Posted by Daniel Sullivan on Mon, Apr 15, 2013 @ 10:00 AM
John Care is currently Managing Director of Mastering Technical Sales, having spent numerous years building world-class Sales Engineering organizations at companies such as Oracle, Sybase, Vantive, Clarify, HP, Business Objects and most recently Vice President and Area Manager of Pre-Sales at CA. MasteringTechnicalSales.com
Several times a month I hear a sales or presales leader say something like “we need to move our sales engineers from being feature/function speeds-and-feeds oriented to being more business oriented – can you help us?”. The answer is often (but not always) yes – but it comes at a price.
Before I even look at the “how?” it is worth spending some time looking at the “why?” After all, as I often say in my classes – ‘It’s not a problem until the customer says it is a problem!” So what is driving this shift from the highly technically oriented SE to a technical-business balanced SE?
1. SE’s are expensive! The average fully burdened cost1of a field SE is now well over $200k in the US and approaching $250k in large enterprise companies. It’s a little lower in Western Europe, a touch lower still in Singapore and Hong Kong and smaller in India. Yet salaries in traditionally cheaper places like Bangalore are rising rapidly – the time of inexpensive presales labor is behind us. If you run a balanced team of 20 presales engineers with managers and a leader in the Americas, that is a $10-12m investment.
2. Obtaining an ROI on SE’s. Given that level of investment, companies need the SE team to be more than just the demo dollies and RFP hacks of old. Companies used to have Business Consultants, Solution Consultants and Technology Consultants who ranged across the spectrum. That model is no longer viable because of portfolio breadth or affordable because of headcount requirements.
1 Covers Salary, Commission, Overhead, Travel, Training and Benefits. Subtract 25-35% off the number for inside SE’s.
3. Your Customers Demand It! The #1 skill that mid to senior level executives want from the vendor presales team is someone who understands their business. Follow that with designing innovative solutions, communicating clearly and trust. Ranked at #5 on the list is deep technical knowledge–in poker terminology that is the table stakes required just to get in the door and play the game.
4. The Salespeople Need (And Ask For) Help! There are dozens of sales methodologies out there – and from an SE point of view, it doesn’t matter which one sales uses, as long as they actually use one. Sadly, other than complying with the minimum data entry requirements of salesforce.com, methodologies and process are abandoned at the first sign of trouble in favor of whatever sales feels is the right thing to do. This causes deals to fall out of the forecast, to disappear totally from view. Sales needs a counter-balance (most Sales VPs will admit this)
and a technical SE cannot do that. They can judge a technical fit, but not the feel of the business side.
There are a few other drivers, but those four are a good start. So now let’s move onto
the “and exactly how do we transition our SE’s?” section. Here are some ideas for
implementation based on many years of direct experience.
1. It’s A Journey, Not An Event. Holding a meeting to declare that everyone will now be more business-oriented, or even holding a 2-Day training class are just catalysts to get things started. You are looking at a 12-18 month process and need to set out milestones and targets for achievements. There is no magic wand.
2. You Will Take Casualties. Not everybody will make it. The classic split is 1/3 will easily adapt, 1/3 will adapt with effort and oversight, and the final 1/3 will resist, complain and ultimately fail. Yet all is not lost – one of the major parts of your plan is to determine exactly how many SE’s you need in which role in the future. Is this a plan for your SMB (Small Medium Business) or Partner SE’s? Depending upon what you sell and how you sell it, there is still a valued place for the Super-SE Technician. Someone has to conduct Trials and Evaluations and maybe even Implementations. Someone has to go toe-to-toe with your customer’s technicians.
3. Build A Profile. Building on the prior point, you probably need to revamp both your hiring profile and job descriptions for the SE team. As an individual, you need to think about what you should incorporate into your performance review cycle with your manager to assist you in “getting there”.
4. Build a Curriculum. The SE team have different skills, so get everyone to a standard base level, and then develop from there. You will probably need basic, advanced and applied level “courses” over the 12-18 months. These may be a mix of internal and external courses. Set the tone by dividing training into technical and professional skills. For example – when providing technical training for a new product or release, also incorporate the business and professional skills required to communicate the business benefits. I do have a sample curriculum I can supply if you email me.
5. Get First Line Sales Management BuyIn. Like anything else in the sales world, all internal change and cultural shifts live and die with the buy-in of first-line management. This also applies to presales managers and the senior / principal level SE’s as well. You cannot afford to have people holding you back and whispering negative thoughts in people’s heads. To refer back to poker terminology again – the SE team is going “all-in”.
6. Get Help (From Everywhere). Do not forget this! When looking to increase the financial acumen of the SE team, why not ask someone from the Finance department to spend a morning with the team? Look to do the same with our CMO and any other sources of tribal knowledge. You’ll have to translate some of this into SE-speak but it is a great start. Then approach your customers and ask them to help. You will be surprised. I learnt about Clinical Trial Systems, Financial Trading Systems and Telco Mobile Phone Turn-up from my customers when I ran a SE organization!
