We were a $250k ARR legacy app when we were introduced to our 900 lb. Gorilla.
A Fortune 10 Financial Services company. We signed them (for +$1M/yr, 5 yr min) and then lived the dream, then lived thru the nightmare.
It was a good move for us, but here are some things to consider:
- The legal departments of companies of these size review EVERYTHING. And they will try to prove their own internal value by negotiating every single sentence in your terms of service and license agreement. These lawyers have never even met your customer and the things they will say are "deal breakers" will boggle your mind. Getting to a "Green Light Go!" from your customer is one thing. Getting a signed contract thru the black hole of their legal department is another. ADD 4-5 months to your go live timeline for this bullshit.
- Very large companies in the US have all adopted management policies I like to call the "Wal-Mart Business Model". It goes like this :
1) Screw your employees.
2) Absolutely fuck your vendors.
3) Pass the savings along to your customers to undercut your competitors.
You will be on the receiving end of #2. Enjoy!
During license negotiations, they will ask for 'most-favored nation' status. This means that if any customer you currently have (or ever sign in the future) has lower fees than them, you agree that they will get their fees reduced to that level too. And they will want to audit you to ensure that this actually happens. Do not let them audit you.
On the go live anniversary, it will primarily manifest itself in the form of a process these big companies run called 'zero-based budgeting'.
Zero based budgeting is exactly what it sounds like: every single line item in a department's proposed next year's budget has to be re-submitted de novo, as if they were doing it for the first time and the ROI re-justified.
Because of this, every single year, your Gorilla will do two things:
1) Put your process/function/idea out for RFP or for T-Shirt sizing for their internal IT to develop their own version (now that you've shown them how to do it).
2) Tell you unless you cut your pricing 50%, they will replace you with someone else.
When this happens, (and it will) you startup puppies had better have your ducks in a row. You need biz intel on your competitor's pricing. Your need a deliverable product roadmap that their internal groups can never match. You need an impeccable customer service and uptime record. Your CEO had better have balls of steel and the voice of an angel to stand up to their demands while keeping them happy as clams.
Finally, more than anything, Enterprise customers want customization and special treatment. The reason they are going with you as a SAAS is they can't get their internal people to do it. So give them something they can't get internally: their own private woodshed. Instead of giving them volume pricing discounts, give them "funny money". For every 3 months at full $49/month pricing per user, you'll credit them $49 in arrears towards training/custom development/support/etc. Consulting margins typically run north of 50%, so this funny money gives your customer champion a load of flexibility to customize, keeps them out of arguing their internal company IT backlog, adds features to your product and keeps your margins where you want. Win-Win-Win.
We did too.
We were a $250k ARR legacy app when we were introduced to our 900 lb. Gorilla.
A Fortune 10 Financial Services company. We signed them (for +$1M/yr, 5 yr min) and then lived the dream, then lived thru the nightmare.
It was a good move for us, but here are some things to consider:
- The legal departments of companies of these size review EVERYTHING. And they will try to prove their own internal value by negotiating every single sentence in your terms of service and license agreement. These lawyers have never even met your customer and the things they will say are "deal breakers" will boggle your mind. Getting to a "Green Light Go!" from your customer is one thing. Getting a signed contract thru the black hole of their legal department is another. ADD 4-5 months to your go live timeline for this bullshit.
- Very large companies in the US have all adopted management policies I like to call the "Wal-Mart Business Model". It goes like this :
You will be on the receiving end of #2. Enjoy!During license negotiations, they will ask for 'most-favored nation' status. This means that if any customer you currently have (or ever sign in the future) has lower fees than them, you agree that they will get their fees reduced to that level too. And they will want to audit you to ensure that this actually happens. Do not let them audit you.
On the go live anniversary, it will primarily manifest itself in the form of a process these big companies run called 'zero-based budgeting'.
Zero based budgeting is exactly what it sounds like: every single line item in a department's proposed next year's budget has to be re-submitted de novo, as if they were doing it for the first time and the ROI re-justified.
Because of this, every single year, your Gorilla will do two things:
When this happens, (and it will) you startup puppies had better have your ducks in a row. You need biz intel on your competitor's pricing. Your need a deliverable product roadmap that their internal groups can never match. You need an impeccable customer service and uptime record. Your CEO had better have balls of steel and the voice of an angel to stand up to their demands while keeping them happy as clams.Finally, more than anything, Enterprise customers want customization and special treatment. The reason they are going with you as a SAAS is they can't get their internal people to do it. So give them something they can't get internally: their own private woodshed. Instead of giving them volume pricing discounts, give them "funny money". For every 3 months at full $49/month pricing per user, you'll credit them $49 in arrears towards training/custom development/support/etc. Consulting margins typically run north of 50%, so this funny money gives your customer champion a load of flexibility to customize, keeps them out of arguing their internal company IT backlog, adds features to your product and keeps your margins where you want. Win-Win-Win.
Good luck!