SFE Study_Observations in Cloud Services Models_July2016
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right © 2016 by The Segal Group, Inc. All rights reserved. OBSERVATIONS ON STAFFING, JOB ROLES AND COMPENSATION FOR CLOUD SERVICE MODELS A study conducted by Sibson Consulting June 2016
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Transcript of SFE Study_Observations in Cloud Services Models_July2016
Copyright © 2016 by The Segal Group, Inc. All rights reserved.
OBSERVATIONS ON STAFFING, JOB ROLES AND COMPENSATION FOR CLOUD SERVICE MODELSA study conducted by Sibson ConsultingJune 2016
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with company names excluded for confidentiality
from Sibson’s Semi-Annual High Tech
and Software Sales Compensation Forums
Results are based in aggregate
Study ObjectivesTo identify key observations that organizations struggle with when transitioning from a non-cloud (“CAPX”) world to a cloud services (“OPEX”) world. The study probes recurring revenue challenges, flexible consumption and usage buying and selling process, and compensation planning.
Study Parameters
Study Details
The study was sent to
50 participants
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When analyzing the study results, participants felt that the largest transitional point of a cloud services selling model was with staffing related issues.
To sell cloud services effectively and efficiently the majority of respondents felt that different salespeople are needed to get the most impact.
Organizations stated: There is a decrease in the qualified sales candidate pool (19% of respondents) that can
effectively sell cloud services compared to non-cloud services Many organizations (19%) experienced an increase in turnover of sales people when the
transition was made Companies felt (12.5%) that their organizations
needed additional sales people to meet the additional sales requirements
Observation 1: Different salespeople are needed for cloud services selling
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Observation 2: Competencies differ for reps selling cloud based services versus non-cloud services
88% of respondents
agree that the job roles competency
is different
The majority of companies felt that job role competencies differ for sales reps focused on renewal sales versus acquisition sales.
The general reasons why participants felt that job roles/competencies are different:
Sales representatives that focus on acquiring new business have different skill sets then representatives trying to retain business
Acquisition sales are more product centric and focus on driving penetration of products
Renewal skills focus on retaining business, upselling, decreasing discounts and problem solving
Renewal sales representatives utilize customer skills, like acquisition representatives, but employ a more systematic selling process
Acquisition representatives are considered hunters while renewal representatives are considered farmers
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The majority of companies struggle with Compensation Plans, Sales Processes, and Organizational Design Issues.
75% said Compensation Plans· i.e., paying for committed versus uncommitted revenue
56% said Sales Processes· i.e., moving from a hunter/acquisition process to a recurring
revenue account management type of process
31% said Organizational Design Issues· i.e., services reporting relationship, centralization
versus decentralization and deployment of resources
Despite the challenges of the transformation, the majority of participants say that once they get it right, the model better aligns with customer needs and creates higher satisfaction and churn reduction
Observation 3: There are three key areas where companies struggle
Organizations willing to overcome obstacles to design cloud service models may see more satisfied customers.
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The majority of companies equalize compensation payments in a cloud services world. 52% of participants say that renewal sales are equalized in comparison to penetration sales
and hunting sales i.e., a rep gets paid the same dollar for all revenue
35.3% of participants say that renewal sales are paid at a lower rate
Other participants pay renewals on SPIFFs
Observation 4: Most companies try to keep the reps compensation protected when they transition from non-cloud to cloud
Whether or not a company equalizes payment, pays more, or pays less for renewals, acquisitions, or penetration sales, all revenues are paid consistently across the global organization.
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When it comes to crediting revenue, 63% of organizations fully credit and pay a rep for committed revenue.
Observation 5: Committed revenue is still king
Crediting Committed and Uncommitted Revenue*
Other
Partial credit for committed revenue
Full crediting for uncommitted revenue
Full crediting for committed revenue
50%
25%
6%
63%
Other responses include:· Multi-year time ACV· Consumption mechanics· Paid based on bookings· Paid based on billing event· No credit given where clause applies
* Participants could select all that apply.
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In many cases, the specialization occurs when cloud sales are renewed. 44% have Account Managers managing their renewal opportunities 22% use Renewals Teams to manage the opportunities and renew contracts
Many organizations wonder how renewal roles are incentivized:
Observation 6: When transitioning to cloud, organizations create specialized jobs and payments
Compensation Elements Used to Incentivize Renewal Roles*
Other
Dollar amount of sale
Year over year growth factor achieved
Percent or dollar amount of new incremental revenue
Percent of historical revenue renewed
29%
29%
18%
47%
29%
Other responses include:· Renewal money as hurdle, payment on new· Discount reduction· Annual billing· Churn target· Use hard threshold to drive minimum performance
* Participants could select all that apply.
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While sales representatives are most commonly incentivized by percent or dollar amount of new incremental revenue, customers are best incentivized to renew when offered discounts.
Observation 7: In a cloud services world, companies incent the customers to renew their contracts
Other responses include:· Access to latest versions
Compensation Elements Used To Incentivize Customers*
Other
Bundles
Specialized billing
Discounts
No incentives
18%
35%
12%
59%
29%
* Participants could select all that apply.
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1. Different salespeople are needed for cloud services selling
2. Competencies differ for reps selling cloud based services versus non-cloud services
3. There are three key areas where companies struggle
4. Most companies try to keep the reps compensation protected when they transition from non-cloud to cloud
5. Committed revenue is still king
6. When transitioning to cloud, organizations create specialized jobs and payments
7. In a cloud services world, companies incent the customers to renew their contracts
Summary of Observations
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For more information, please contact:
2018 Powers Ferry Road, Suite 850 Atlanta, GA 30339T 770.403.8006www.sibson.com
333 West 34th StreetNew York, NY 10001-2402T 212.251.5268www.sibson.com
Megan [email protected]
1100 Crescent Green Dr., #103Cary, NC 27518T 919.233.6654www.sibson.com
Taylor [email protected]
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