Is the Technology Sales Cycle Getting Longer?
With recent macroeconomic reports downplaying a recession, enterprises might be ready to open their wallets as 2023 comes to a close.
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Rise Technology Advisors co-founder Eric Ludwig (pictured) said he has seen delays in customer purchasing decisions. However, he has seen strong correlation to sentiments about the economy. Specifically, he notices a connection between reports by financial analysts and the trailing 30-90 days of sales.
But despite much publicized concerns about inflation and interest rates, the latest round of reports provide optimism, Ludwig said.
“Clients are delaying or increasing budget decisions in parallel to broader economic data. We’ve seen recent adjustments in the probability of recession. Goldman Sachs recently reduced the probability of recession from 20% to 15%, and employment remains high,” Ludwig told Channel Futures.
And Ludwig said IT decision makers are taking note.
“Many clients during this more recent cycle have begun to move forward with projects delayed in the year prior or even in the beginning of the year. The key to these decisions regardless of economic data currently is a targeted return on investment and/or short/medium term cost reduction,” he said.
According to a sales study conducted by the authors of the JOLT Effect, indecision stalls between 40% and 60% of an average rep’s sales.
CXponent CEO Joe Rice (pictured) said the indecisive customer may completely understand all the benefits of the product the partner is trying to sell. Rather, they’re stuck on how to navigate their own procurement environment, and the risks associated with pushing for a particular product.
“It’s not fear of missing out. It’s fear of messing up. It’s risk avoidance. And it’s not just risk avoidance in the actual project. Contact center has huge upside but also a really low downside if you screw it up,” Rice said. “If I’m going to burn political capital and get people on my side for this, I have to have validation that this is right for me.”
Prachi Nema (pictured), Omdia‘s principal analyst for unified communication and collaboration, pointed to another reason in addition to economic uncertainty that is causing purchasing delays: Businesses are still mulling their overall hybrid work strategies. (Omdia is a sister site of Channel Futures.)
The world moved en masse to remote work in 2020, with COVID-19 accelerating the move. Some companies have kept that model, while others have fully reverted. Others are going hybrid, but that word contains a world of different possibilities in terms of both policy and tech stack.
“This lack of clarity regarding the future work environment makes organizations reluctant to commit to specific equipment solutions for their meeting rooms,” said Nema, who noted that the video conferencing equipment industry is experiencing extended sales cycles. She said conferencing vendors, as well as audio/visual systems integrators and distributors, have reported delays.
Partners and analysts tell Channel Futures that customers often look to reduce the number of vendors and products that they use.
That comes after a rush of pandemic-related tech purchasing had the unintended consequence of creating vendor sprawl.
“There was a lot of buying that happened out of necessity. So now it’s about platform consolidation rather than best-of-breed tools,” C3 Technology Advisors global consultant Andrew Klos said. “How can we get the most value from the players that we have? And if these aren’t the right players, who should we be looking at from a platform perspective to be able to derive the value that we expect? This is especially true with respect to cybersecurity.”
Research firm Omdia earlier this year conducted its IT Enterprise Insights study. Nema said only 10% of enterprises are using a single UC&C platform.
10%.
On the other hand, 90% of them are using between two and 10 different solutions.
And for many companies, the mandate is to get that number down. The vendors are similarly branding themselves as providing a single, comprehensive platform, Nema said.
But she said the single-platform approach comes with advantage and challenges.
“In the case of large enterprises, the adoption of a one-platform strategy is a gradual process due to the presence of multiple purchasing centers and their distinct demands when it comes to features, usefulness, ease of use and also how the technology is procured. Committing to a single platform necessitates the cooperation of various stakeholders, including IT, HR, facilities management and top-level executives,” Nema said.
As a result, businesses don’t just need to pick the right technology. They must determine how they’ll deploy it across their whole organization, Nema said.
“Given these obstacles, enterprises are taking a lot of time to commit anything in haste. This is one of the reasons the sales cycles have been prolonged,” she said.
And as businesses evaluate their hybrid work strategies, generative AI has entered the conversation in a big way. While contact center software featured conversational AI before the rise of Chat GPT, the latter is creating questions for UCaaS and CCaaS customers.
Will their large language model integrate within their UCaaS/CCaaS systems? How will it access and store data, and how will that be done securely?
ATC managing partner David Goodwin said those questions, paired with economic uncertainty, have contributed to a lengthened sales cycle.
“I think everybody’s … trying to wrap their arms around that,” Goodwin told Channel Futures. “People are thinking, ‘Well, if I make a decision, I don’t want to do it in a box or in a silo and miss out on those opportunities.’”
