1Group - 9

SCALIX CORPORATION: THE EVOLUTION OF A SALES MODEL

Analysis of Case Study

Group - 92

1. In 2003, Scalix delivered zero revenues against what was believed to have been a

modest target.” What do you think is wrong here? Why isn’t the product selling?

• Misunderstood the product demand• No prior experience• High switching cost• MCSE’s were not ready to shift to Linux• Very few Unix/Linux based System Engineers• Large sales cycle• Product less in features

Group - 93

2. Describe the sales model for Scalix as of May 2003. Be as specific and as complete as possible. What are the resources required by

the model (both initially and at maturity)? What are the assumptions regarding deal success rate and time to close? What are the economics of the solution currently in

place? What are the critical factors that will affect the viability of this model?

Group - 94

Sales ModelProduct• Linux based

Openmail

Process• Appointments

with CIOs and Presentations

• Most of the leads were generated through contacts

Customer• Large

Organisations (>10,000 seats)

Group - 95

Go to Market Strategy

• Direct Selling

Channel

• Linux based Email & Calendering

Product

• Approached large corporations

Place

• 43% lower than MS Exchange over 3 yr period• Onetime $60 per seat fee + 20% List price for maintenance

Price

Group - 96

Assumptions: The views of the CIO is echoed to the

lower ranks There are plenty of medium & large

enterprises where running current systems was cumbersome and needed change

Confident about standing by the transaction sizes due to large and medium enterprises

Group - 97

Economics of Solution

Group - 98

Critical Factors• Skill of the sales personnel• Length of the sales cycle• Targeting the right customers• High cost per sale• Relationship management

Group - 99

What did Scalix learn from the sales cycles at Capital One. Perot Systems. and

Cincinnati Financial? How should it respond?

Startup – No credibility Did not consider the views of

operations team Very few people on Linux/Unix

platform Scalix has product issues

Group - 910

Response Build a customer base in the small

and medium segment enterprises Build a new strategy to tackle CIO,

Bottoms-Up method where training is given to lower rank employees.

Have Linux/Unix based certification.

Group - 911

Given the success at city of Bloomington and county of Pottawattamie. should Winokur abandon direct sales to medium and large enterprise accounts? What are the economics of “telesales” compared to the direct sales model? How would you oppose selling into the mid-market?

Scalix should emphasize on a combined model (Direct +Indirect Sales)

Direct sales model makes contacts easy with large enterprises

Tele Sales models should be adopted in order to target the small enterprises

A contract with a large enterprise would act as a goodwill to get contracts with similar or small sized companies

Scalix doesn’t have Acts & Assets to offer credibility in the market and hence clinch deals with medium and large enterprises. They are not willing to take risk by going with Scalix as the stakes are very high as e-mail is an integral part of an organization.

Group - 912

Targeting mid market companies will bring credibility and reliability for Scalix.

Point of Differentiation – Price, which matters more to mid market segment rather than Medium and Large Enterprises.

Can use revenues from mid market sales to cover Total Variable Costs. In Initiation stage it is important to break even rather than make profit.

Time taken to close a deal is small in mid market sales.

With small organizations stakes are lower and chance to learn from mistakes.

Group - 913

Telesales Direct Sales

Start up in initiation stage. During maturity stage

Low Value accounts. High Value accounts.

Low Selling Cost. High Selling Cost.

Low Value familiar Product. High Value unfamiliar Product.

Lower Connect with the CustomerGreater connect with the Customer