Watch Hans-Peter Bech's, the author of Building Successful Partner Channels: in the Software Industry, interview with Sales Force Europe's CEO, Rick Pizzoli.
Revenue Generation as a Service
The information technology industry enjoys steadily diminishing barriers for market entry and struggles with ever diminishing windows of opportunity. A steadily increasing number of competitive products and services have to make it to market leadership at an ever increasing speed. While developing a new meaning and useful product or service that the market really wants can be done in less and less time, we still struggle finding the formula for exposing the value proposition to enough potential customers before someone else has taken the money for something similar or for something else.
While the cost of scaling the use of a software based product or service is close to zero or at least declining according to Moors law, the cost associated with scaling marketing and sales are not governed by the same laws. Rather they keep increasing. However, it is not only a matter of money. It is just as much a matter of finding, engaging and managing the skills, competences and experience required to scale the marketing and sales operations at a global level. For most information technology companies exactly that represents the biggest challenge of all.
Over the last 10-15 years we have seen the proliferation of companies offering “Revenue generation as a service” as a response to the situation described above. Is this a viable solution for technology companies and will we be seeing growing use of such services? Let’s just face the brutal facts: Marketing and sales is not the core competence of most information technology companies and that is the primary explanation that they may make it out of the startup stage, but they very rarely make it to the tipping point and beyond.
I have interviewed Rick Pizzoli the founder and CEO of Sales Force Europe. Rick has been operating his “revenue as a service” model for more than 10 years and now has over 50 sales and marketing professionals across Europe working exclusively for technology companies.
Hans: Hello, I'm Hans Peter Bech and today I'm interviewing Rick Pizzoli, the founder and CEO of Sales Force Europe. Sales Force Europe is a revenue generation as a service provider that operates across Europe. Rick, thank you for taking the time to participate in this interview. And Rick can you tell us what is a revenue generation as a service provider?
Rick: Thank you, Hans. This is a service that is fully dedicated to delivering revenue for our clients. There's no delays or cost in recruitment, for opening up offices, or for dealing with local taxes. We just simply get down to the business of sales. It's a flexible approach where you can drop in well-qualified and trained senior sources in your target countries, focused on your target verticals and quickly develop qualified opportunities. Think of us as the SEAL Team Six of sales.
Hans: Okay, so what is the profile of your typical client?
Rick: If they're coming from the U.S., they typically have $2 to $50 million in revenue and maybe the same in funding. If the client is European expanding from one market to the next, probably a bit less. If it's a start up that's founded in Finland, for example, and they want to expand to Sweden or the UK, maybe a million dollars in revenue and their home market is enough. They need as well to be established in their home market, established processes, happy clients, a differentiated product, and well organized team and game plan to expand.
They need to be open to new ways of doing business and having the philosophy of "I'm going to do things different to beat my competition to market and not just follow the normal approach." They need to have a product that can be sold or that needs to be sold. So that's typically a product that is more than $10,000 a year if it's a service. Or if its hardware that needs to be sold via channels, so we do a lot of channel work. Assigning a channel is easy but really engaging and enabling channel is a lot of work. So what probably is less of a fit, are consumer applications that can be sold off the web or just lower cost items that can be sold off the web.
Hans: Okay, so how does the business model work? How do you charge for your services?
Rick: We spend time understanding our clients business. So that can be a couple of calls of really digging deep, understanding their target countries, their target verticals, the positioning of the product, and then we spend time qualifying the right resources on our team to represent the client in the market. Then we present a team to the client. We have another series of calls, and if there's a good fit, we agree on objectives in terms, and the client then on-boards that team. They become an automatic extension of the client's team, completely transparent to the outside market.
The fees are based on a monthly fee and a commission. We try to keep that as simple as possible. So there's no recruitment, there's no office costs, there's no incorporating. No additional cost, just a fixed operating costs, and a commission on sales.
Hans: Okay, so you carry the business cards of your clients.
Rick: Correct, we were completely transparent. So we use the business cards, emails, the agreements. So for the market, we’re an extension of the client's team immediately active in these new markets.
Hans: So let's imagine that we have a technology company. They're out of the startup stage and generating revenue with their current sales and marketing operation in their domestic market. And now it's time to scale the business and grow and they basically have two options: Option one is that they simply hire more people and they open new offices in the new markets. Option two is to engage with an international revenue as a service provider just like you. So what is really the difference between those two scenarios?
