We interviewed Pete Tyrrell, VP of Sales for 170 Systems, a provider of software products and services that streamline the business processes of ERP systems such as Oracle E-Business Suite. Read on to see why he thinks that “To build an enterprise software product with the expectation that someone else is always going to sell it for you is naïve, especially if you are selling deals worth half a million dollars or more.”
Todd Rose: As VP of Sales, how do you position 170 Systems to potential customers?
Pete Tyrrell: We sell business process automation software that enables companies to drive tremendous cost out of their operations by streamlining processes. We couple document imaging with workflow integration into an ERP system that allows clients to take things that are paper-based, and therefore manual, and automate or optimize those processes online.
What drew you to 170 Systems in the first place?
170 Systems represents a unique situation for me relative to other private “start-up” companies. It has been around for 12 years, but was completely bootstrapped for the first 11. It had an established customer base when I came on board: well-known names like JP Morgan, Marsh McLennan, CitiGroup, AT&T, and BT. Moreover, the company solves a unique problem with a quantifiable return on investment.
What had to be in place for you to consider joining the company?
Given the economy today and the fundraising climate, there had to be a complete product. That was an absolute must. Moreover, there had to be a large market opportunity and a product that provides a quantifiable return on investment. Every investment that a company makes today is being scrutinized. And while we may be competing against other products in our market space, we are ultimately competing against every other purchase that that company is trying to make. So, the relative prioritization of my purchase and the urgency associated with it is going to drive me to success or failure. Therefore, quantifiable ROI was imperative.
What does it take to be the first sales guy in an organization, and how is that skill set different from being the VP in an established sales organization?
The first sales guy has to be a salesman with supreme initiative and supreme confidence to help offset what is inevitably a not-fully-baked product. He or she has to set the tone or vision of an opportunity to get those first beta customers: the people willing to take a chance and help co-develop or sponsor the company for those first deals. Scaling an established sales team, on the other hand, requires the ability to attract talent, to develop talent, and motivate that talent to sell your particular products.
Some say that the direct sales model is dead in the current environment, especially for a lot of enterprise software vendors. Is this true?
No. VARs need validation. It is very rare that a reseller is going to pick up a product without proof points, without references, or without developed marketing tools and marketing support. Their margins are not that great in a reselling environment. To build an enterprise software product with the expectation that someone else is always going to sell it for you is naïve, especially if you are selling deals worth half a million dollars or more. That is going to require direct attention, proof points, a lot of care to ensure scalability, a repeatable sales process, the proper sales support tools, etc. Once those things have been established, channels are the next logical step to increase margins and get greater scale and coverage, but the software company remains responsible for generating demand.
Is a direct sales model, then, an imperative for a start up to get off the ground? Or is there some sort of formula where companies can go directly to OEMs or system integrators?
There is no easy formula, and it depends on the specific market and its current stage of development. In the case of the CAD/CAM marketplace, small resellers typically satisfy the low end of the market, while high-priced solutions are sold direct. This channel structure evolved over time, as the market became educated about CAD/CAM capabilities. When SolidWorks came on the scene with a low-end tool, the market dictated that they sell exclusively through resellers. SolidWorks ultimately had a tremendous impact with a reseller-dominated strategy.
How do you use founders as a strategic weapon in sales?
It depends on the founder’s knowledge, capability, and willingness. They usually have a ton of passion for their product, their “baby”. Usually the founder is one of the largest shareholders so he has a vested interest in extending the reach of the product both from a technology standpoint and from a revenue standpoint. So it would be ignorant of me to say that I haven’t utilized the founder at every start up I have been at in some capacity to help close deals or advance a campaign.
In your opinion, is there an optimal interaction between sales and engineering in the product development process? Should one or the other take the lead in prioritizing product enhancements?
I think that typically there is an inflection point in every organization. Early on, the technical founders drive the core of the product in a certain direction. Gradually, enhancements and further applications gain focus from feedback in the marketplace. Ultimately, as the business continues to grow and prosper, customers end up driving product direction via the sales force.
As VP of Sales, do you sign off on the prioritizations in the product development pipeline?
I don’t sign off, but I’m involved in the discussion of priorities. We take into account the long term base of the product and past commitments that we need to keep and balance those with new initiatives to drive new revenue growth opportunities.
How do you deal with channel conflict?
First and foremost, your sales reps should never be competing against your channels. If they are, you’ve got two people in the same spot generating more energy against each other than for the benefit of the customer. It’s always been my belief that a territory manager or regional account manager owns the territory. He’s responsible for all the revenue in that territory, direct and indirect. In many cases, the channels require assistance from the direct organization, whether it is sales support, technical support, materials, etc. There is always some type of touch.
The other type of conflict that you have is channels conflicting with channels. What can occur in that case is that the street value of your price is dramatically reduced. You avoid that by being consistent in your reseller agreements and being consistent in how you treat work with those resellers. You can’t play favored nations here.