1) Cloud solution providers are shifting from selling individual products to selling comprehensive cloud solutions addressing multiple business needs. This requires more sophisticated pre-sales roles to support complex solution selling. 2) Both hybrid and cloud-only companies leverage pre-sales architects and specialists to assist sales teams with cloud solutions, though hybrid companies prefer to share these resources between cloud and on-premise. 3) While cloud adoption is driven more by customer demand than sales reps, lack of customer knowledge remains a key sales challenge according to survey participants. © 2011 The Alexander Group, Inc.® 28

1. Cloud Coverage & Compensation Study
2011 Sales Practices & Findings Report
Jeff Hersh Carl Ehrnrooth
jhersh@alexandergroup.com cehrnrooth@alexandergroup.com
Principal Consultant
Atlanta | Chicago | San Francisco | Scottsdale | Stamford

2. Table Of Contents
1 Executive Summary
2 Participant List
3 Routes To Market
4 Pre-Sales & Inside Sales
5 Cloud Sales & Services Practices
6 Migration To Cloud
7 Cloud Partner Practices
8 Sales Compensation Practices
9 Contact The Alexander Group
© 2011 The Alexander Group, Inc.® 2

3. Executive Summary
1 Executive Summary
i. Definition Of Cloud
ii. Why Study Cloud Sales Practices?
iii. Impact Of Cloud Computing
iv. Cloud Computing Myths
v. Findings Summary
vi. Succeeding In The Cloud
© 2011 The Alexander Group, Inc.® 3

4. Definition Of Cloud
+
Cloud Computing Hybrid Solutions Cloud-Only Solutions
Internet-based computing Used to refer to solutions Used to refer to solutions
where scalable and elastic offered by companies that offer offered by companies that offer
resources, software and both traditional on-premise only cloud based solutions.
information are provided to software and cloud based
computers and other devices solutions.
on-demand.
Companies that offer this type
Companies that offer this type of service are referred to in this
of service are referred to in this report as:
report as:
Cloud-Only companies or
Hybrid companies or Hybrid Cloud-Only solution
solution providers. providers.
© 2011 The Alexander Group, Inc.® 4

5. Why Study Cloud Sales Practices?
 Definition Of Cloud Computing Evolving
Enterprises, governments, and consumers are embracing and consuming
emerging technologies at a rapid pace.
 Relationship Paradigms Are Eroding
Customer / Vendor relationships changing as firms focus on flexibility,
adaptability, and choice.
 Innovation Fed By Co-Creation
Global pace of technical innovation is being fed more and more through co-
creation versus traditional product development lifecycle.
 Customers Are Driving Adoption
They are quick to identify trends, test and deploy technologies, and evolve or
dispose of them.
 Go-To-Market Model Impacted
Everything from strategy to coverage to licensing will be altered by addition of
cloud solutions when paired or competing with on-premise offerings.
© 2011 The Alexander Group, Inc.® 5

6. Impact Of Cloud Computing
Cloud computing market expected to grow to Cloud Computing
1 $150B by 2013 (Gartner). Will Radically
Transform The Way
You Approach Your:
Cloud economics will continue to lower barriers
2 of entry for SMB.
Go-To-Market Strategy
Pace Of Innovation
Custom application platforms will encourage Customer Involvement
3 innovation & experimentation from customers.
Partner Ecosystem
Sales Teams & Talent
Services offered on public & private clouds will
4 be linked to mobile internet experience.
Social Networks will increase number of cloud
5 services targeted to end consumers.
© 2011 The Alexander Group, Inc.® 6

7. Cloud Computing Myths
Myth Reality
Cloud Will Sell Itself FALSE
Customers are running to the cloud to replace Customers are taking a cautious approach to
existing on-premise solutions without help. cloud solutions preferring to conduct small
pilots vs. enterprise deployment.
Customers Afraid Of Commitment FALSE
Buyers demand cloud solutions that are flexible 80% of customers sign annual or longer
and easy to exit from. contracts.
Customers Know What Cloud Means FALSE
Buyers are savvy and understand business value 47% of participants cite ‘Customer Knowledge’
of cloud. as a major sales issue.
Cloud Is A ‘One-Click’ Answer FALSE
Customers expect their cloud solution to be Over 66% of participants are deploying
online and operational with a single click. architects to support their sales teams.
Partners Are Cloud Ready FALSE
Companies can use existing partner networks Only 50% of participants are satisfied with
and programs to increase cloud reach. their partner’s cloud readiness.
© 2011 The Alexander Group, Inc.® 7

