Monday, February 2, 2009

Getting Deals Unstuck from Legal & Procurement

Maybe you used to work toward quarterly deadlines. But if you're a software-as-a-service provider, now you're on daily deadlines. In the SaaS model, when customers start to pay on the day they subscribe, the sooner you close a deal, the better. With on-premise licenses, the timing didn't matter much as long as the deal closed before quarter-end. But for SaaS vendors, a deal is worth more - 90 days of revenue more - on January 1 than on March 31.

So it matters urgently when deals are stuck with legal and procurement departments. Unfortunately, because the customers' lawyers and purchasing agents may not be familiar with SaaS solutions and standard contract terms and conditions are still emerging, this happens often. Everything in the sales process is moving along smoothly. The functional buyer is convinced of the value of the solution, the CIO is OK with security and performance, and the CFO sees the investment value.

But then you enter the long, dark tunnel of legal approval. I've seen deals suddenly snagged over payment terms, credit policies, service level agreements, activation dates, length of term, termination clauses, renewal practices, data ownership, and more.

Done well, marketing can steer deals more smoothly through this approval process. The key is to educate the buyer. (Folks from the New York-area may recall Sy Syms, "An educated consumer is our best customer." I never bought a suit from Syms, but his advise makes sense.)
  • Develop a straightforward standard contract. Shorter is better. The longer and more flexible the contract, the more you'll prolong the process. Remember: delays cost money.
  • Explain the essential contract terms to your sales people. Let them know what items are non-negotiable and what areas provide some flexibility.
  • Prepare material - white paper, FAQs, etc. - to educate customers about your terms and conditions. Describe the key contract terms and explain the rationale behind them. If you require a one-year minimum term, tell them why.
  • Ensure that there's a discussion of contract terms early in the sales process. If you follow a standard "sequence of events," put "contract policies" early in the sequence.
If you find that you've spent eight weeks pushing forward on a deal only to get intractably snagged by legal and procurement for another 12 weeks, then something's gone horribly - and expensively - wrong.

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