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Monday, October 04, 2010

3 Oct OCC Meetup Roundup

We had the October 2010 meetup of the Chennai OCC. Tony Aug, VP IT of Sanmina had come down to attend the meet. Once of the big problems startups often have is understanding how large enterprises make decisions. This is really important in the context of B2B enterprise sales. So it was really good to have Tony come down and talk about the executive perspective when purchasing software.

Some points from the meetup -
  • The #1 reason for purchase in a recessionary environment right now is to cut costs. If you can show substantial cost reductions, then that is a big win.
  • Many cloud/SaaS startups dont understand the security and privacy needs of enterprises. Eg: A company like Sanmina with operations in 20 countries need to run only on certified infrastructure that comply to EU security and privacy regulations, HIPAA, and a host of other regulations. Startups right now cannot guarantee all this
  • Pricing: $10/user a month sounds reasonable, but multiply it by 50,000 users and it becomes huge. So you will need to find a way to get it into the team on one pricing model and then switch to another pricing model (possibly a flat price) when rolling out to the whole organization
  • Dont forget about switching costs. Once an organization has spent tons of money on training and integration, it is unlikely that they will switch over, even to a superior product, unless there is a really easy path for them to do so
  • Subscription pricing is great because it allows organizations to get started without expensive capital expenditure. The old model was to buy expensive servers, install expensive software, training, integration and then you could look to get RoI. The new model is to subscribe and cancel if it doesn't work out
  • You can expect a small team to pay by credit card, but larger orders will need a purchase order and go via the purchasing department. Once that happens a lot of other stakeholders will look at it and question the need for the purchase. So you will have to answer to these other stakeholders too.
  • Lock-in is important in a subscription service. Most companies will want to be sure that they can get their data out at any time
  • Sanmina is a huge believer in open source - cuts costs and there is a community to help. For mission critical systems they pay for commercial support
  • Escrow: Larger companies will usually ask startups that the source code be put in escrow. In case the startup closes down, the company gets access to the source.
  • Using tools like Linkedin, it is really easy nowadays to find a path to get to a decision maker in any company

1 comment:

dorai said...

Some ideas from the conversation, not directly related to it:

1. It may be a good idea to find an entry point into enterprises through channels like Salesforce.com or Sharepoint through product extensions and components.

2. Anything that saves an enterprise money is a good bet. What Tony mentioned is confirmed by a survey of Society of Information Management (as covered in this article http://bit.ly/9PMZVG ). To quote:

"an expectation for technology to be a strategic cost-cutting and simultaneous revenue-producing investment"