8. Summary Of Findings
1 Cloud Offerings Are Shifting From Product Centric To Solution Centric
2 Adoption Of Cloud Driven More By Customer Desire Than By Reps
3 Attempt To Penetrate Market Through Low Cost & Existing Resources
4 Companies Avoid Direct Cannibalization But Still Aim For Pay Parity
5 Skills Gap In Sales Talent Between Technical Sellers & Service Sellers
6 Role Of Account Manager Evolving To Customer Success Manager
7 Channel Partners Conservative About Their Own Cloud Investment
© 2011 The Alexander Group, Inc.® 8

9. Study Findings
1 Cloud Offerings Are Shifting From Product Centric To Solution Centric
 The complexity of cloud solutions has increased as companies offer a suite of services instead of
single applications to address customer business needs.
 To effectively solution sell cloud offerings, solution providers are using more sophisticated pre-
sales roles to answer customer technical and business needs.
2 Adoption Of Cloud Driven More By Customer Desire Than By Reps
 80% of participants who offer both cloud and on-premise solutions do not emphasize one solution
over another and instead let customers drive the decision to a particular implementation strategy.
 47% cite a lack of customer knowledge and awareness of the cloud and its capabilities as their
primary sales obstacle.
3 Attempt To Penetrate Market Through Low Cost & Existing Resources
 Inside Sales teams at Cloud-Only companies have more responsibility in the sales process
compared with Hybrid companies. Several participants express challenges over determining
where to draw coverage line between Inside and Field teams.
 Hybrid companies seek to leverage their economies of scale and existing pre-sales resources by
sharing them between their on-premise and cloud solutions.
© 2011 The Alexander Group, Inc.® 9

10. Study Findings (cont’d)
4 Companies Avoid Direct Cannibalization But Still Aim For Pay Parity
 80% of Hybrid companies with competing On-Premise & Cloud solutions do not emphasize one
solution over the other to minimize cannibalization. However, 68% offer special treatment to their
sellers for selling cloud to establish pay-parity between solutions.
5 Skills Gap In Sales Talent Between Technical Sellers & Service Sellers
 25% of participants cite sales talent as a major issue affecting their go-to-market strategy and
describe challenges with sales force uptake because Cloud has a different sales cadence and
requires a skill set tuned more to selling a service than selling a technical product.
6 Role Of Account Manager Evolving To Customer Success Manager
 73% of participants do not set their clients on auto-renewal programs by default. Customers
require more touch and role of Account Manager is focused on solution adoption, consumption
and expansion and has responsibility for driving customer success.
7 Channel Partners Conservative About Their Own Cloud Investment
 50% of participants are unsatisfied with their partner’s level of cloud readiness. One frequent
comment is that partners don’t understand the economic value proposition of cloud and are taking
a wait and see approach to determine if the economic model is sustainable.
© 2011 The Alexander Group, Inc.® 10

11. AGI Recommendations To Succeed In Cloud
 Develop Solution / Service Sales Capability
Increased deal complexity and nature of sale requires less technical selling and more service selling.
 Get Customer to Commit (And Grow)
Measure success of prospect conversion, account penetration, & customer retention.
 Emphasize Quality of Customer Experience
Reliability is taken for granted but best in class implementation and support is not.
 Determine Role of Partners
Understand new dynamics and develop their value proposition.
 Develop Cloud Outreach to Increase Awareness
Overcome customer fears and educate customers on value of cloud compared with on-premise.
 Increase Deal Size for Inside Sales
Elevate reach of Inside Sales to allow Field Sales to focus on largest deals.
 Pay Sales Talent for Sales Performance
Use fewest number of metrics necessary to focus behavior on most important sales goals.
© 2011 The Alexander Group, Inc.® 11

12. Participant List

13. Mix Of Cloud & Hybrid Solution Participants
Survey responses came from 12 Cloud Only and 11 Hybrid On-Premise / Cloud
Solution providers from a range of industries.
© 2011 The Alexander Group, Inc.® 13

14. Data Legend
# Responses
10 10 10
Label Label Label
Responses Responses From Responses From
From Both Hybrid & Hybrid Companies Cloud-Only Companies
Cloud-Only Companies
© 2011 The Alexander Group, Inc.® 14

15. Routes To Market

16. Route To Market Observations
Cloud offerings are shifting to solution selling from product selling.
 There is a shift to offering a comprehensive cloud solution by offering a suite of applications
that addresses multiple business needs instead of a single product.
Cloud-Only companies are leveraging self-directed fulfillment channel.
 60% of Cloud-Only providers use e-Commerce to reach customers compared with only
36% of Hybrid solution providers.
 This can also be related to the complexity of the solution as Hybrid companies adapt existing
licensed software for the cloud.
Cloud-Only companies more reliant on Inside Sales for revenue.
 Cloud-Only providers drive 40% of their revenue through telesales & web compared with
Hybrid On-Premise & Cloud solution providers who rely more on their field sales teams and
channel partners.
© 2011 The Alexander Group, Inc.® 16

