Hitting It Big In The Enterprise

Editor’s Note: Alexander Haislip is a marketing executive with cloud-based server automation startup ScaleXtreme and the author of Essentials of Venture Capital.

Silicon Valley is its own best friend when it comes to booking sales. The first dollar in the door for most startups comes from another startup. That’s because startups are always seeking a competitive edge, they can make purchasing decisions fast and are willing to accept the risk of buying from another small company. It works great for most companies in most tech verticals most of the time.

But it also induces market myopia. Selling solutions only to startups slows your growth by limiting your addressable market. That may not seem like a problem if you’ve got customers like Zynga, but even the most amazing and fast-growing startups have but a fraction of the budget of big established corporations outside of Silicon Valley.

Waiting for your startups customers to get big is not a viable growth strategy. If you truly want to hit the accelerator, you have to sell to big, established corporations—especially the ones outside of the Valley.

Big Desires

That’s hard work. It requires a lot of traveling and a lot of listening. Big corporations aren’t particularly good at explaining specifically what they want and the individual requirements will vary from industry to industry. But each potential enterprise customer expects two things from a Silicon Valley startup: a path to the future and a solution for the here and now.

Consider the market for computing power. Each big buyer we talk to wants to start using public cloud computing. They cite some of the regular reasons you’d expect to hear: Flexibility, self-service, cost. Everybody knows the benefits. But they’re acutely aware of the costs. For them, innovation comes at the cost of management complexity. Considering the public cloud? Better begin reading SLAs and start looking for a VP of Cloud to run the thing. Then there’s the issue of making sure the public cloud can work in tandem with the physical servers and virtual machines.

Big buyers need ways to harvest the benefits of new technology while incorporating them into their existing IT portfolios. They don’t have the startup’s luxury of building from a blank slate and they’re not about to rip out their old server farms to rush to the public cloud or chuck their Dell desktops in favor of iPads. Enterprise IT doesn’t begin and end with the launch of an EC2 instance.

The juiciest accounts with the deepest pockets face tradeoffs, looking to optimize their infrastructure for certain parameters and picking a portfolio of technologies to get them to their goals. Physical servers, virtual machines, public cloud instances—they each have a role to play and the potential benefits have to be weighed against both the actual costs and the attendant complexity and management costs.

The public cloud is going mainstream inside big companies because it can show both how it can help and how it can be managed as part of a bigger compute portfolio. Startups should take note: No matter how exciting your future vision, you’ll only win enterprise accounts when you can easily fit into the existing IT infrastructure and start solving problems immediately. You have to align your startup selling cycle with the enterprise IT “need cycle.”

The Big Easy

The best part about going after big customers outside the Silicon Valley echo chamber is that it’s easier than ever. SaaS, elastic compute, freemium, agile development—all change the way big companies buy what startups sell. An enterprise sale can start small, with a few installations or even a single user. Growth can be explosive once you’ve connected with the right people inside of a business and they start getting value. They’ll give you great insights and sell your product for you.

To be sure, not every large organization is comfortable with this new model. Many IT managers remain mired in the old model of enterprise sales called “big game hunting.” They expect to be hit by a dozen suited salesmen that make ridiculous promises (the “Every-time Always Say Yes” strategy). They’re still looking for lengthy contracts fraught with opportunities to upsell consulting, training and integration. They still perceive the cost of even considering an enterprise IT buy substantial. It’s just what they’re used to.

But over the past decade the economics of the business have changed. It used to be that the price of complexity, management and commitment required for an enterprise sale was high, so the quantity of sales was low. Today, the price of trying things out and getting them to work together is much, much lower. The quantity of sales must go up. Self-provisioning, easy-to-use, pay-as-you-go applications and infrastructure may not make enterprise IT sexy, but they do enable startups that can offer immediate solutions to companies beyond the borders of the Valley to see some big returns.