We are witnessing something quite amazing: the unstoppable force of cloud subscriptions, meeting the immovable object of commissioned sales. Unfortunately, somebody’s gonna lose.
Which way is up?
If you’re an IT-related sales professional, and any good at your job, the last few decades have been pretty awesome for you. Four-, five-, even six-figure commission checks…oh my. Do you hear that screeching sound behind you? That’s your world, as you know it, coming to an end. I’m not saying you won’t make any money anymore but, like the rest of us, you will need to adopt a longer view. Clearly you are not a moron, you’ve seen this coming for a while now, and you have just been trying to stay out of sight for as long as you can. Hey, remember when you convinced your bosses to stay the course, because this cloud fad would pass soon? Guess what? They know! The radar you have been flying under has collapsed.
What’s a Rainmaker to do?
The way I see it, you have a few options before you. You can jump to a partner who is still behind the curve… but that only buys you some time. At the end of the day, IT services providers don’t really dictate anything, their customers do, and customers are ahead of many providers right now in their cloud thinking. Damn you, Cloud! A large chunk of that money that customers are excited about saving is coming straight out of your pocket. Cloud is annihilating up-front costs…the very costs that you got a big piece of! You can’t just pick up your ball and go home—you have Beamer payments! You could switch to another industry entirely, one that still has large up-front costs, but that means starting all over again. Before you jump out your window, if you even have an operable window in your office, let’s look at how sales professionals will be compensated in this brave new world to see if we are talking PB&J or if we are heading all the way to Ramen Noodles.
Fear leads to “Never” and “Always”
Sidebar: I find it interesting to hear IT services providers at various events, proclaiming that there will “always” be a need for on-premises systems, and they will “never” go away. I get, based on where we are today with cloud solutions, that a segment of the market still requires on-premises solutions. But to say this requirement will never go away is to assume that cloud has reached its zenith. In the lifespan of a technology, cloud is but an infant. No one can credibly say “never” or “always” when it comes to technology. Doing so either proves that you are either ignorant, or afraid of the future, and eventually you’ll be proven wrong. By the same token, you will not hear me saying that cloud will be the only thing there is in the future, just that none of us can see the future. Look at everything that is happening today that did not even exist just five years ago, and tell me you know that on-premises will “never” go away. Never is a very long time. I am also frustrated when I see cloud providers calming skittish partners by agreeing with this. A smile and a shrug would be the honest answer!
How Beamer payments will be made
So here is the reality of the situation: the prior pie you gorged on has been cut into a bunch of slices to be eaten over a period of years. The remaining whole pies will all be sliced up soon. The entire concept of large commissions, based on large up-front costs, is inexorably accelerating toward a cliff. While this post may seem like doom and gloom, not everyone is unhappy about this turn of events. There are at least two people in your own organization that are quite pleased. Your boss, and that young, inexperienced salesperson she recently hired. Your boss is happy because, contrary to what you might think, she never liked giving you those big commission checks in the first place. She knows that the customer wallet share that was previously doled out to you up front will now go into her pocket over time, and she is not in any hurry. The new wide-eyed sales recruit never knew what a big commission check even looked like, and he is thrilled with the new compensation plan, because he never experienced the old one.
Is there No Value in your Skills?
I guess that depends on you. If you are highly skilled at selling something that is going away, and not really up-to-speed on what is replacing it… well, that is not a good place to be. The good news is that a lot of what you do is fully transferable. Your ability to explain things clearly, to enlighten others to a legitimate value proposition, your sixth sense of when to close, all of these things are valuable. While you can apply these skills to a new “thing”, they will not affect the coming compensation plan changes. Be prepared for a much smaller commission basis, but on a higher base salary, and don’t be surprised if those smaller commissions are paid over time as the revenue is now collected over time. The only way it works otherwise is for your employer to reach in their pocket and front it; I would not count on that. To make similar money in this new paradigm, you will need to shift your focus from targeting a few whales, to generating a high volume of customers. It has always been a numbers game; the game just shifted from vertical to horizontal.
Pssst, hey Owner, down here…
So I have just been talking to your hotshot salesman, you know, trying to let him down easy. I let him know that things are different for you too, that this “recurring revenue” thing means there is a lot less up-front money. I did not mention that recurring revenue will significantly increase the value of your business, and your Customer Lifetime Value. I know you have been concerned about losing a top-producer, but frankly, unless he leaves the industry, there is no where he can go. So I suggest you get that new comp plan in front of him quickly, rip off the band-aid, and provide him the support he needs to generate volume. Personally, I would not say anything about you being able to retire much earlier now, let him believe you are just as unhappy about this cloud thing… and avoid smiling at the office.