17. Shift From Single Offering To Cloud Solution
What Categories Do Your Cloud Offerings Fall Into? (Check All That Apply)?
15 1. Cloud Data Centers / Private Hosting
2. Enterprise Application Integration
Cloud Data Centers / Private Hosting 3. Virtualization / Virtual Resources
12 4. Business Intelligence & Analytics
5. Security / Risk Management
Enterprise Application Integration 6. Customer Relationship Management
10 7. Messaging, Conferencing, & Communications
10 8. Human Resources & Workforce Management
9. Enterprise Resource Planning
10. Content & Document Management
11. Storage & Systems Management
8 12. Supply Chain Management & Logistics
7 7 13. Manufacturing, Warehousing, & Industrial Software
14. Other
5
5 5 5 5
4
3 3 3
1
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14
N=23
© 2011 The Alexander Group, Inc.® 17

18. Self Fulfillment Common Among Cloud-Only
Which Of The Following Routes To Market Do You Use To Reach Customers?
(Check All That Apply)
15 N=11
Hybrid
N=12
Cloud-Only
11
10
10 10 10 10 10
Partners / Direct / Inside / 7
Channels Field Sales Web Sales
5 4
E-Commerce / Other
Self Fulfillment
0 1
0
© 2011 The Alexander Group, Inc.® 18

19. Hybrid Companies Lean More On Partners
Estimate % Of Cloud Revenue Driven By The Following Routes To Market?
Route To Market All Hybrid Cloud-
Only
(N=22) (N=10) (N=12)
Direct / Field Sales 44% 39% 48%
Partners / Channels 28% 46% 13%
Inside Sales / Chat Centers 21% 13% 29%
E-Commerce / Self-Directed Fulfillment 6% 1% 10%
Other 1% 1% 0%
© 2011 The Alexander Group, Inc.® 19

20. Pre-Sales & Inside Sales

21. Pre-Sales & Inside Sales Observations
Cloud solution complexity has increased.
 Both Hybrid and Cloud-Only companies support their sales with Architect and Product Specialist
pre-sales roles to off-load non-sales functions.
Hybrid companies prefer to leverage existing support resources.
 80% of Hybrid solution providers leverage their existing on-premise architects and sales engineers
with their cloud pre-sales teams.
Inside Sales teams assigned specific responsibilities.
 74% of Inbound and Outbound Telesales teams have ‘Lead Generation’ responsibilities.
 78% of Outbound Teams are able to initiate and close sales compared with 60% of Inbound.
 35% of companies use Web Chat for either sales or lead generation.
© 2011 The Alexander Group, Inc.® 21

22. Increased Support Role Complexity In Cloud
How Do You Align Your Pre-Sales Support Roles To Assist Your Sales Teams?
15
Support Dedicated To Cloud Offerings Only
11 11
10
Sales Product
8
Engineers Specialists
Architects
5
4
Other
0
N=12
*Question Answered Only Cloud-Only Companies
© 2011 The Alexander Group, Inc.® 22

23. Support Resources Shared In Hybrid Model
How Do You Align Your Pre-Sales Support Roles To Assist Your Sales Teams?
15
Support Dedicated To Support Shared Between
Cloud Offerings Only Cloud & On-Premise
10 9 9
Sales
Architects
Engineers
6
5 Product
Specialists
Product
Sales Specialists
Engineers 3 Architects
2 2
Other
1 0 Other
0
N=11
*Question Answered Only By Hybrid Companies
© 2011 The Alexander Group, Inc.® 23

24. Inbound Telesales Used For Lead Generation
How Do You Use The Following Inside Sales Roles? (Check All That Apply)
25
How Do You Use Your Inbound Telesales Team?
20
17
15
Lead
14
Generation 13 13
10 Retention
Initiate /
Renewals
Close Sale
5
5
Do Not
0 Have Role
N=23
© 2011 The Alexander Group, Inc.® 24

25. Outbound Tele Used To Initiate / Close Sales
How Do You Use The Following Inside Sales Roles? (Check All That Apply)
25
How Do You Use Your Outbound Telesales Team?
20
18
17
15 Initiate /
Lead Close Sale
Generation 13
12
10
Renewals
Retention Do Not
5
Have Role
2
0
N=23
© 2011 The Alexander Group, Inc.® 25

