Sean Ryan: Hey there, Sean Ryan and Ted Grossman partners with the Alexander Group. Well, Ted, this time of year, we like to kick back and reflect on a lot of things both work-related and not. But we especially like to look back on things that happened in the tech market that maybe were surprising, unexpected, areas where our clients drew us into issues that we weren’t necessarily anticipating at the beginning of the year. I don’t know about you, but that’s what makes the job fun for me is to see how these things develop over the course of time. I think we had a chance to talk before this, and we’re in violent agreement that one of the biggest areas of change that we’ve seen in a relatively tumultuous year in tech is certainly this idea around the changing role of post-land resources. The whole post-land motion, from the core rep to the CSM to the renewal reps, anybody that’s really responsible for bringing in revenue after that initial land, there just seems to be a lot more upheaval in that space than I can ever remember. Before we get started, I’d love to get your perspective on that as well, and what you’ve seen and how pervasive it’s been from your perspective.
Ted Grossman: There’s definitely been an inflection point this year. I think it has to do with, you know, there’s been a constant movement within the tech industry as a whole as we move to SaaS and we move to recurring revenue models about growing accounts, growing your install base. So, not talking about acquiring new accounts, but within your install base – how do you grow? What’s the role of the go-to-market to do that? Things have gotten very competitive over the last number of years, and it’s always been competitive in tech, but probably more so now with the advent of all these new AI companies that are coming up and new solutions coming out every day that seem exciting. The tech stack has just grown wider and bigger and deeper. So the question is, how do you hold on to what you got and how do you grow it?
Sean Ryan: Well, I think the other interesting thing from my perspective, Ted, I mean, you know, we collect benchmarking data. We’ve been doing it together now for more than 15 years. Right. And the interesting thing, when we got our most recent batch of data a couple of months ago, I think we’ve been feeling that churn rates are up and executives are anxious about it, but we saw it borne out in the data. I can remember not too long ago, we were probably at 92% GRR in the industry or an 8% churn. And now, everywhere we look, it feels like it’s more 86/87. So, you know, 13, 14 points of churn. That’s a big difference in a small amount of time. I think it’s putting a lot of pressure on go-to-market models, but particularly kind of that revenue retention and expansion piece.
Ted Grossman: Yeah, I agree with you. I mean, a couple things. One is, and that’s kind of where my point was going, it’s gotten very competitive. And people are, IT buyers are swapping things in and out all the time. So, you know, holding on to what you got, you know, 1 or 2 or 3% of extra churn when you annualize it over many years is actually a ton of money. So people are paying attention to that. Secondly, you know, the executives of all these software companies in particular, you know, SaaS companies, but now we’re even seeing it in as-a-service for hardware is about growing the business. Okay. It’s about the NRR growth. And, you know, traditionally when you think about the core sales rep, it’s go in and sell stuff and sell add ons and sell cross-sells and upsells. It was less about mitigating churn and how that all figured out. But that’s kind of the world’s kind of changing right now. And we’re looking at, and this is probably the biggest inflection point I’ve seen, the role of a core seller now, to actually grow the account, to be responsible for the GRR and the NRR of the account is something that we’re being asked about by virtually almost all of our clients.
Sean Ryan: Yeah. No, it’s really interesting. You know, we’ve talked for years about the need to have this virtuous cycle of adoption and solution assurance, usually led by the CSM or an account manager, that’s kind of creating that stable platform not only to expand, but also to renew. And, you know, for a lot of years, that core rep was maybe left out of that discussion, particularly around renewals. It was always go out and get that new thing. And more so this year than ever, you know, I’ve had conversations with clients that are just like, I can’t afford to let my rep, particularly in my largest accounts, step away from that responsibility to hold on to those accounts and give me a leaky bucket from a GRR standpoint. I wonder how much you think consumption plays into that, right? As we see companies move from subscription to more pay-as-you-go type models, is that kind of placing pressure on those existing subscription contracts?
Ted Grossman: I think so, and it’s about consumption, and it’s about use cases and business value. More and more, it’s not what product have you sold me, but what business case are you solving for me? What workload are you helping me with? How am I working my workflow better than I did before. And this is where it’s gotten competitive, right? So at any given time, an end customer is trying to solve a bunch of problems. And it could be that the stack that you’re selling them is working really well, but it could be that something new is going to take over part of that because it’s about those use cases. That’s why the reps have to stay involved, and that’s why they have to work really closely with their CSM and the other post-sales resources, you know, not only make sure things are working well with what they’ve purchased already, but making sure they’re always thinking about the next use case that’s coming down the pipe. And that’s really what the role has sort of turned into. It’s not product pushing at all, it’s really use case pushing. And, you know, that has fundamentally changed the role.
Sean Ryan: Yeah, I think that’s interesting. And I wonder how much more pressure that whole shift to consumption is going to place on traditional roles. So, for example, one of the things I’ve seen is you need a different CSM in a consumption model, right? You need a CSM that’s much more commercially focused and getting the customer to use, you know, the adoption and the customer care is a part of it, but I think it’s less of a big deal for that role, right?
Ted Grossman: The coordinated effort between the CSM and now the SE who in the past you would not have put into post-sales world, but now has to be constantly demonstrating new capabilities along with the CSM and often, that’s a big shift. I think where you’re actually starting to see that is, and tell me if you see this, a lot of companies, you’re starting to see more and more of a shift of the CSM roles and even the SE roles almost showing up in one organization, all rolling up to a chief commercial officer or chief revenue officer.
Sean Ryan: It’s interesting, and I think it’s also placed pressure on that traditional divide we’ve seen between the chief revenue officer and maybe a chief commercial officer or a chief experience officer that has control over that kind of success support function as well. I think organizations are kind of coming to grips with we can’t afford to have those be siloed any longer.
