April 1, 2020 | Firm News

The Importance of a Buyer’s Perspective for Startups

Jim Wilson

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Jim Wilson

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As the majority of employees are working from home, they’re relying on technology to allow them to communicate, collaborate, and secure their work. Now more than ever CIOs are in a crucial position to lead their companies. While companies do their best to prepare for these types of situations, COVID-19’s impact is unprecedented and companies have already responded by tightening their expenses and refocusing their priorities. Understanding how CIOs think through and navigate emerging challenges will be critical for infrastructure companies to understand how to show the value of their products.

In order for our team and portfolio companies to better understand the buyer’s perspective, we wanted to hire a leading CIO with deep experience at a large company who knows the infrastructure space and has gone through the IT purchasing process many times. This executive will be able to provide real-time product, messaging, and sales feedback to all of our infrastructure-focused portfolio companies and give industry feedback as we do due diligence on potential investments. This is how we came to invite Declan Morris, former CIO of Splunk, to be our first buyer-focused executive-in-residence.

We have gotten to know Declan well through the Costanoa Executive Advisor (CEA50) program we formed last year and through the various Innovation Forums we have hosted. Declan is one of the sharpest and most forward thinking CIOs in the world today. He is interested both in current tools that optimize IT at scale as well future advances in the space.

And what better way to introduce him than to hear from Declan himself? We sat down and asked him how COVID-19 has impacted IT, what his peers are focused on during this uncertain time, and other common questions and misperceptions software companies have when selling to the CIO.

What’s a day (or month) in the life of a CIO like?

My typical daily routine is to get to the office an hour before everyone shows up for the first meeting that usually starts at 9am. This quiet time is used to deal with any incoming missiles from the night before, as well as setting up for the day ahead. I maintain a weekly check-in with my direct reports plus the HR, Finance, and Procurement teams. Hiring is a top priority for the IT leadership team given the shortage of top talent. When you’re in a hyper-growth company, it is too easy to fall behind if you are not paying close attention to hiring since the work does not stop. That means someone else is trying to cover the gaps while maintaining their full-time job.

Staying on top of the budget is essential to ensuring that IT is maximizing its spend to the greatest benefit of the business. My preference is to go over rather than under budget. Why? There is nothing worse leaving dollars on the table that could have been put to good use elsewhere. Overall, the goal is to stay +/- 3% of the total IT budget. And the procurement process is also tied into budgeting because maintaining a vendor scorecard enables the team to stay on top of vendor spend, especially when coming up to renewal or replacement events.

The overall IT strategy ties everything together. Assuming you have a solid strategy in place, it is a matter of performing the annual tune-up and assuming your company conducts annual budget planning. I like to kick off the process six months prior to the due date to allow for multiple iterations of the plan and eventually a quality deliverable. Our approach has been to manage the overall IT portfolio through the governance of the Portfolio Working Group (PWG) representing the business interests of each member of the executive team. Consequently, strategic initiatives are appropriately prioritized and budgeted with an eye towards achieving the best business outcome.

How does a CIO think about their company’s needs and products for the organization?

I like to start at the business macro level. For example, if you’re in a hyper-growth company, you need to look at where you see the overall business in the next three to five years in terms of annual revenue and employee growth. Why these two? There is a natural tension between the two when plotted on an x- and y-axis. Using the excellent “Zone to Win” framework developed by Geoffrey Moore, you can use year-over-year revenue growth percentage as a proxy for overall company performance, while employee growth serves as a proxy for company efficiency. If you overemphasize on one axis, you do so at the expense of the other. As a result, this framework enables you to identify where you should make strategic investments that ultimately lead to the best business outcomes that are underpinned by key technology investments.

The vetting of those technology investments involves different processes based on a separate set of criteria ranging from business benefit, product fit, and overall total cost of ownership. If we are considering a multi-million investment such as an ERP replacement, future-state use cases need to be identified upfront. From there, the preference is to narrow the choice of vendors down to three major players such as SAP, Oracle, and Workday. A boutique consulting firm such as Navint may be brought in to help with the vendor selection process given their expertise in the ERP space. At the end of the process, you should have a definitive recommendation to present to the executive team for final sign-off.

On the other end of the spectrum, if you are purchasing an add-on to an existing ecosystem such as Salesforce, it is not uncommon to source great solutions within your network. A good example of that might be Envoy for registering guests. Based on the overwhelming positive feedback from others within the network, we adopted Envoy.

While these two examples lie on opposite ends of the spectrum, they both demonstrate that reputation is everything when winning over the customer.

What are your peers focused on right now in this uncertain environment?