7. Remember The First Law Of Discovery.
“Every business problem comes down to a single number. Either that number is too small and needs to be larger, or is too large and needs to be made smaller.”
The art of being an amazing business-oriented presales engineer is finding out what that
number is, who cares about it the most, and how much it is worth to the customer to
change it. Then you need to demonstrate, in all senses of the word, why only your
company can do it.
In Summary
Like almost everything else in business, you need a plan to transition the SE team from highly technical to balanced technical-business. It won’t just happen, and requires an investment of time, money, people and a great deal of patience. Be prepared for casualties within the team, and make sure you publicize all the successes. But before you do anything else – learn from the basic principles of discovery, and ask “what exactly do you mean by more business-oriented?”
Article By John Care
http://masteringtechnicalsales.com/files/How_Much_Is_An_SE_Worth.pdf
http://masteringtechnicalsales.com/news.html
Posted by Daniel Sullivan on Mon, Mar 18, 2013 @ 02:54 PM
John Care is currently Managing Director of Mastering Technical Sales, having spent numerous years building world-class Sales Engineering organizations at companies such as Oracle, Sybase, Vantive, Clarify, HP, Business Objects and most recently Vice President and Area Manager of Pre-Sales at CA. MasteringTechnicalSales.com
“How Do I Justify Incremental SE Headcount?”
“What’s the ROI for an SE?”
“How Do I Calculate Presales Effectiveness?”
Have you ever heard one of those questions? Have you ever been put in the position of
having to justify your business impact (or that of an entire presales organization) to a
sales leader, sales operations, or to someone in finance or even HR?
It’s a topic I’ve wrestled with over the years, and with the help of Michael Lohr, Sean
Cullen and Jim Sargent from out there in the SE community we’ll look at the costs, the
benefits and a few ways to calculate the ROI of a presales engineer.
The Costs. So let’s look at the basic costs associated with an SE. These are all
approximations based on an average SE salary in the software business in the US. So your
mileage will vary depending upon location and industry – but the basic structure remains
the same.
Base Salary and Commissions $150,000 Average SE ; 5-7 years
Overhead/Burden $ 60,000 40% for Benefits and Overhead Expense
Training $ 14,000 External Training/Certifications etc
Travel $ 36,000 $3k/month
Approximate Overhead $250,000
So – figure that even a 40 person SE organization is going to cost you $10m if you get
them travelling. From a financial point of view, only 10-15% of that $10m budget is
variable – the rest is fixed no matter what happens to sales quota.
The Direct Benefits: The first obvious benefit is that the SE team drives a massive
proportion of new product revenue – where product is defined as what you are selling. If
your product is renewable in terms of being software, hardware or other goods that
require ongoing support – then there is an annual support or maintenance payment stream
as a result of the sale too. In most industries the sales force is credited for at least the
first year of such support. There may also, for example in the Telecommunications space,
be recurring annual revenues instead of an upfront-payment. Plus, your product may
require installation, setup, education or configuration services – which is also revenue
driven directly by the sale.
So, at least for a first approximation, you can count all this revenue as SE-driven
revenue. For accuracy you can factor out upgrades and increased customer use due to
natural growth and expansion (i.e “more seats”). This applies only to the current solution
set. For example if you are selling medical supplies/pharmaceuticals and a new indication
is approved which causes additional sales – someone still has to “push” that.
The Indirect Benefits: There are a number of these softer benefits so I’ll focus on
three common examples.
1. Post-implementation visits. A typical presales organization spends 5-8% of its time in
post-sales activity fixing something that is broken – either in support or services. Happy
customers buy more products and this is an area we can influence outside of the
traditional role. You can also include planned post-implementation visits such as
performing a "health check" with the goal of making some recommendations to improve
the product usage as well as explore other opportunities in accounts. This is very hard to
measure because these visits are not always attributed to another sale but I'm certain
they contribute to these deals.
2. Enhancement requests. In general, SEs are the foot soldiers who know what customers
want and where they want to go. Product Managers would be very blind to the market
without the SEs input. Hiring one more SE does not necessarily increase this feedback
but this information cannot be underestimated.
3. Collateral. As the typical organization of last resort – if a piece of collateral, training
or general infrastructure is required then presales will usually create the content when
no-one else does. This also extends to covering marketing events, partner training, trade
shows and so on.
The Extreme ROI. Having looked at the SE-driven revenue, it’s important to understand
that sales is primarily driven and rewarded for generating revenue. Just as it’s easy to
say that if there were no SE organization then revenue would plummet, the same could be
said for sales. An extreme and simple ROI would be – using our 40 person SE organization
and an overall sales quota of $100m. (So even though most SE’s do not have a personal
quota, for the purpose of the calculations Quota = (100m/40 = 2.5m per SE)
Quota 2,500,000
------- = ROI ----------- = 1,000%
Salary 250,000
Clearly not a credible calculation for many reasons.