Keith Hatley (pictured), partner at Inc. 5000-recognized Cloud Communications Group (CCG), said he hasn’t seen significant changes to the sales cycle.
But he said partners may define the sales cycle differently. Hatley, for example, is currently working on a engagement that has lasted for two years. They are nearing the point where they define and sign a statement of work Hatley said.
“Some folks that will tell you they’ve been in a sales process for two years. But in my book that’s not accurate,” Hatley said. “For me I’m spending two years trying to build a relationship. Trying to find a need where they really do require somebody like me to come in and help them solve the problem.”
The statement of work plays an important role of keeping partners and customers in sync, Hatley said.
“If we’ve got this SoW and the associated project plan done, it allows me to have those accountability conversations with the client: Here’s what we said; here’s what we’re going to do. So if we need to move the goalposts, let’s have that conversation. Because I’m not doing my job if I’m not making sure that I’m working here with you to make sure that we get the deadlines that we agreed to,” he said.
Kairos Data Communications chief revenue officer Lucas Salvage said he also has not seen disruption to the sales cycle. That goes for both midmarket and enterprise clients.
“I’ve possibly seen [fewer] technology changes being made as of late, but when a decision is made between us and a client, I think we’re still seeing the ink relatively quickly,” Salvage.
These customers are businesses that Kairos has established a relationship with rather than trying to break into for the first time, he said
He said he tends to frame the sales cycle more around a client’s ongoing overall engagement to Kairos, rather than how close they are to signing a particular deal.
“I know some think of a sales cycle as an ‘identified opportunity’ to ‘quote’ to ‘contract negotiation’ to ‘contract execution,’ but I feel more energized and try to measure our sales team around how strong the relationship is,” Salvage told Channel Futures. “The stronger the relationship, the shorter the above type of sales cycle lasts in my opinion, and while a large project may take a bit of time, there should be so many other smaller items falling from the sky with enterprise and midmarket companies that it should help fill those gaps between large projects.”
For example, Kairos is currently engaging with a customer on a sizeable UCaaS project. Although the sales process lasted four to six months before nearing a close, Salvage said the client has been running business through Kairos in the meantime.
“In that time, we’ve sold them $15,000-$20,000 of connectivity, started talking about their security posture, and moved their Microsoft 365 and Azure ($50,000-plus spend) under Kairos as well. So I’m not judging the cycle of the UCaaS project. I’m judging the sales cycle of them as a client,” Salvage said.
Ronnell Richards, author of the book, “Shut the Hell Up and Sell,” considers the lengthening sales cycle a good example of Newton’s Third Law: For every action, there is an equal and opposite reaction.
The first action? An explosion of UCaaS orders that propelled channel partners in the last three years.
“We are coming out of a time of tremdendous abundance in the technology sales world. People were buying from the standpoint of need, which made for very short sales cycles and very transactional business. So many in our world were selling and selling very easily,” Richards told Channel Futures.
And that ease of transactional business led to two things: bloating and bad habits.
The bloating occurred when businesses rushed to buy the tech they needed to make remote work possible. That led to the need for the already discussed platform consolidation.
“Buyers are needing more value to be built. Because of the gluttony in the previous environment, they’re bloated. As a technology sales person, you need to build more value and more impact for your product to get it sold,” Richards said.
But in order to create value, partners need to shake off bad habits from the pandemic that incentivized them to do transactional selling, Richards (pictured) said.
“They were taking shortcuts. They weren’t really investing in relationships. And now they’re suffering for it and applying transactional sales tactics to a solution-based sales environment,” he said.
What should partners who want to start selling into the enterprise keep in mind?
Hatley said they’ll first they’ll need time to work these deals. And part and parcel to have the necessary time to establish the necessary cashflow.
“Depending upon where in the life cycle you are in your business will determine in large part whether or not you can go attack the enterprise,” he said.
They also need to consider the full landscape of the customer’s purchasing trajectory. For example, Hatley said multiple agents were speaking to a customer that CCG was engaging with. And as partners are looking to grab their own “piece of the pie,” it’s easy to focus on the smaller pieces that won’t provide full value to the customer in the long-term. While the client may very well need short-term technology solution – such as a new UCaaS solution to replace a failing one – Hatley said his team wants to look beyond that.
“We might recommend you renew several of your contracts for the next 12 months, because we’re playing the long game,” he said. “… And oftentimes what we’re selling to a CIO is, ‘Let’s tap the brakes until we have a solid understanding as to what the three- to five-year road map is going to look like. Let’s not make decisions today that can cause problems 12-24 months from now.’”
Partners selling to enterprises and the upper midmarket note that they’re working with multiple people and lines of business on the customer side. And often those groups bring different requirements and goals to the table.
