Monday, July 13, 2009

can you outsource Sales?

The below article from the Mass Hightech Times informs us that smaller technology companies are considering a near 100% virtual model, including the outsourcing of Sales. Their example is a hardware company with a seemingly low price point.

It is Xtra Effort's opinion that outsourcing of Sales is only viable if the product's price point is relatively low, the category mature, and the installation/integration simple. Otherwise it won't work.

Sellers need to have extensive knowledge of their customers, markets, and pain points to be effective in making a corporation feel comfortable to make a capital expenditure with a newer technology that requires a change in enterprise behavior (to adopt among users). Customer intimacy is also required to help the enterprise buyer mitigate political and financial risk.

Only Sales people who are 100% committed to an employer can develop this required mix of knowledge and relationships for an enterprise to embrace change that is externally initiated by a start-up.

Outsourced demand generation is the exception. Appointment setting and market intelligence gathering can be effectively performed by a third party.

Technology start-ups should only outsource their entire Sales cycles if their price point is relatively low, their solutions represent little risk to enterprise decision makers, their product category is mature, and solutions easy to integrate and adopt.

Can you imagine a CIO (or more likely, her subordinate's subordinate) adopting new wireless headsets or a blog widget from a third party Sales agent? Yes, probably.

However, can you imagine a sales agent from a third party being successful in convincing a CIO to embrace a $500k annual commitment to a new order entry system based on Cloud Computing? Probably not.

The Mass High Tech Times article:


  1. Hi Mark,

    I agree with you statement that, in general, it is not a good idea to outsource sales. Although in using resellers for certain geographies or for certain verticals in which you are not experts does make sense. This is in effect an outsourcing of sales - but typically would account for a small % of your revenues.

    Your article does raise a question of whether the indirect channel can be outsourced. I would suggest there is an opportunity for a channel expert organization, with the appropriate connections, to provide such a service. The service would be typically to develop the indirect channel. Once established there would be less of a need for the outsourced BD organization.

    Alistair Wilson.

  2. In many situations it can make sense for a business to outsource its sales. Generally it can be wise however for businesses to initially use several sales outsourcing companies to find the one that will work best for them.

  3. Hi Mark,

    I hope all is well and thanks for the post.

    My firm actually provides outsourced sales to small, growing technology companies and we routinely can and do close deals at low price points and six figure deals for them. We do this directly and through channels as well.

    The long term issue has more to do with scalability and growth. Our model is designed to get clients going while they figure out complex issues such as sales models, pricing, markets etc... Once those critical early wins and pipeline are in place, I agree that bringing sales back in house makes sense. Low tech or low price points could remain outsourced for sales.

    We have seen this model borne out over the last 3 1/2 years of our business and the model is increasingly interesting as it offers an initial variable cost risk vs. the traditional (high) early fixed cost risk.

    Chris Foran