Alternate Views. There are now two approaches to the ROI calculation. The first is the
overall ROI on the entire pre-sales organization. I personally find this is almost
impossible to calculate and is not a feasible business number anyway – what is more
important is the ROI of the next SE hired. So let’s look at that instead.
The New Hire. The annual costs for a new hire using our same example are still around
$250,000. Training and travel costs may be lower, balanced by a possible internal
referral fee, cost of laptop and other equipment etc. In terms of potential quota
contribution, industry guidelines are:
Years in Organization Qutota Contribution
1 40% (1,000,000)
2-4 100% (2,500,000)
5+ 120% (3,000,000)
This takes the conservative approach that the first six months are pure ramp-up time
spent in training and ride-alongs with other SE team members. The second six months the
SE is placed in lower-value and lower-risk situations – typically smaller deals, RFPs, trade
shows etc. thus freeing the more experienced members of the team to focus even more
of their time on the high-value revenue targets.
Given the typical ramp-up time for an SE, there is also a case to be made for building
bench strength for each of your major solution sets. Under no circumstances should
activity in a vital geography or product line be single-threaded because there is only one
SE who can cover the opportunities. Sometimes hiring needs to occur prior to a projected
increase in activity, regardless of current ROI.
An Introduction to ROPE “Return On Presales Effort”. The other assumption in the
calculations that will follow is that a new-hire is placed in the optimum position to benefit
the company. One way to assure this is by using an analysis of activity against revenue –
hence the ROPE acronym. In essence you are checking that (a) sufficient demand (and
pipeline) exists for an incremental head and (b) sufficient revenue is associated with that
demand. ROPE examines revenue, utilization, time and win-rate broken down by
geography, product line and activity. For example – by geography:
Geography Revenue(m) Heads Rev/hc Utilization (%) Win-Rate
North 15 8 1.88 82 36
South 18 6 3.00 66 42
East 24 8 3.00 65 42
West 22 9 2.44 58 44
Strategic 12 4 3.00 54 53
Federal/Gov 20 5 4.00 74 56
There is a lot of analysis and definitions of terms that we’ll skip over here, as you need to
examine all three dimensions (and that’s one of the things I consult upon), but looking
through the data it seems the Federal/Government group is producing the most revenue
per SE, has the highest win-rate and is heavily utilized. It is the logical place to add a
head as there is both demand to satisfy and revenue to gain. The criteria for each
parameter are highly dependent on each individual company, but in general the higher
numbers win.
When dealing with sales you can also factor in the size of pipeline. Usually 3.5 to 4x quota
in a pipeline is considered healthy enough to justify additional SE-power. Assuming the
pipeline is large enough then none of the other geographies satisfy the ROPE criteria.
There are two options – either hire a new SE directly into Federal or transfer from the
North or West into Federal and then backfill.
New Hire Direct Into Federal --4.00m x 40% = incremental revenue of 1.60m
Transfer North to Federal and backfill -- (4.00-1.88) = incremental 2.12m. Plus 1.88m x 40% = 0.75m -- Total incremental revenue of 2.87m
Based on this data you could incur the additional $250k cost of a new SE and recoup
anywhere from $1.6 to $2.87 million in return – both a payback in way less than a quarter.
It’s important to realize that these calculations are based on the marginal rates of
adding a small number of heads. Adding ten new SE’s to Federal wouldn’t return ten times
these results. That said, what financial controller could turn down these numbers?
Article By John Care
http://masteringtechnicalsales.com/files/How_Much_Is_An_SE_Worth.pdf
http://masteringtechnicalsales.com/news.html
Posted by Daniel Sullivan on Tue, Nov 22, 2011 @ 02:13 PM
In another encouraging sign for hiring demand for Information Technology candidates, I have seen multiple examples of Sales Engineering managers loosening their requirements for new hires, and looking outside their traditional talent sources for exceptional candidates.
A number of recent searches have cropped up where companies hiring sales engineers have been asking for candidates outside of traditional pre-sales support roles, such as post-sales account manager, project managers, and product delivery/implementation types. Even technical trainers and some sales reps with the required technical depth. This openness means that hiring managers are exhausting the pool of available strong candidates, many of whom have simply withdrawn from interviewing for new jobs because they are making or exceeding their sales targets (and the accompanying commissions) and have a strong pipeline of sales prospects for quarter-end/year-end sales accelerators (where the scores can really change!) as well as for Q1 2012.
A window of opportunity has opened for external and internal candidates in highly-technical customer-facing roles to leverage the mix of technical depth and personal communication skills and land a lucrative Sales Engineering position, even from outside of a particular firm.
If you are looking to make a transition into Sales Engineering but don't know where to start, LOOK HERE. Our Telecommunications, Applications, Information Security and Systems Integrator customers are hiring aggressively, and I foresee this trend continuing.
Just make certain that you have a strong technical base in the product or services area that the hiring firm when you apply. Technical and market domain knowledge, as well as a strong personal presence, and communications skills (for product demos, webinar, presentations, RFPs, etc.) are the ingredients for successful Sales Engineer.
Good luck!
Dan Sullivan