Rick: The difference in the option one, the traditional approach, is first you need to get budget. So it's probably $1 million to open up a new region like Europe just to begin with. So that can take one to two months to get that budget approved. Then you need to find a recruitment company to start building the team. That could be another two months and distraction from your home business, flights back and forth.
That recruitment company is going to pull typically random CVs off LinkedIn or off the internet to make a short list of employees. Then there's another couple months of interviewing short list, selecting the person, they need to leave their current job. Then you need to do an office search, office setup, payroll, incorporating, legal, tax. That's six to 12 months of lost time and revenue where you've lost focus on your home market. You've lost focus on the new market, on revenue, because you spent your whole time building this team that you hope is that right team and, you hope, is the right market.
And guess what? Maybe you've landed in London and you're too early or you too late. You've built this establishment that's very difficult to move and very expensive to move, and if you have to close it because it's wrong, it's also a black eye in the market and it's hard to come back later. Whereas if you engage with a revenue-as-a-service company, first you have the first couple of calls with the company to really share your strategy, they source a team for you, that's part of their team, you interview the team immediately, typically with one or two weeks. If there is a fit, you agree on objectives, agree on the terms, on board the team, bring them to your home market, train them for a few days, you review sales strategies, targets, objectives, etc. And you engage the market. In that entire process can take three to four weeks.
Hans: But I'm a little curious here, I suppose that your people are busy. How can you make resources available in such a short time frame?
Rick: In our business, we have about 60 or 70 resources that are engaged with clients today. We have another probably the same 60 to 70 people that we've interviewed, that we've liked, that we've worked with before, that are basically in the bullpen. Maybe they're half time working with somebody else, maybe their full time on another assignment that’s about to end. So we have a bullpen of very strong people on a per country basis. So in each country, in Spain, for Italy, or UK, or Germany, maybe we have eight, ten people active. And that team has another ten, 20 people that they know that are available or going on jobs, going off jobs. So these are personal relationships, people that we worked with before, and people that we can bring to the table very quickly.
Hans: So working with the service provider like you requires some level of competence and skills on the client side I presume.
Hans: So what is required for working successfully with somebody like you?
Rick: The whole picture needs to be there, right. They need to have a solid product that's differentiated; they need to have a strong sales team, and founders that understand the whole process. They need to have made the evolution from founders doing the sales to being a professional sales team. So that's a big step. The product needs to have the evolution from being a highly customized for each client to a real product, where there's product releases and documentation around the product. Marketing needs to evolve from just technical marketing to value based marketing and not fluff, but really what's the business justification for these products. Support needs to be there, operations need to be there, and very important is funding.It takes time and money to open up a new market. If you want to deliver $1 million in a new market, you need to invest a quarter million dollars up front to get there. So we can deliver 300% ROI, but there's an investment up front to get that revenue.
Hans: Finding competent and skilled marketing and sales people is extremely difficult for everybody. How do you tackle this challenge better than your clients?
Rick: Well, like I mentioned earlier, it's because we live and breathe this business. We know the hitters in each market. So the verticals we focus on are Telco, Enterprise SaaS, and Channel. Channel being either business hardware or consumer electronics hardware. And so the people that do those sales in London, or Paris, or Madrid, we know them all. We know the guys that are very strong. We know the guys that are not so strong. If somebody wants to develop Telefonica in Spain, we know the top two to three salespeople that really know that organization up and down, and we can bring them to the client sales team immediately when they're ready to go.
Hans: So I assume that you see a growing market for revenue generation as a service.
Rick: Yes, I believe so.
Hans: Why is that, and how do you expect this market to develop?
Rick: Well, we've seen an explosion of software as a service. Nobody installs enterprise software any more. We've seen an explosion in human resources as a service. We see this is a combination of the two, and it's growing quickly. You wouldn't manufacture your own products today. You leave it to an expert.
Why, if you're an expert in building technology and selling it in San Francisco, why do you believe that you're an expert all of a sudden opening up a new office in London because that's the right spot? Leave it to experts in the market. Find the revenue, close the revenue, and then build the organization around the revenue. Don't build an organization and expect revenue will come.
Hans: It sounds to me like opening new markets is a sweet spot for you. But how long should your clients keep on using resources like you? Is there an expiry date for you or is this something that could go on forever?
