I started my first company in 1996. A couple years later that company morphed from a service business (offering web design and development services) into a product business with the launch of our web-based project management application. Those were the early years of Software-as-a-Service (SaaS). In fact, we were referred to as an ASP (Application Service Provider) back then, and the biggest hot button issues were the fact that implementing web-based / hosted solutions was extremely new, security, and SLAs (Service Level Agreements.)

Truth be told, those were the early days of Enterprise 2.0.

Nowadays, very few companies are worried about hosting mission critical applications outside of their own networks. Security is less of a concern, because companies are generally comfortable with Web security. And SLAs still exist, but they’re not the predominant issue. Most companies understand that web-based / hosted applications stay up fairly well, but nothing is perfect.

But even with many of the biggest issues resolved over the last 10 years, companies are still not adopting Enterprise 2.0 at the pace you would expect. And many Enterprise 2.0 startups can’t get the traction they need.

So what’s up?

Bernard Lunn at ReadWriteWeb writes about 11 things startups should know about Enterprise 2.0. He makes many valid points (well, 11 in fact) and touches on some of the struggles I’ve experienced and witnessed in the past.

Ultimately, it all comes down to knowing your market. And in my experience, many startups jumping into Enterprise 2.0 aren’t built off that solid foundation; it’s more about launching something cool & innovative, making noise and trying to gain traction. That strategy may work for consumer / B2C startups, but it’s a very tough slog for enterprise sales.

Here are some things to think about when it comes to selling Web 2.0 social software to enterprises:

1. Innovation vs. Status Quo Bernard touches on this in his final point, but I think this is something Enterprise 2.0 startups struggle with immensely. They can readily see what’s broken with existing, old-style software. They see how it can be improved. And they want to scrap the old and innovate like fiends to bring in something that’s so much better.

   But the problem is that companies may like the status quo. Ignoring the fact that switching from one system to another is tricky for companies, and just focus on the fact that an enterprise might actually like some of what we (as newer people looking into the market) think is bad, pointless and stupid. Enterprise 2.0 startups have to be wary about overselling innovation and change, while at the same time not sacrificing the value they bring.

   And the fact is, this point of “innovation vs. status quo” is true with respect to everything an Enterprise 2.0 startup does. For example, you might want to innovate your sales model, or your pricing, or support structure. And there’s no shortage of innovation that can take place in those areas. But if your market is still comfy in the status quo, you’ll hit roadblocks very quickly.

2. Who are you selling to? Every company, big and small, has a hierarchy. And you’ll need to understand who you’re selling to within an organization. There will be the gatekeepers (lower level folks who are tasked with doing research on Enterprise 2.0), mid-level managers who have some budget, but probably can’t spend more than $5,000/year without higher-up approval, and then C-level executives – namely CFOs and CEOs. You have to be very strategic in how you sell to enterprises, who you reach, how you move up (or down) the food chain, and how the value proposition changes along the way.
3. How are you training customers? One of the biggest challenges with enterprise software is adoption — getting customers to actually use what you’ve sold them. Certainly, social software has a viral component that can increase adoption, but there will always be challenges. For example, a CEO may buy something and then in a top-down approach “force” everyone to use it. How well do you think that typically works?

   Even with relatively simple software, companies will often ask about training. Most Enterprise 2.0 startups can’t afford to do on-site training, so what else can be done to provide the necessary hand-holding and comfort level, without being overly costly? In my experience, I’ve found that creating a video tutorial library is a great way to give companies good quality training and support without breaking the bank. Video tutorials are also great when new employees join an organization, or they’re increasing the usage of your software within the company; all they have to do is ask people to go through the videos to get up-to-speed.

4. What level of customer support do you offer? Customer support is a huge issue for Enterprise 2.0 startups. We know that most legacy software companies provide piss poor support (and it’s generally quite expensive too), so there’s opportunity to differentiate. But I’ve also seen too many Enterprise 2.0 software companies take the “less is more” approach with support. “Well, our software is free. And we’re focused on innovation and product development. So we don’t have the time or resources to offer great support. So there.”

