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International Business Machines Corp
Apollo Group Inc
In Silicon Valley, where everyone says he’s out to disrupt the status quo, the sales force is a surprisingly resilient institution, especially in enterprise software. Every two to four years, companies such as IBM (IBM) and Oracle (ORCL) produce new versions of their flagship applications, then send out armies of salespeople to persuade customers to upgrade.
Lewis Cirne, an entrepreneur who sold his business software company, Wily Technology, for $375 million in 2006, has become one of the most vocal advocates for a new type of leaner, faster business software maker. His latest company, New Relic, relies on just seven salespeople to serve more than 10,000 customers, who use its software to track the performance of websites. Cirne aims to sell his products to clients without doing much actual selling, in part by building software that is intuitive enough for a customer to install, test, and use without a salesperson’s help. Cirne claims it’s a better model for customers, who get to judge a product rather than a sales pitch, and it boosts profits. “At Wily, we were always chasing the break-even point because we had salespeople flying all over the place,” he says.
New Relic’s software keeps watch over a customer’s website, tracking how fast Web pages load and how users’ experiences vary based on things like which browser they’re using and what ads are filling their page. The software then digs into a customer’s data center to find out where a hiccup is slowing a website. “It will even find a single line of code that is causing a problem,” says Rich Phillips, the principal network engineer at Apollo Group (APOL) , which runs the University of Phoenix and is a New Relic customer. Others include Groupon, AT&T (T), Zynga, and Best Western International.
The sales forces at traditional business software companies spend days, weeks, and even months installing, explaining, and training customers on their products. To flip this model, New Relic has borrowed from the consumer technology playbook and made a product meant to provide enough visual pop to attract customers on its own. It’s also designed to be easy enough to use that customers can install it without the help of a knowledgeable salesperson. New Relic uses a cloud model, where customers gain access to a dashboard through their Web browser to configure and test the software. They’re then presented with a variety of colorful charts that break down the performance of their website. The product “has to be good enough that someone tweets about it,” says Cirne.
In the past, customers would install this type of software in their own data centers and use it in isolation. Because New Relic’s software lives in the cloud, every day 1.5 billion data points flow from its customers to a central online repository. New Relic’s engineers crunch the data and reach out to customers to tell them if they’re missing an important piece of information or not using a potentially helpful service. That “makes a lot more sense than talking to a traditional sales guy,” says Phillips.
“There are a number of startups out there that believe you can sell without a sales team,” says Asheem Chandna, a partner at venture capital firm Greylock Partners. Chandna has backed AppDynamics, a rival to New Relic, that uses the lean model for smaller customers but relies on salespeople to handle large ones. “At a certain point those customers want to look someone in the eye and have that direct relationship,” Chandna says. Kenny Van Zant, a former executive at SolarWinds (SWI), which adheres to the lean model, says that business software makers used to rely on “good PowerPoint and sales teams” to make up for a product’s deficiencies. But that “just doesn’t work anymore.”
For Cirne, the debate is personal. He’s a coder who stayed up through the night writing software in the early days of New Relic and still dedicates about half his time to programming. He says a sales-centric culture can be toxic. “That tiny fraction of the company gets the trips to Hawaii and the Rolex watches,” he says. “They come back all tanned with their wonderful stories, and it’s so deflating for the rest of the company.”
The bottom line: Some business software startups are making do with small sales forces by building products that are simple to install and use.