Rick: It may continue for the medium to long term, as long as the team is delivering and the business model works for the client, so the ROI is there. You can keep expanding in this scenario. Employment laws in the U.S. are very flexible, employment laws in Europe are very inflexible. The market was not built for technology, it was built for heavy industry. And so you can work with contractors. Legally, it's exactly the same as a normal employee, full time, fully dedicated, and grow and expand as you need. Focus them on certain verticals and maybe, as a technology company, you get bought by a Cisco or Google, most cases these companies don't want all these employees. They want the technology.
And so as a younger company, you're actually more valuable to a company who might take you on without the big burden of a European team. So we have clients who we've been with for many years and we just continue to grow with them on the service basis.
Hans: Okay. What are the most common misconceptions that potential clients have when it comes to asking help from somebody like you?
Rick: First, we can't work in a vacuum. We need active engagements from our clients. You just don't find team like ours and expect them to sell. You need to do road shows; you need to be involved in the sales process. Another misconception is people think that they lose control. They think we as a service company in Europe kind of like this development team in India. It's outsourced out there someplace. When actual fact, I believe the clients have more control because it's a service that is integrated into the client's team, and it's very easy for the client to turn this up or turn this down, where is if you have an employee, you spend a lot of money bringing this person on, and it's very expensive to get rid of them. So it's a big step. Where as a service that's not a big step, you just turn it up and turn it down.Another misconception is clients say, " I want our team. I want my guys." Well just because he's an employee doesn't mean he's any more of your guy than if he's a full time service completely dedicated to you. He still your guy, he's just under a different agreement.And probably the last thing we see is people will say, "Well my product is too complex for this type of service." We can source the best people in the business 100% dedicated to our clients. So they are just as capable of selling a complex solution as any other normal full time employee would be.
Hans: So what I hear you saying is that choosing a revenue generation as a service provider to bring into a new market is not so much a question about saving money, it's about saving time. Maybe in the long run that could be converted into money, but it's not the immediate saving that is the motivator. Is that right?
Rick: Well I think there's upfront saving, because if you go to the traditional approach, you have all the recruitment fees, and offices, and flights. So that's a big hit at the very beginning. But yes, it's time, it's beating the competition to market, its flexibility, it's getting the right team, it's a team and the right market, and the right verticals at the right time, and then expanding that. I mean we've had excellent clients that they first put a team in London, and guess what? They were selling, in this case, an OTT platform and all the big providers in the UK had already bought one. They got there too late. And so they were making flights around Europe, they could get meetings, but they couldn't penetrate those tier one Telcos. They sign with us, we got them in all those tier one and tier two service providers and broadcasters. And within two years, they were bought by a major manufacturer.
Hans: So Rick, let's just imagine a client has been using you and that they're very happy with that. But they come to a stage where they really want their own team. They want to employ their own team. How do you make that transition?
Rick: We have two or three clients each year they come to a certain point, maybe it's for political reasons, or their VCs that say, you know what? We want to go through the transition of having this service is these new markets converted to employees. And we're absolutely open to that. They can recruit the people on our team, so they would pay normal recruitment fee, and they bring our people on, and they become employees. And at the same time, we could also help back fill any other positions and do some recruiting as well. We don't position ourselves as a recruiting company, but since we're there, we're engaged in the market, we know their space, we know the people in the market, and we can help facilitate that transition process.
Hans: Okay, so if that's what the client wants, and if that's what your people working for the client, if they want that too, you will facilitate that process.
Rick: Absolutely, it happened as I said two or three times a year. And those have all been good transitions and the companies have continued to grow from that point.
Hans: Thank you very much for your time, Rick. I'm sure that those watching have learned something new, and have learned something about this alternative to hiring your own staff, and opening your own offices. You can find more about Rick and his business on his website obviously, and I have listed his contact details after these closing remarks.
I'm Hans Peter Bech. Thank you for watching, and please visit our website for more free resources on how to grow faster than the market, and faster than your competitors, and make it to global market leadership, because that's the only comfortable position in this industry.
####Hans-Peter Bech is Marketing & Sales Strategist, Amazon bestselling author, keynote speaker and business advisor. He has created a series of videos on Building Successful Partner Channels written by Hans-Peter Bech and produced by Microsoft. You can learn more about Hans-Peter Bech on his website: http://tbkconsult.com/ and you can follow him on Twitter.