   WRONG! WRONG! WRONG! If you take this approach, you’re dead. End of story.

5. How are you perceived in the market? A lot of companies don’t like to buy from startups. There’s more risk involved. What happens if you go out of business in 6 months? (I get asked that a lot!) Or they’re worried that they won’t get the hand-holding they deserve (because every customer thinks they’re the most important, remember that!)

   Again, this comes down to innovation vs. status quo. You don’t want to pretend you’re a big, old school company, but you also don’t want to look like a 2-person garage-based startup. You can balance this by doing a few things:

   • Offer a 1-800 # for customers to call
   • Use press releases to market in a more traditional way
   • Become well-known within your industry as a market leader (to prospects, customers and journalists)
   • Publicize stuff about your company that exudes stability (Advisory Board, venture capital, customer acquisitions)
   • Get customer case studies as soon as possible
   • Have a good-looking, sophisticated and not-ultra-Web 2.0 website

   This is not about being an illusionist and faking people out, it’s about how you present yourself effectively in everything you do.

   The biggest question to ask (and I don’t think a lot of Enterprise 2.0 startups ask themselves) is this: How do my potential customers WANT me to look and what do they WANT me to present them in order for them to feel comfortable about buying from me?

6. What are your distribution channels? This is of critical importance to any Enterprise 2.0 startup. It’s unlikely you’ll have the time, money and expertise to launch a huge awareness campaign, followed by heavy duty marketing and direct sales. That’s going to mean finding distribution partners – resellers – who can leverage their existing customer base, sales staff and knowledge of the market. Companies already in your market will know it better than you, and they’ll know how to sell to customers. Knowing your market, and by extension knowing the players in it and who can serve as a distribution channel is key.

   Note: Startups partnering with startups is very difficult. It might make sense technologically to do so, but since neither startup has the sales team, distribution channels, pipeline or customer base, it’s just a techno-mumbo-jumbo connection. Enterprise 2.0 startups need paths to customers, and as quickly as possible, and that means partnering with much larger organizations that might not have the technical sophistication and innovation that you possess.

7. When are companies buying? Timing is everything. You need to know when companies are in budget season, prepping for their next budget cycle. You need to be top-of-mind when companies are deciding what to spend on, and how much. Buying cycles for most companies will follow similar patterns, but there could very well be some specifics in your market that you should know about.
8. What are companies buying habits? You need to know when companies buy, but also how they buy. Enterprises are tricky beasts. They’re accustomed to long sales cycles, approvals, demos, trials, more demos, and so forth. Changing those habits is not always easy, and in some cases you’ll have to play by the rules to get a foot in the door.
9. What are the nitty-gritty pitfalls? This is a catch-all bucket for me when it comes to knowing your market. Whatever market you’re going after, it’s unique. You’ll have to know it inside out before you can make a dent in it. And there are a lot of little, sneaky details to understand. For example, some departments within an organization are afraid of technology. Use the word, “software” and they immediately respond with, “Well, we have to get I.T. involved.” Except part of your value proposition is that it’s hosted and dead simple to use, so I.T. doesn’t have to be involved. You have to know these things, so you can couch your offering the right way, market properly and sell effectively.

Enterprise 2.0 Startups Rock!

I’ve told a number of people that my next startup (after Standout Jobs, which is squarely in the middle of Enterprise 2.0 land) will be a consumer play. Direct to consumers, all the way! But the fact is that I enjoy the B2B software-as-a-service world because it’s more concrete. You build useful software applications and sell them. Most days that makes a lot more sense to me than building something for consumers, and trying to get millions of users before figuring out how to monetize. Apparently 12+ years in B2B SaaS makes me old school.

Enterprise 2.0 has its unique challenges, especially for startups (especially when they’re run by people without deep knowledge of their market, or deep experience in the space). You have to really know your market to succeed, and not assume you can go in guns blazing and change the world in a heartbeat. Whether you put a 2.0 (or someday a 3.0) into the catchphrase, it still says “Enterprise.”