With each passing year, software sales representatives are doing less and less of the work required to close a deal. It was not long ago when software sales reps played a critical role in all aspects of a deal. The sales rep generated the leads, demonstrated the product, explained the value proposition, developed the formal proposal, negotiated the pricing and debated the contract terms. After the deal was closed, the sales rep continued to maintain the relationship with the customer handling renewals, upsells and cross-sells as well as support issues and past-due receivables
In the modern software sales organization, however, the account executive doesn’t do any of those activities. Instead, there are specialized teams to help the sales representatives at each step of the lifecycle. And these dedicated teams do almost everything short of collecting the commission for the sale.
The prospecting, cold calling and social selling activities required to book a lead are rarely the responsibility of a sales representative these days. At most software companies there is a specialized team responsible for scheduling appointments. These teams have various names – Lead Development Representatives, Business Development Representatives or Account Development Representatives. However, they all perform a similar function – to offload the cold calling and lead generation functions from the sales team.
Historically, solution consultants handled all the technical aspects of the sales process, but they are increasingly expected to be the experts on the functional aspects of the product as well. In the modern sales organization, not only does the sales rep deliver the demo, but they also deliver the “meaty” parts of the presentation that explains the features and functions of the software. Throughout the deal cycle, solution consultants work closely with the account as the product experts to match the customer’s business and technical needs to the best combination of products.
At many software companies, the sales representative is no longer expected to explain complex value propositions or show the financial payback from an investment. These functions are offloaded to a specialized Value Engineering team. Tasks such as ROI or TCO analysis, business process analysis and benchmark comparisons are performed by specialized consultants on the value engineering team.
Responding to sales proposals used to be one of the key functions of a sales representative back in the 1980s and 1990s. But today, it is rare for the sales rep to even read the proposal response for the deals they are working on. RFP work is offloaded to the sales engineers or, at larger companies, a dedicated proposal or Bid Management team. As RFPs get longer and longer, more and more time is required to research answers to hundreds of complex, sometimes customer-specific questions. And it is the RFP team, not the sales rep, that is burdened with pursuing this painful information scavenger hunt.
One of the biggest challenges in any sales process is overcoming any weaknesses your company has relative to the customer’s requirements. Weaknesses might be product feature gaps, security concerns and technical compatibility with the customer’s other systems. In the modern sales organization, it is the solution consultant (not the rep) that must tackle these make-or-break issues for important deals. Solution consultants are the ones tasked with convincing the software engineering team to change the product roadmap. Solution consultants are the ones negotiating with the technical operations team to modify security policies. Solution consultants are the ones lobbying with the head of customer support team to add the foreign language support required to win the deal.
Price and Contract Negotiation
Discounting and price negotiation, once solely the domain of the sales representative, is now increasingly delegated to offloaded to specialized organizations. At many software companies, the “deal desk” in partnership with legal counsel handles the negotiation of pricing, statements of work, service level agreements, terms and conditions directly with the customer’s procurement organization. The sales rep often still carries the burden of seeking out discounts and concessions with senior management. However, the role is typically limited to managing exceptions and escalations.
Upsell and Cross-Sell
Most software companies have split their sales organizations into hunters and farmers. The hunters in sales are tasked with acquiring new customers while the farmers are responsible for retaining, renewing and growing the existing accounts. There are some exceptions to the rule. At most companies, the hunters are still tasked with working on deals that exceeding a certain dollar value. And hunters still work on complex deals that require a longer sales cycle or more extensive travel. However, the farmers own the majority of upsell and cross-sell opportunities, carrying a separate quota target and commission structure.
At most companies it is the farmers, not the hunters, that own renewals of existing accounts. Again, there are exceptions. Hunters may get involved in renewing top tier accounts which generate sizable amounts of revenue. Hunters might also own renewals for accounts with significant upside potential in terms of near-future deals. However, the farmers in a dedicated Customer Success or Account Management organization, own the quota target and revenue retention objections tied to renewals.
There is an old joke that software sales reps like to tell. “The sales representative’s job is to drive the car and pay for lunch.” It used to be funny, but now it is much closer to reality.
Collecting the Commission
One might expect that as sales representatives responsibility has lessened, the corresponding sales commissions has been lowered as well. But that is not the case. The sales representatives at most enterprise software companies have compensation packages with On-Target-Earnings targets of $300K. Top performers with accelerators and other commission multipliers might exceed $1M.
So why are software sales reps paid so much for doing so little? Is this a great social injustice or is there are a rationale for what appears to many outside of sales to be pure madness. In my next post, I will explain why sales leaders have moved to this modern structure. And how it benefits not just the sales organization, but the entire software company as a whole.