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Pioneering SaaS In Business Process Optimization: Ariba’s Kevin Costello (Part 5)

Posted on Sunday, Jun 6th 2010

SM: How did your customers handle your move to SaaS?

KC: The customers bought the license and then went and implemented [the product]. It was almost up to them to be successful. Now, if the customer buys something it is still up to them to be successful, but it is really up to us to help them be successful. If they are not successful, they will not renew the contract or license. They are leasing, not buying. That means you need to have the entire company focused on driving the success of the customer.

SM: Did you switch to more of a telesales/pilot sales model for the early part of the sales cycle?

KC: For small customers we do have a corporate sales group that is somewhat telesales based. We also have a team of demand generation individuals who are on the phone, and they respond to inquiries. These inquiries come from places such as events we host or from the Web. Our demand generation folks handle the initial call to see if we are a good fit for the customer. If we are, then they hand the conversation over to a field sales person.

SM: So you don’t do telesales for large accounts?

KC: No. The reason being that the process we are trying to drive efficiency in is a complex process. Many people in a company can procure goods and services, and no process is identical company from company. That makes it mandatory for us to sit down and have a face-to-face meeting.

SM: Who is the buyer? The CIO?

KC: It is normally the CFO or chief procurement officer. The conversations happen with the purchasing department or with the CFO. The network we have not only processes transactions, but there is also the ability for buyers and sellers to do some trade financing across the network. Say you are a buyer and you have terms with a supplier who is 2/10 net 30. Our network is so efficient that the buyer can approve that invoice and be ready to pay in three days and the supplier may offer a 3% discount, which would be a 36% payout to the buyer over the course of a year.

SM: How do you define the boundary between a large enterprise and an SME?

KC: The boundary of our telesales center is a $200 million revenue stream. A significant portion of our revenue stream comes from large enterprises.

SM: Perpetual license models are big deals, and [sales people] try to get them closed by the end of the quarter and receive the entire commission at close. SaaS contracts get revenue recognition over time. What is the change in the compensation model that you have put in place?

KC: People get paid for the size and duration of a deal. A one-year deal is not worth as much as a three-year deal. Our quotas match those components and are based on geography.

SM: Do you pay the commission on basis of closing the deal regardless of whether the customer continues?

KC: It is based on closing the deal. We have a different group of people who are not sales people, they are customer success people, and those individuals are compensated based on renewal rates. We have non-cancellable contracts.

This segment is part 5 in the series : Pioneering SaaS In Business Process Optimization: Ariba's Kevin Costello
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