26. Web Chat Typically Not Utilized In Sales
How Do You Use The Following Inside Sales Roles? (Check All That Apply)
25
How Do You Use Your Web Chat Role?
20
15
15
Do Not
Have Role
10 Lead
Generation
Initiate /
Close Sale Retention
5 6
Renewals
4 4
2
0
N=23
© 2011 The Alexander Group, Inc.® 26

27. Cloud Sales & Service Practices

28. Cloud Sales & Service Observations
Cloud solutions still requires customer commitment.
 83% of companies still require their customers to purchase a fixed length contract.
 47% of deals sold to customers are for an annual term.
Early cancellation carries a penalty.
 33% of companies will not allow early termination and require payment of contract in full.
 29% will allow early termination but charge customers a penalty fee.
Minimum service guaranteed; reimbursement for outages is not.
 70% use a standard service level agreement for all customers.
 91% guarantee a minimum level of service uptime but only 68% have a customer reimbursement
policy for outages.
© 2011 The Alexander Group, Inc.® 28

29. Licenses Most Frequently Sold Per Seat
In What Ways Do You License Your Cloud Offerings? (Check All That Apply)
15
15
Per User /
Seats
10
8
7
Consumption
5
Subscription
3
2
Per Device
0 Other
N=23
© 2011 The Alexander Group, Inc.® 29

30. 83% Of Cloud Services Require A Contract
Do You Require A Minimum Contract Term For Purchases?
20 19
Yes
-
15 Users Must
Agree To A
Contract Term
No
No
10 -
- Depends
Not
Users Don't Enter -
Required, But
Into A Fixed Based On
Offer Both 'Pay
Contract Term - Customer Type
As You Go' And
'Pay As You Go'
5 Contract Terms
2
1 1
0
N=23
© 2011 The Alexander Group, Inc.® 30

31. Annual & Multi-Year Most Common Terms
What Contract Terms Do You Offer? (Check All That Apply)
25
21
20
17
Annual
15
Multi-Year
10
10
Monthly
5 Other
Semi-Annual
4
Quarterly
2
1
0
N=23
© 2011 The Alexander Group, Inc.® 31

32. Majority Of Deals Sold As Annual Contract
What Percentage Of Deals Are Sold At The Following Contract Terms?
Average For Participants That Offer Average For Participants That Offer
Any Deal Length (N=20) Only Multi-Year or Annual Terms (N=10)
Contract Length % of Deals* Contract Length % of Deals**
Annual 47% Annual 60%
Multi-Year 33% Multi-Year 40%
**Data excludes participants who offer ‘Monthly’, ‘Quarterly’, ‘Semi-
Monthly 17% Annual’, and ‘Other’ contract lengths
Other 3%
Quarterly 0%
Semi-Annual 0%
*Data excludes participants who only offer ‘Other’ contract lengths
© 2011 The Alexander Group, Inc.® 32

33. Auto-Renewal Based On Initial Agreement
Do Contracts Auto-Renew At The End Of A Term?
10
9
Maybe Yes No No No
- -
- - -
Contracts 'Pay As You
Depends On Renewal Team / Usage Rights
Auto-Renew Go' System
Account Size System Prompts Expire Without
Without With No
And Customer For Customer
Customer Contract
Agreements Action Action
Involvement Required
5
5
4
2
Other
1 1
0
N=22
© 2011 The Alexander Group, Inc.® 33

34. Cancellation Frequently Carries A Penalty
Do You Allow Users To Cancel Their Service Mid-Contract?
10
Yes Yes Yes
– -
-
Cancellation 'Pay As You
Customer Can
Only Allowed If Go' / No
Cancel
Minimum Contract
Without
7 Service Levels -
Penalty Before
(from Vendor) Can Cancel
Contract Over
6 Not Met Anytime
5
No Yes
–
- Cancellation Customer 4
Requires Can Cancel
Payment Of With Penalty
Full Contract Before
Contract Is
Over 2
Other
1 1
0
N=21
© 2011 The Alexander Group, Inc.® 34

35. First Billing Most Common At Booking
When Does 'First' Billing Occur For New Cloud Service?
10
9
Booking /
Signing
6
5
Scheduled
Invoice 4
Custom
Deployment / Contract
Acceptance 2
0
N=21
© 2011 The Alexander Group, Inc.® 35

36. Service Ends After 60-90 Days Non-Payment
At What Point Do You Terminate Service For Non-Payment?
10
Invoice Invoice
+ +
60 Days 90 Days
7
6
Invoice Invoice
5
+ +
30 Days 120 Days
1 1
0
N=15
© 2011 The Alexander Group, Inc.® 36

