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5 Red Flags to Watch For When Buying Enterprise Software

Red flag

Jason JacobsBy Jason Jacobs

Purchasing the software you run your business on – whether CRM, PRM, marketing automation or what have you – is an important decision. Your team will be living with it for years to come, so be on the lookout for these five tactics — any of which should sound an alarm that you’re on the road to getting less software, and more costs, than you bargained for:

 

1. Before we talk pricing… We’ve all spoken to sales people like this. You ask about pricing, they try to redirect by asking you what your budget is, and they won’t discuss pricing until they do a deep dive into your needs. At a minimum, this is a relationship-building strategy to extract as much as you have budgeted. At worst, it means they don’t really have a finished product that you can configure, thus the pricing will vary depending on how customized you need your system to be. You will also be dependent on them for future services should you need changes to your system. This is by design. So consider total cost of ownership. Look for companies, like Salesforce.com, Hubspot and my company, Channeltivity, that publish pricing on their websites.

2. Land and expand …  This is a pretty common sales strategy of venture-capital-backed companies. It’s based on the notion that it’s easier and more cost effective to sell into an existing client than to get a new client. So they lose money on the initial sale then upsell you later. Again, if there is not clear pricing by module published on the website, the entry price may not be representative of the total cost of ownership going forward. In essence, there is nothing wrong with entry-level programs. Just make sure you know how cost of ownership will climb with more features and users.

3. The big dipper … So your prospective vendor does a number one on you (see above) and produces the custom proposal. Perceiving your sticker shock, and realizing it is the end of month or quarter, they immediately begin stripping away pricing and giving you things for free. Run! This is another way some companies behave. They have unrealistic sales goals, and the pressure causes them to exhibit these behaviors. In the end, if the vendor takes on enough desperate bad business, everyone loses.

4. Coffee is for closers … If you have ever seen “Glengarry Glen Ross,” you know what this means (if not, check it out below, language alert). If, in your sales cycle, a new person gets introduced with the proposal, this is a “closer.” They don’t care about anything but closing. If you start to feel like you need a shower at any point in a sales cycle, trust your gut. These are the verbal promise-makers that tell you what you want to hear. They will also try to cast shadows of doubt on your other vendors under review. Buying a solution should not require this. It should be simply an alignment of need to the solution and does the cost outlay make sense.

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5. They never tell you no … Be aware in the sales cycle if they never tell you “no” when asking about systems capability. Custom software has no limit in functionality and, concurrently, price. If they cannot show a function to you in the demonstration and admin setting section of the product, it is likely custom and will come with a cost. Worse, if you ask for a feature and they say they will build it for you if you come on board, run. You will be the test bed for versions 1, 2 and 3 of the feature, and they will have budgeted only for version 1. When closing sales dictates a vendor’s product roadmap it is on the road to destruction. This is another trait of VC and private equity backed companies. So be careful.

What should you look for?

  • Transparency in pricing. If it’s not listed on the vendor’s website, they should be able to give you a pricing sheet to provide a clear idea of what you will pay. Look for the recurring product pricing, the setup pricing, any user- or variable-based pricing triggers, and any ongoing services required to maintain the system. Simple is better.
  • Ask to talk to references that are similar to your company in channel stage and size. Specifically, talk to someone going through implementation.
  • Selecting the solution that is the best fit is important. If it feels like they are selling, get crystal clear on your requirements and take control of the conversation, holding them to short answers, and then make them show you that exact configuration.

Jason Jacobs is responsible for Channeltivity’s overall vision and strategy. As a serial entrepreneur, visionary leader and seasoned high growth startup CEO, he brings his expertise in launching and growing technology and technology-enabled services companies to the organization. Jason also is founder and president of The Verge Group, a consultancy that identifies potential and accelerates results in early stage companies, where he focuses on emergent strategy and agile-organization practices for high growth and restarting growth.


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