The Carrier Sell
Untangling the complicated stages of carrier sales is not easy: customer traction, lab trials, contracts... These words are often used to measure the success of new equipment vendors. In the last few years, however, we have seen many supposed customer wins vaporize into thin air.
To those with years of experience selling to large telecommunications carriers, this may sound like business as usual. But for the uninitiated, the carrier buying process may seem like one of those Russian matryoshka dolls: Each time one opens it to get to the prize, one finds another doll that needs opening. The prize, of course, is not a lab trial or even a contract. These are only stages on the way to the real prize: money in the bank.
Each carrier is different, and describing all of the details and variations would entail an opus that'd put a Russian novel to shame. However, a high-level outline of a typical process can shed some light on the complexities involved.
Traction Most vendors begin to talk about their selling relationships with carriers by describing the “traction” phase. Traction may indicate anything from “their receptionist answers my phone calls” to “their lab manager lets me take him to lunch.” Of course, this is better than having the customer refuse your lunch offer, but it’s not an indication that sales are imminent. Each salesman has his or her methods of getting the customer’s attention, but these are preliminary steps, not milestones.
Trial The first indication of success in the selling process is when the customer commits some of its own resources and time – which is to say, a trial. Yes, that’s right: A trial is the beginning, not the end. Assessing the significance of a trial can be tricky, however, because there are different types of trials.
Some carriers have advanced technology groups, chartered to look at technology at a three- to five-year horizon. (Keep in mind that revenue generation in five years is not typically optimum for the average new equipment vendor.) These groups will often play with any new toy that looks interesting to them. They may be looking at the vendor’s products just to keep abreast of technology, or as part of an assigned task. It’s not that a lab trial with these groups is insignificant; it’s just that these types of trials don't always indicate that money will be spent any time soon.
Lab trials take on more significance if they are driven by budgeted projects. In this case, there is often an RFP (request for proposal) issued to a narrow field of vendors – say, three or four – who are brought into the lab for comparisons. Becoming a finalist in an RFP can be better than simply winning a lab trial. An RFP indicates consensus at some level that the given technology is something for which the carrier has a specific need, not just a toy to play with. Unfortunately, there are no guarantees. There are many cases of RFPs being won without generating revenue – as well as contracts awarded outside of the RFP process.
Not only the advanced technology group but the network engineering group gets involved for the second type of trial; these are the people in charge of the current network's architecture (i.e., where the carrier puts its money).
Contract Lets say that the vendor gets past the engineering lab-trial process and wins a contract. Home free? Not quite. A contract does imply a much higher level of commitment than a trial. However, a contract is simply an agreement on terms, such as pricing, delivery, and support, and a general estimate of what types of volumes may be involved to set pricing. Contracts usually allow the carrier to back out for almost any reason.
Well, at least a contract means the technical hurdles are over, right? Not quite. More often than not, the pre-contract trials don’t include a lot of operational features necessary for the equipment to be supported under the carrier's existing operational and support systems. Once the operations group becomes involved, it often brings up new equipment requirements that must be addressed. This usually means another round of functional changes and testing. In extreme cases, operational issues may even prohibit previously approved technologies from being deployed.
Lets assume that the contract is signed, operational issues are resolved, and even a field trial with real applications is complete. The next question is: Is there a budget for the equipment? Budgets are usually set at the beginning of the year, so if the evaluation process is completed in the middle of the year, this can be a problem. If the vendor is lucky, someone in engineering has allocated money for the equipment. If not, the vendor now has a wonderful trophy (a contract) but no way to generate revenue until the next budget cycle.
With a budget in place, the salesman is finally ready to begin asking for purchase orders. The purchase order, however, is merely the first step in the process whereby the customer actually says: “Ship me X units on Y date and I will pay you Z dollars.” In some cases, various applications may require new functions and new testing, but these will usually be abbreviated.
Now it is finally time to ship the equipment and book the revenue. In some cases, equipment that is used for the first time may have to perform for a period of weeks or months before payment is made and revenue is recognized, but this is hopefully a timing issue. Unfortunately, in these times, we may have to add one additional step, depending on the solvency of the customer: making sure that the check clears the bank.
The bad news for the equipment vendor is that this is a long and painful process. This example is actually a simplification, and there are hundreds of variations. The good news is that once the flow is turned on, it is much easier to sustain. Good news, that is, if you are now the incumbent equipment vendor. Bad news if you are the next upstart just beginning the process.
— Doug Green is an independent consultant providing expertise in telecommunications marketing, communications, and investment due diligence. He can be reached at [email protected].