37. Standard SLA Used In Majority Of Sales
Do You Have Standard Service Level Agreements (SLA) For Customers?
15
Additional SLA Questions % Yes
15
Do You Guarantee A Minimum Level Of
Standard SLA
Service Uptime? 91%
For All
Customers
Do You Have A Customer
10 Reimbursement Policy For Outages? *68%
5 Individual SLA
4 Both Individual &
Standard SLA
Do Not Have SLA
2
1
0
N=22
*% ‘Yes’ also includes respondents who don’t reimburse cost but instead have a service credit policy
© 2011 The Alexander Group, Inc.® 37

38. Migration To Cloud

39. Migration To Cloud Observations
Cloud adoption is a customer choice.
 80% of participants that offer competing on-premise and cloud solutions do not emphasize one type
of sale over the other and let customer drive implementation and adoption strategy.
 However, 63% will allow existing licenses to terminate early to move customer to cloud.
Cloud adoption not necessarily the sales person’s first choice.
 68% of companies offer special treatment for the sale of their cloud solution, primarily to establish
pay parity with their competing on-premise solution.
Customer knowledge most frequently cited cloud sales issue.
 47% cite lack of customer understanding or knowledge of cloud as primary sales obstacle.
 Sales leaders also express concern about how to evolve the sales model to address the
rhythm and cadence of cloud solution sales.
© 2011 The Alexander Group, Inc.® 39

40. Few Emphasize A Specific Adoption Strategy
If You Offer Competing On-Premise And Cloud Solutions, Does Your Company
Emphasize One Solution Over The Other?
10
Neither - Customer Determines Implementation Strategy
8
1. Neither - Customer Determines Implementation Strategy
2. Emphasize On-Premise Over Cloud Solution
3. Emphasize Cloud Over On-Premise Solution
4. Not Applicable - Do Not Offer Competing On-Premise and
Cloud Solutions
5
1 1 1
0
1 2 3 4
N=11
*Question Answered Only By Companies Offering Both On-Premise & Cloud Solutions
© 2011 The Alexander Group, Inc.® 40

41. Early Termination Policy To Move To Cloud
If You Offer Both On-Premise and Cloud Solutions, Do You Have A
Migration License / Policy To Move Existing Customers From Your
On-Premise Solutions To Cloud Offerings?
Migration Policy % N=
Yes –
Will Terminate Existing Licenses Early To Move
Existing Customer To Cloud Solution
63% 5
No –
Customer Must Finish Out On-Premise Contract
Before Moving To Cloud
38% 3
Not Applicable - 3
*% Calculation Excludes ‘Not Applicable’ Answers
© 2011 The Alexander Group, Inc.® 41

42. Pay Parity An Issue To Selling Cloud
What Is The Intent Of Your Special Treatment To Motivate Sales Of Cloud
Solutions vs. Existing On-Premise Solutions? (Check All That Apply)*
Cloud Migration % Yes
5
Do You Offer Special Treatment To Sales To
Motivate The Sale Of Cloud Solutions?
68%
5 (N=11)
Establish Pay
Parity With On- 4
Premise Solutions
Develop
Momentum To 3
Gain Market
Share Prioritize Moving
On-Premise
Solutions To The
Cloud
0 N=7
*Question Answered Only By Companies Offering Both On-Premise & Cloud Solutions That Have Special Treatment For Cloud
© 2011 The Alexander Group, Inc.® 42

43. Special Incentives To Motivate Cloud Sales
Key Findings:
 2/3 of participants offer special incentive treatment on cloud sales in new accounts.
 Special treatment includes additional quota relief or bonus on top of existing plan.
 Additional incentive used to establish pay parity with on-premise solution.
Quotes:
 Most deals are sold as a monthly contracts but we annualize the credit from a quota and
commissions perspective to achieve pay parity with our on-premise solution.
- Network Solutions On-Premise & Cloud Solution Provider
 We want to prioritize movement to the cloud but haven't figured out how to set quotas for
cloud yet so we do a separate bonus on top of the plan.
- Security & Risk Management On-Premise & Cloud Solution Provider
© 2011 The Alexander Group, Inc.® 43

44. Customer Knowledge Is Major GTM Obstacle
What are the top 3 issues you are experiencing with your go to market strategy or
sales team, related to the cloud?
10 Customer Knowledge
Cloud
8 Sales
Model
Customer Competing With
Adoption Established Solutions
6 Developing Sales Goals / Target Security /
Partners Commissions Audience Data
5 Compliance
5 5
Sales Talent
4 4 4 Pricing Lead
Generation
3 3 3
Managing
Rapid
Growth
1 1
0
N=17
© 2011 The Alexander Group, Inc.® 44