“There is no decision maker when you get upmarket,” Ludwig said.
Rice said he frames his goal as being a “translator of IT” rather than a “seller of IT.”
In a similar vein, B2B sales research Brent Adamson used the phrase “buyer enablement” at an Intelisys event earlier this year. According to Adamson, enterprise customers tend not to understand the flow chart of their own buying journey. And that’s due in part to the fact that they aren’t regularly navigating that process, Adamson said.
“They’ve never bought this stuff before, or they haven’t bought it in a long time. You guys sell this every single day,” he said. “You have it in your power to make your customers feel more confident in their ability to navigate their organization by just teaching them what that looks like.”
Partners selling to enterprises and the upper midmarket note that they’re working with multiple people and lines of business on the customer side. And often those groups bring different requirements and goals to the table.
“There is no decision maker when you get upmarket,” Ludwig said.
Rice said he frames his goal as being a “translator of IT” rather than a “seller of IT.”
In a similar vein, B2B sales research Brent Adamson used the phrase “buyer enablement” at an Intelisys event earlier this year. According to Adamson, enterprise customers tend not to understand the flow chart of their own buying journey. And that’s due in part to the fact that they aren’t regularly navigating that process, Adamson said.
“They’ve never bought this stuff before, or they haven’t bought it in a long time. You guys sell this every single day,” he said. “You have it in your power to make your customers feel more confident in their ability to navigate their organization by just teaching them what that looks like.”
Many channel partners have seen the technology sales cycle lengthen in 2023 due to a confluence of macroeconomic concerns, “bloated” vendor stacks and questions about hybrid work.
Building a technology advisor (agent) practice has always been a patience game. Partners spend years building up their base of recurring revenue from residual commissions. They receive those commissions after the suppliers they sourced have installed the technology and billed the customer. In the meantime, partners engage in ongoing, often multi-month engagements with customers to determine their needs and find the right technology solutions for them.
And for many of those partners, those engagements have been taking more time in 2023.
ATC chief technology officer Nick Enger oversees the technology advisor’s consultant and support teams. For the Ohio-based company, sales has always functioned cyclically, with December usually generating the most deals and and implementations of those projects taking place in the first half of the next year.
Technology Sales Cycle: Reasons for Lengthening
ATC’s Nick Enger
But Enger said the technology sales cycle has taken longer in 2023 compared to previous years in terms of new customers. While existing customers have proven a steady source of ongoing deals, Enger said new logo sales are 10-15% lower year-over-year in 2023. And that’s not for lack of interest. The pipeline is as wide as it has ever been, ATC managing partner David Goodwin told Channel Futures. But it has been stretching out.
Enger, who participates in a peer group with other established technology advisor leaders, said his peers are reporting a similar slowness in customers for the first half of 2023. And an obvious culprit was the concern IT purchasers felt about the macroeconomy.
“The first half of the year was plagued with uncertainty surrounding interest rates and inflation that seemed to leave clients paralyzed from making decisions,” Enger told Channel Futures.
However, partners tell Channel Futures that they see the technology sales cycle moving faster. ATC has recently closed multiple large deals in quick succession, and Enger said the company expects to hit its target for 2023 monthly recurring commission sales.
“We have since seen those budgets loosen, and decisions are starting to get made,” he said.
Avant’s Alex Danyluk
Alex Danyluk, chief strategy officer at tech services distributor Avant, sees aggregate sales data from the technology advisors that work with Avant. His assessment lines up with Enger’s — while economic uncertainty did cause a slowdown, the sales cycle is speeding up.
“We’re seeing the pipeline clearing. Now, that means the sales cycles were longer because they kicked the tires back at the end of last year. But I’m bullish on the future based on what we’re seeing on the trendline,” Danyluk told Channel Futures.
CXponent CEO Joe Rice engages with businesses about contact center projects, among other technologies. He’s also seen a lengthened technology sales cycle this year. And budgets didn’t play into that delay.
“We haven’t anyone say, ‘We have no money to spend here.’ I think there are external pressures to be more efficient. But I’m pretty optimistic,” Rice told Channel Futures.
CXponent’s Joe Rice
Rice and other channel partners shared what they’re seeing in their pipelines. Not all of the partners we interviewed agreed about the state of the sales cycle. Some say it has remained the same year-over-year. Others noted that they define and measure the technology sales cycle differently.
To read everyone’s observations and learn some best practices on attacking enterprise sales, scroll through the 13 images above.
Want to contact the author directly about this story? Have ideas for a follow-up article? Email James Anderson or connect with him on LinkedIn. |
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