A lot of the work I do with the startups I’m an investor in revolves around ensuring the most efficient marketing and sales processes are used. The proverbial filling and conversion of the funnel. It’s always interesting to take a step back and contrast traditional models of technology sales with more contemporary approaches to the same. The former, often a legacy approach from the days of installation disks and widespread piracy, tends to be adversarial in nature, with the vendor having to convince the customer, against their better judgment or otherwise, to purchase their software. I had an experience recently that reminded me just how far most of us have come since the bad old days of technology sales, and just how far the odd vendor still has to travel.
I’m a shareholder and sit on the board of a manufacturing and retail/etail company. It’s a small business but, like many small businesses, displays a complexity that belies its revenue figures. The general manager of said business has spent the past 12 or 18 months evaluating new software solutions – he’s looking to replace our financial, point of sale, customer engagement and manufacturing systems. Given my particular interest in this space, I’ve been helping him and have introduced him to probably a good proportion of the global vendors in the space.
Recently I got an email from our GM telling me that he’d discovered a solution that looked like it could meet the majority of our needs. His email stated that the vendor, who I'll not name out of pity, required that as a director I sign a Non Disclosure Agreement before the vendor would actually let our GM get his hands on a trial copy of their solution. Up until that time all he’d been able to see was a screen-shared demo where he could see the software in action, but not interact with it himself. In order to get a demo copy for even a short amount of time, the vendor demanded I sign an NDA.
Now bear in mind that the competition (and there’s many – from Intuit’s QuickBooks to new entrant Xero, from Vend to Shopify, from NetSuite to Intacct) invariably give a free trial account to prospects where they can dive in and really test the functionality of the solution – generally these demo accounts are real live accounts but simply created with demo data within them. It’s a great sandbox to test a solution.
Getting back to our friends and, considering I make part of my living as an ERP/financial software consultant and commentator, I balked at signing an NDA that was pretty onerous in its breadth. I don't like to sign NDAs at the best of times and when they’d potentially threaten my ability to do what I do for a living, I run a mile. Our GM approached the company to see if they could be flexible about this only to receive a very succinct reply:
I’m sorry but skipping the NDA is completely non-negotiable.
We have had 2 POS companies in the last 18 months try to steal our IP and we are now deep in legal action with them both.
I just about fell off my chair. These guys really need to get over themselves. Our GM was a little frustrated but luckily found one of the other directors who was happy to sign the document. And here it got interesting, you see said director happens to have a son who makes a living as an iOS developer. He’s not in the POS space, not even in the financial space and yet they were concerned at the IP risk issues that having a developer who was related to a (non-executive) director could raise. Eventually they relented and agreed (bless them) to let our GM obtain a trial copy of their software, but only for a scant 48 hours.
Where to start on this one?
- The software costs a few thousand dollars. Any competitor could, if they so desired, simply go out and buy it tomorrow under the cover of a bona fide business. They’d then be able to roam through the code at their will. Of course they don’t do that, because the good ones are busy actually building a business based off execution, not code foraging
- Code is not a differentiator. Sure a product that simply doesn’t work won’t get very far but beyond that, it’s about agility, market entry strategy and good marketing that decides success. If you’re a vendor of software in what is a widely available space, you’re crazy if you think that holding tight to your source code is what will make or break you
The crazy thing here is that I’m led to believe that this is actually a great product. But their prehistoric approach towards prospect nurturing and managing leads has me wanting to run a mile from them. I’d actually advise anyone to chose a slightly inferior product based on the fact that if their approach to running their business is to sweat endlessly about IP, that their rate of innovation is likely to suffer as a consequence.
It doesn’t need to be this hard – there are endless books, blog posts and articles in existence all about how to run a sales and marketing organization in this more modern, more connected and more open world. This example is a throwback to an era that, thankfully, has just about left us.