45. Top Cloud Sales Issues
Quotes:
 There is confusion around the definition of ‘Cloud’. We tend to think that we're selling
products but it's really a service.
- Messaging & Collaboration On-Premise & Cloud Solution Provider
 Uptake with our sales force has been challenging as its something new that they don't
really understand.
- Security & Risk Management On-Premise & Cloud Solution Provider
 Our primary challenge is getting our business partners to actively invest, promote and
grow their cloud practices as we try and sell Cloud up-market.
- Enterprise Application Cloud Solution Provider
 Our adoption levels do not meet the hype because the current economic climate does not
encourage risk or change.
- Cloud Data Center / Private Hosting Cloud Solution Provider
© 2011 The Alexander Group, Inc.® 45

46. Cloud Partner Practices

47. Cloud Partner Practice Observations
Channel partners still part of the software solution ecosystem.
 74% of participants use System Integrators in their indirect strategy.
 Referral fees and commissions are primary channel incentives used to drive sales.
Solution providers far from satisfied with channel partners.
 Fewer than 50% of participants are either ‘Satisfied’ or ‘Very Satisfied’ with the breadth of solutions
and services offered by their partners.
 Only 48% are satisfied with their partner’s ability to effectively market and sell their solution.
 50% of participants believe more partner education is needed to improve partner capability.
© 2011 The Alexander Group, Inc.® 47

48. Sys. Integrator Most Common Partner Type
Which Of The Following Partner Types Do You Utilize For Your Indirect Route To
Market? (Check All That Apply)
20
17
16
15 System
Integrators
14
Value Added 13
Resellers Independent
10 Software
Vendors
Distributors
8
5 Hosting
Partners 5
Other
0
N=23
© 2011 The Alexander Group, Inc.® 48

49. Cloud-Only Companies Self-Host
Which Of The Following Partner Types Do You Utilize For Your Indirect Route To
Market? (Check All That Apply)
10 N=11
Hybrid
N=12
Cloud-Only
9
8 8 8 8
7
7
System Value Added
Integrators Resellers 6 6
5
Independent
Hosting
Software Distributors
Partners
Vendors
3
2
1
Other
0
1 2 3 4 5 6
© 2011 The Alexander Group, Inc.® 49

50. Multiple Channel Incentives Within A Partner
What Channel Incentives Or Sales Compensation (For Partners) Do You Use?
5
4 4
4
Referral Fee Commission
3
3 3
Revenue
Discounts
2 Share
2 2
Rebates MDF
1
1
Margin
0
N=14
© 2011 The Alexander Group, Inc.® 50

51. Only 50% Report Satisfaction With Partners
How Would You Rate Your Partner Capability In The Following Areas?
Partner Capability Satisfaction* N=
Breadth Of Cloud Solutions Offered Through Partners 48% 21
Breadth Of Cloud Services Offered Through Partners 48% 21
Ability To Service / Implement Cloud Solutions 52% 21
Ability To Sell / Market Cloud Solutions 48% 23
*Percent reporting being either ‘Satisfied’ or ‘Very Satisfied’ with partner capability
© 2011 The Alexander Group, Inc.® 51

52. Cloud Partner Education Still In Early Stages
Key Findings:
 1/2 participants say more partner education needed to increase channel capability with
respect to their cloud solution.
 1/4 participants reported that recruiting and building partner network is the biggest
challenge to increasing overalls satisfaction with partners.
Quotes:
 Our partners need time and experience to develop the necessary domain and application
knowledge.
- Human Resources & Workforce Management Cloud Solution Provider
 We need to increase our partner capability and convince our partners of the economic
value proposition and benefit of Cloud compared to On-Premise.
- Enterprise Application Cloud Solution Provider
© 2011 The Alexander Group, Inc.® 52

53. Sales Compensation Practices

54. Sales Compensation Observations
Booked revenue is the primary sales compensation metric.
 All participants use 3 or fewer performance metrics to motivate sales reps.
 45% of participants provide reps with sales incentive credit immediately at booking.
 However, 50% of companies have claw back policies for accounts that cancel.
 Reps are most frequently paid using Individual Commission Rates or Bonus Formulas which
equalize pay across different sized territories.
 71% of sales organizations credit deals using either Total Contract Value or Annual Contract Value
policies which are easy to explain to sales reps.
Outside / Field reps have sales goals 2.2x higher than Inside reps.
 Average sales goals for an outside rep is $1.07M while inside reps annually drive $490K.
© 2011 The Alexander Group, Inc.® 54

