for you based on a typical 50 user sales organization doing $50m revenues per year, but you will want to do this as accurately as you can for your own organization. Page 7

8 Project Goals What are your Business Drivers, Initiatives and CSFs for the project? What are your objectives? What are your time-to-market requirements? Questions to Ask Buy Build Development Costs Product management and specification N/A $5,000 (1 month s work) Technical Specification N/A $5,000 (1 month s work) Project management N/A $5,000 (1 month s work) Development N/A $48,000 (4 developers for 3 months) Testing N/A $8,000 (2 testers for 1 month) Licensing of third party code and tools N/A $0 $10,000 Licensing of sales methodology and process IP from sales performance vendor Included $20,000 (50 users at $400 per annum Integration costs Developer or outsourcing overhead N/A $0 $25,000 API integration N/A $0 $10,000 Test system integration N/A $0 $8,000 True total cost of ownership, including: Hosting/on premise costs Included $20,000 Professional Services Priced as required $0 $50,000 Hardware Included $9,000 Storage Included $5,000 Data security Included $12,000 End user support Included $20,000 (half an FTE support person) Regulatory compliance Included $5,000 (1 month s work per year) Page 8

9 Maintenance costs Bug fixing Included $4,000 (1 developer month) Enhancement request management Included $2,500 (1/2 product Development of new functionality Included $8,000 (2 developer months per year) Time to market costs Implementation timeline c. 6 Weeks c. 4 Months Lost revenue due to delay of solution availability to sales Lost or gained revenue due to difference in solution effectiveness None (Assume the buy option is the fastest you can reasonably implement a sales performance solution) None $1,600,000 (Assume opportunity cost of 10 weeks lost performance improvement of average 17% on $50m annual revenues. 10 weeks is the difference between the buy go date and a very ambitious build go date ). Assume solution equally effective as bought in solution Training costs IT development staff N/A $2,000 User support staff N/A $2,000 Product management N/A $2,000 Sales Included $2,000 Sales Management costs Management time spent building and guiding requirements N/A 40,000 (2 managers for 2 months) TOTAL YEAR 1 COST (TCO) $50 - $100,000 $1,824,500 - $1,927,500 BUILD OR BUY DELTA ($1,724,500 1,877,500) * Costs are based on an organization with 50 sales users, annual revenues of $50m. All costs are Year 1 costs. Page 9

10 CONCLUSION When it comes to automating your sales performance, the temptation to keep it close and build your own bespoke solution must be great. You must, however, make sure that you uncover answers to all the questions raised by a decision to build, and put estimates against these answers to arrive at the true cost of the DIY approach. When you do this, you will find that the cost of waiting for the solution to be built, coupled with the ongoing cost of running the solution yourself, far outweighs the cost of moving to a bought solution. The TAS Group is pleased to discuss your specific needs further, and explore our sales methodology...please contact The TAS Group at marketing@thetasgroup.com. Page 10

11 ABOUT Sales Compensation THE TAS GROUP Plan Policies The TAS Group is a Sales Performance Automation company that helps you sell smarter, and manage your business better. Our industry-leading TAS methodology has helped more than 750,000 sales professionals find and close more deals, and our proven sales process shows you what you need to do to move opportunities through the pipeline. The result is increased revenue, accurate sales forecast and pipelines, and timely information to make better decisions. It all gets delivered through our on-demand Dealmaker technology that integrates with your existing CRM system to produce sustained, measurable results. And to ensure that your sales teams get the full benefit, Dealmaker virtual learning delivers on-the-job training worldwide reinforced by expert coaching. Dealmaker solves these problems: We have a revenue problem. Is your pipeline weak? Do you find yourself saying, I don t have enough deals in the pipeline, and I m not sure about the quality of what I do have? Or maybe it s We re losing too many deals, or Our sales cycle is too long. Companies like Xerox, Bluecoat and Kodak use proven sales methodologies and process from The TAS Group to improve pipeline quality and size, increase win rates, and shorten sales cycles. And with Dealmaker reinforcing and measuring best practices across the sales team every day, you get a revenue boost that lasts and actually improves over time. I need to improve the effectiveness of my sales team - consistently. Are all of your sales people working on the right deals? Are they customer-focused and can they identify and build relationships with the real buyer? Our proven TAS sales methodologies solve those problems, and show your team how to gain control of the sale and build an opportunity plan to win. TAS workshops are supplemented by Dealmaker virtual learning for preworkshop knowledge transfer, and post-workshop reinforcement. This eliminates the average 87% drop in retention typical within 30 days of learning in traditional classroom sales training. Post-training, our Dealmaker Sales Performance Automation platform integrates with your CRM system so that the sales person applies what they learned where they need it on every deal. Forecasting is time-consuming and isn t accurate. Sales people spend on average 2.5 hours per week on sales forecasting and in most cases deals do not close as forecasted. The sales process science in our Dealmaker software takes the guesswork out of forecasting by removing sales people s subjectivity and guides them to truly understand when a deal will close. Accurate sales forecasts result because of Dealmaker s objective in-depth analysis of the team s actual performance and knowledge of what it takes to close deals based on your business. Learn more about the TAS Group at thetasgroup.com. Contact the Tas Group by at marketing@thetasgroup.com Page 11