Ted Grossman: Yeah. And, you know, another area I think that’s kind of tangential to this, but equally important is, you know, we’ve been talking about directs resources, but let’s talk about the channel. There’s been a major shift in the channel ecosystems over the last number of years in tech. You know, the traditional VARs and resellers and distribution model still around, still important. But again, if you go back to this idea of how do you stay relevant with a customer, the way you have to sell them is not a transactional reseller anymore. It’s finding that next use case. It’s finding that value that you can add. So you know, what have we seen? We’ve seen more and more even, you know, traditional VARs and yet a whole slew of new service providers pop up, and they are providing expertise in a particular, you know, functional area or a particular vertical or some combination of those two. And that allows them to be really relevant. Now, those business models tend to be a little bit more consulting-esque. They tend to often be you know, we’re seeing the rise of the MSP is becoming more and more important. So I think you’re seeing some of these trends are really starting to affect not just the direct side of the house, but the indirect side as well. Do you agree?
Sean Ryan: Yeah. No, I think it’s a great point. So to the extent that we’ve laid out the issue, and I think it is a real issue for all the things we just went through. I think the impact is maybe even more interesting. What we’re seeing as a result of some of these factors that are changing post land, in addition to the changing roles that we’ve already gotten into. I’ve seen an increasing environment where profitability matters, where we’re looking at that envelope of sales and marketing resources, and we’re trying to think, how do we do more with less? Or sometimes how do we do less with less? The one thing that I’m seeing pretty consistently is roles sliding from lower down in the customer pyramid up market so that we can start to layer a higher level of coverage density, if you like, on those accounts at the top that really help us move the needle on ARR, GRR, and, you know, overall growth. So that we have maybe fewer accounts up market and the reps are able to have more of a definitive impact with a smaller set of customers.
Ted Grossman: Yeah. I mean, the way that people are covering the segmentation model is evolving as well, and that’s your point. You’re getting much more focused with smaller account loads at the top, and down market, which has always been a push for companies trying to get distribution and trying to get service providers in a down market. What I’ve seen like this year, and I think it’s going to continue in spades next year is can we get MSPs down in the down market? Can we get distributors who are actually providing services which, in addition to, you know, providing access to other smaller resellers to add value. It’s all about the value game right now. And so what I’m seeing is these down market strategies that are there not just to make sure that we have a good, strong partner model that’s going to cover down market, but it’s actually to free up all your high paid internal resources to focus on the up market. So yeah, I mean, it’s a profitability play and it’s a growth play at the same time. Lots and lots of change here.
Sean Ryan: One of the things that I’ve sort of wrestled with with clients is, you know, if I look down market, you know, I know I have to tighten up at the top. And that’s usually where most organizations start, particularly if they’ve got leakage going on. But pretty soon it becomes a cost to serve question when you move down the customer pyramid and all of a sudden you’ve got maybe low ASP customers, maybe they turn over more quickly, less reliable as a source of revenue. And the question really becomes, how much can we afford to proactively cover those? Do we need to, to your point, plug in a higher order MSP or some sort of partner that can add value, add volume? Or do we just say, you know what this is simply giving them the ability to have a digital self-serve play or be in a marketplace or be with a hyperscaler or something like that. I’m just curious where you where you’re coming out in some of those discussions? Because I know they’re top of mind for you.
Ted Grossman: I think you kind of nailed it with, we’re trying to find the lowest cost option that can provide the best value to the customer. Look, if you have products that are geared toward the SMB market or the mid-market or the commercial market, then you’re going to want to sell there, but you want to do it profitably as you can. And the options are expanding. One, because of marketplaces that you’re now seeing, which is almost become an essential for down-market selling. And, one, because I think there are, you know, the explosion in MSPs in this country. I saw a stat the other day that within tech alone, there are almost 90,000 MSPs in the United States, which shocked the hell out of me.
Sean Ryan: Are those really MSPs, or are they just VARs calling themselves MSP?
Ted Grossman: Well, they might be a little bit and a lot of them might be 10% shops, but my point is that they’re providing an ongoing, recurring revenue service related around tech. We’re starting to see a significant change in coverage, both on the direct side and on the indirect side. It’s caused by, I think, this continuing move to value. But I think the financial metrics and, you know, the focus on GRR and NRR is really what’s changed it this year. I mean, I’m starting to see this being operationalized in comp plans. I’m seeing it starting to be operationalized in channel programs. I mean, there are drastic shifts that are going on and it’s an exciting and dynamic time.
Sean Ryan: Yeah, I remember the days when we would discourage people from doing, you know, kind of growth-based comp plans or MRR based comp plans because it would distract the rep from bookings. And now we’re kind of in the opposite boat, and everyone’s asking the question, how do I get something that gets the rep to care about the overall value of the accounts that they cover into a plan that we can effectively administer and measure and pay on?
Ted Grossman: Yeah. Yeah. No, definitely. So, you know, I’m sure everybody who’s listening to this is, I don’t think I’m speaking out of turn, that this comes up in all of our conversations. I imagine our clients and people who might be listening to this are talking about this as well. You know, AGI, we’re here to help. But more importantly, and just as importantly, we have a community. What I’d like to do is anybody who’s interested in hearing more, go to our website. We have a whole slew of different kinds of events, and see if you want to participate in the conversation.
Sean Ryan: And thanks, Ted. I really appreciate you taking the time with us today. It’s fascinating. Every year, the market will throw something new at us, and everybody has to adapt. So it’s exciting to see how this plays out number one. And number two, what are the things we’re going to be talking about this time next year. So I look forward to that.