55. Booked Revenue Most Common Metric
Which Of The Following Types Of Metrics Do You Use To Determine Individual
Sales Incentive Pay For Cloud Solutions? (Check All That Apply)
20
Booked Revenue
17
Actual Billings
15
Number of New Accounts
Retention Metrics
Customer Satisfaction
10
9 Profitability Metrics
Corporate Performance
5 Committed Seats
4 4
3 Attached Products
2
1 1 1
0
N=22
© 2011 The Alexander Group, Inc.® 55

56. Typically No More Than Three Incentive Metrics
How Many Sales Incentive Metrics Do You Use In Your Primary Sales Role?
10
10
3
Metrics
7
5
5
1 2
Metric Metrics
4+ Metrics
0
0
N=22
© 2011 The Alexander Group, Inc.® 56

57. Reps Typically Have Annual Sales Goals
How Long Is The Performance Period For The Primary Sales Goal Of Your Main
Sales Role?
15
12
10 Annual
Goals
5
5
4 Semi-
Quarterly Annual
Monthly Goals Goals
Goals 1
0
N=22
© 2011 The Alexander Group, Inc.® 57

58. Pay Frequency Increases With Goal Length
How Frequent Is The Sales Incentive Payout Of The Primary Sales Metric?
More Frequent Than Goal Length (Ex. Annual Goals But Pay Monthly)
Equal To Goal Length (Ex. Quarterly Goals & Quarterly Payout)
100%
100% 100%
92%
75% 80%
Reps Have Reps Have Reps Have Reps Have
Monthly Goals Quarterly Semi-Annual Annual Goals
N=4 Goals Goals N=12
50% N=5 N=1
25%
20%
8%
0%
N=22
© 2011 The Alexander Group, Inc.® 58

59. ICR & Bonus Formula Center Pay Practice
What Type Of A Pay Mechanic Is Used For Your Primary Incentive Metric?
Pay Mechanic Definition
10
9 Indiv. Commission Rates Rate Based On Quota and Target Incentive
Bonus Formula % of Incentive Earned at a % of Goal Attained
8
Individual
Flat Commission Rates Fixed Commission Rate For All Sellers
Commission
Rates (ICR) Flat Bonus Amount Fixed $ Amount For Performance Milestones
Bonus Sales Objective Based Achieve ‘X' Goal, Get ‘Y'
Formula
5
Flat Use Both
Commission Bonus
Rate Flat Sales Formula &
Bonus Objective Commission
2 Amount Based Rates
1 1 1
0
N=22
© 2011 The Alexander Group, Inc.® 59

60. Credit Given Close To Point Of Persuasion
When Do You Give Incentive Credit For Cloud Sales?
10
10
Booking
5
Invoice
Partial
4 Payment Credit At
Various
Deployment 3 Stages
2 Delivery 2
Acceptance 1
0
0
N=22
© 2011 The Alexander Group, Inc.® 60

61. TCV & ACV Most Common Crediting Method
For Sales Requiring A Contract Length, Which Of The Following Methods Do You
Use To Credit? (Check All That Apply)
Crediting Method Definition
10
9 9 Total Contract Value Credit For Entire Contract Upfront
Annual Contract Value Assume Customer Renews & Credit Full Year
Total Annual
Contract Contract Total Value Staggered Pay Total Value Incrementally
Value Value
First Year Value Only For Multi-Year Deals Credit First Year Only
(TCV) (ACV)
Net Present Value Credit For Entire Contract Using NPV Formula
Decelerated Value Provide Decelerated Credit Amounts
5
4
Total Value First Year
Staggered Value Only
2
Net Present Decelerated
Value Value
0 0
0
N=21
© 2011 The Alexander Group, Inc.® 61

62. Sales Credit Clawed Back For Cancellations
If A Customer Cancels Their Contract Do You Claw Back Commission Credit?
Cancellation Reason (n=22) % Responding Yes
No Reason Given For Cancellation 50%
Cancellation Due To System Outages / Issues 5%
N=22
© 2011 The Alexander Group, Inc.® 62

63. Participant Claw Back Policies
Quotes:
 We credit at Booking, but pay upon Customer Payment. The credit is removed
retroactively but claw back is minor as customer has not paid the full amount.
- Enterprise Resource Planning Cloud Solution Provider
 If a customer wants to go monthly and cancels their contract we claw back the annual
incentive credit and pro-rate it to length the customer contract was active.
- Security & Risk Management On-Premise & Cloud Solution Provider
 We're not consistent and look at the reason why they cancelled. If the services never
started we claw back fully.
- Business Intelligence & Analytics Cloud Solution Provider
© 2011 The Alexander Group, Inc.® 63

