In the current economic climate, technology, and professional services are the foundation for every major business market’s revenue growth and success.
Technology is a constant element in business control, and productivity increases, from theme parks to funeral homes. This infiltration has led to a rise in sales of technology and professional services for aggressive and well-managed technology companies.
Revenue and market share of technology companies increase when business development is launched correctly. When it’s done incorrectly, IT companies can fail. Today, IT, software, and professional service companies are still missing their forecasted revenue, and many do not know why.
When you examine the current IT business operating cycle and methodology deployed, there are five reasons that high-tech firms continue to remain stuck on the downward curve of their revenue success cycle.
It is a failure of IT companies to use an outbound sales model.
In the 1990s, the sales teams of tech companies profited from the largest wave of technology purchases since the invention of the computer. Three almost simultaneous changes in technology models sparked this dramatic buying frenzy. The three elements were the release of Windows 95 in 1995 by Microsoft, the commercialization of the Internet, and the Y2K fears.
These three technology adaptation models had been in full force by the mid-1990s. In order to increase their revenue, IT teams began to focus less on the outbound model and more on their existing customers.
This misguided focus weakened the IT firm’s ability to sell outside and made them dependent on lead opportunities from within.
Sales training was reduced in the 1990s as firms invested heavily in training their developers in technology. IT sales skills were also diminished, with many IT companies deploying “half cycle” sales teams.
Technology buyers were able to adjust as the year 2000 progressed, and they gained a better understanding of Internet investment and performance and the lack of legacy issues. The prospect has moved away from an inbound technology buying perspective and is now looking to sell with their improved understanding of technology requirements.
The changing nature of our economy has made it necessary to use premeditated, outbound sales in order to be successful in the technology and professional service industries.
Most technology and professional sales teams today use “half-cycles” with excessive costs. They were trained in the 1990s and were not exposed to a sales model, which required them to actively pursue business to be successful with today’s economic model.
The continued use of highly-paid salespeople who do not seek new business undermines the financial base of IT firms. It unbalances their entire economic business models, which were based on predicted revenues. The sales team is hesitant to pursue new business on its own merits. Development and deployment departments suffer due to a lack of revenue support.
Continually Calculating Inaccurate Sales Predictions
IT sales quotas are still an imaginary world in an economy where Wall Street, investors, banks, and Wall Street control corporate communications for financial commitments. Fact and fiction don’t meet. A disproportionately large number of high-tech firms use ten different models.
The top ten methods used by IT companies to calculate technology sales quotas include:
1. The territory sales figures for last year.
2. Multiplier the cost of the salesperson (sales costs).
3. Cost of General Administrative (G & A) costs plus a gross profit margin.
4. Wall Street or Venture Capitalists have set revenue goals.
5. Divide the total of the department’s sales goals by the number of employees.
6. Success of the salesperson in the previous year.
7. A hypothetical compensation number sold to a salesperson as the potential income if they hit their 100% quota.
8. The IT trade press has reported that the technology growth rate is 12% this year. Quotas have also increased by 12%.
9. Experiences of the VP of Sales at other companies.
10. The top salesperson in a territory is rewarded with a percentage of their total sales.
In technology companies, these impractical methods of determining quotas are repeatedly used. Most often, sales quotas are created using the accounting department’s estimation of the cost of selling, along with the commitments made to Wall Street or investors. Sales reps are often the short-term losers as they struggle to meet their monthly targets.
Long-term losers will be the IT companies as well as the operating departments because budgets have been set based on a fabricated sales quota.
Are you able to recognize the technology or method of your professional services firm?
What are the implications of these measurements for the sales potential in a specific territory? These factors are based on outside influences and costs that have nothing to do with the potential sales of a technology product or service within a given region.
These methods are not accurate.
Most of the time, this impractical, unscientific, and arbitrary quota is just frustrating for everyone. Ops is unhappy because bench utilization is low. The sales department is blamed because they “haven’t hit their numbers.” Accounting is unhappy because A/R shrinks, and VCs get upset when their financial milestones have been missed.
There is still confusion about what the intellectual property of high-tech firms is
In the 1990s, the market value of IT firms mirrored the technology used in the workplace. Wall Street and venture investors continued to give exorbitant valuations to companies that had poor economic models and sales but good technology.
In the 1990s, technology was owned by high-tech firms.
This business paradigm, however, has changed. The cost of developing technology has dropped. In the current economy, IT companies are evaluated based on their forecasted revenue, target accounts penetration, and recent sales revenues. The costs of technology have decreased while the prices of selling have increased.
Sales distribution is today the intellectual property for high-tech firms. Finding, training, and retaining an effective sales team is the key to increasing a firm’s value.