64. Field Goal To Drive 2x Bookings vs. Inside
If You Have Multiple Cloud Offerings, Do You Combine The Sales Goals Or
Separate Them By Solution?
Quota Setting Practice (N=15) %
Quota Combined From Goals Of Multiple Solutions 73%
Separate Quotas Set By Service / Solution / Product 27%
Sales Role Average Annual Quota Size N=
Field Sales $1.07M 11
Inside Sales $490K 6
Channel Sales $1.42M 3
© 2011 The Alexander Group, Inc.® 64

65. Contact The Alexander Group

66. The Alexander Group, Inc.® Overview
The Alexander Group, Inc. specializes exclusively in go-to-market consulting by
BUSINESS helping sales and marketing executives accelerate revenue growth and improve
MISSION business results.
We bring expertise in go-to-market strategy design and execution. As a
OUR collaborative partner, we help sales and marketing executives make
VALUE objective, fact-based decisions on the right strategies and programs.
The majority of our consulting team joined The Alexander Group with sales or
OUR marketing experience. Once on board, we provide continual training and
PEOPLE certification across go-to-market specialties.
Founded in 1985, The Alexander Group, Inc. has provided management
OUR consulting services to sales and marketing executives at over 1000 companies,
HISTORY including 70% of the Fortune 500.
Representative Clients
 Adobe  Hitachi Data Systems  Oracle
 Apple  IBM  Salesforce.com
 Avaya  Informatica Corporation  SAP
 Avnet  Intel  Seagate Services (now i360)
 BMC Software  Intuit  Synopsys, Inc.
 Cisco Systems  Juniper Networks  Symantec
 Citrix Systems, Inc.  McAfee  Veritas Software Corporation
 Fujitsu  Microsoft Corporation  Vertafore
 Hewlett-Packard  NetApp  Yahoo
© 2011 The Alexander Group, Inc.® 66

67. How Does Your Sales Team Compare?
Key Findings:
How Fast Is Your Market Changing?
 55% are in the process of or considering changing their sales model.
Is Your Sales Force Fighting Fires Or Building Relationships?
 62% of companies don’t track how their sales teams spend their time.
Is Your Sales Force Focused On The Right Outcomes?
 90% of sales organizations adjust their sales plan each year.
Do You Know Your Customer?
 Fewer than 25% have account based sales potential models.
*Source: AGI 2010 Sales Pulse Survey and AGI 2010 Sales Compensation Survey
© 2011 The Alexander Group, Inc.® 67

68. Where Are You In The Sales Growth Cycle?
Alexander Group works with companies by evaluating:
• Go-To-Market Strategy
• Routes To Market
• Coverage Models
• Customer Targeting
• Sales Organization
• Management
• Working with cross-functional and high-level teams we deliver recommendations
based on an in-depth understanding of the company, and apply our proven
methodology and proprietary benchmark data to quantify results.
© 2011 The Alexander Group, Inc.® 68

69. Alexander Group Cloud Offerings
Sample Of Alexander Group Services:
• Go To Market Strategy
Assess and (re)design your go to market model including: segmentation, routes to
market, sales process, roles, and rules of engagement to maximize your return on
sales investment.
• Sales Role Evolution & Design
Evaluate, map and design sales roles and rules of engagement to align sales
resources to your cloud go-to-market strategy.
• Cloud Sales Comp Design
Assess and refine your sales comp plans to drive sales rep behavior and focus on your
cloud offerings.
© 2011 The Alexander Group, Inc.® 69

70. Alexander Group Offices
Atlanta Chicago San Francisco
1201 Peachtree Street NE 200 West Madison Street 88 Kearny Street
Suite 1200 Suite 1900 Suite 1900
Atlanta, GA 30361 Chicago, IL 60606 San Francisco, CA 94108
404.249.1338 312.357.0500 415.391.3900
Scottsdale Stamford
8155 East Indian Bend Road 2777 Summer Street
Suite 111 Suite 505
Scottsdale, AZ 85250 Stamford, CT 06905
480.998.9644 203.975.9344
www.alexandergroup.com
© 2011 The Alexander Group, Inc.® Atlanta | Chicago | San Francisco | Scottsdale | Stamford

71. © 2011 The Alexander Group, Inc.® Atlanta | Chicago | San Francisco | Scottsdale | Stamford