Having spoken to a number of my peers, the focus is on immediate, short, and long-term priorities. Immediate priorities are focused on enabling a workforce that has shifted to a work from home (WFH) model. For example, how do you enable a workforce of 1,500 employees to WFH when only 200 have laptops? Those of us in high tech take remote access for granted, but that does not reflect the rest of the industry verticals such as manufacturing and energy. One CIO I know directed her IT team to purchase as many laptops as possible from their local Costco and Best Buy stores.

IT organizations are faced with making tough decisions on how quickly they can enable employees to be productive against the need to secure remote devices that access the corporate network. Short-term efforts then shift to IT teams working closely with their security counterparts to safeguard corporate digital assets.

In parallel, IT help desks are getting slammed with tickets. One way to mitigate this flood of tickets is to leverage a digital virtual agent such as Barista from Espressive to be your frontline support, thereby freeing up staff to work on more challenging issues. The top requests employees are asking of help desks deal with VPN setup, VPN account creation, password resets, and how to work from home.

In the face of COVID-19, IT leaders have to plan for the worst and hope for the best. What does that potentially look like? Being prepared for the next WFH wave following a summer lull because we have to assume at this stage we will see a resurgence in novel coronavirus cases. The race is on for IT leaders to work closely with their vendors and security partners to ensure the next WFH wave will be significantly less of a fire drill.

Mid- to long-term, IT leaders are reprioritizing their portfolio of demand based on the new reality. The working assumption is that the budget you thought you had at the beginning of the year is no longer reality. It has to be assumed your budget will be reduced, if that has not already happened, and you need to act accordingly. As businesses struggle to survive, it is essential that IT is an enabler and not a barrier to stabilizing the business. That means increased agility and the need to reprioritize demand at short notice. For example, does IT raise the priority of collaboration initiatives over other initiatives? “Yes” is the short answer given how the way we work has fundamentally changed. Likewise, how about revisiting those business continuity plans (BCP), assuming you have one? BCP programs will need to be revised to take into consideration a pandemic. At best, most BCP programs assume a portion and not all of the business locations will be impacted. That is no longer the case.

Last but not least, IT leaders need to take care of their team while making themselves more accessible to the broader company. One CIO I know has taken to texting all subscribed employees on what IT is doing to enable the business. This approach humanizes the effort of the IT team under challenging conditions while giving credit where credit is due.

What do you really like that vendors do in times like these?

The vendors that stand out the most acknowledge the new reality that IT leaders are expected to operate under. They recognize that priorities have shifted. Vendors close to receiving a signed purchase order may now be facing uncertainty as priorities shift. The best advice is to be patient, acknowledge how priorities have shifted, and recommend solutions that reflect the new landscape.

On the flip side, should an IT leader reach out, seize the opportunity to partner. IT leaders need to move quickly and may see you as a way to accelerate velocity. Those vendors that are willing to be flexible on terms will forge a long-term relationship, which is the best outcome any vendor could ask for.

What did the best companies do to engage and convince you to buy their solutions?

I am most impressed by companies that have done their homework to understand the overall business and not just IT. Examples include:

  • Reading the most recent 10-Qs or 10-Ks
  • Learning about how the company is doing overall and any key initiatives it is undertaking
  • Identifying areas where the solution they are pitching can help drive business success.

In addition, the best companies leverage their relationships, such as engaging the influencer on a CIO’s team to establish credibility. Why? Cold calls and emails to the CIO’s office do not work as they’re drowning in outbound sales and marketing. However, someone with credibility on the team carries far more weight than these cold calls. Finally, an endorsement from the CIO community is huge as CIO-to-CIO influence can be very powerful.

Last but not least is having a great customer success (CS)team in place. It’s not just about closing the deal, but also what happens afterwards — and that’s where a great CS team can make all the difference when establishing a long-term relationship.

What advice do you give early stage founders developing Infrastructure solutions?

Try not to overhype your product with potential customers if you are launching a beta program or a v1.0. Honesty and transparency will earn you the trust of the customer because there is nothing worse than finding out that the production environment has become a test bed due to the lack of rigorous testing in the development stage.

When it comes to engaging the customer, unless you already have a personal relationship with the CIO, suppress the desire to get an audience with him or her as that will only hinder progress. It is far better to engage an influencer in the IT organization who has credibility with the CIO. I wish there was an easy way to identify that person, but that will take time and effort on your part.

What trends in IT are you excited about?

  1. AIOps for predictive insights. Given the deluge of notable events, we have to shift our focus upstream to reduce the noise by predicting outages before they happen.
  2. Serverless computing for abstracting the complexities of infrastructure orchestration. Given the constraints on talent, we are better served by our engineers if they can focus their energy on product differentiation in the market rather than orchestrating infrastructure.
  3. Zero trust outside the corporate firewall. With so many IT services sitting outside the traditional corporate firewall, we have to embrace the “never trust, always verify” model. In doing so, we need to establish a trusted relationship with the user (person/bots), their devices, and the applications they are using. The days of implementing security solely at the network layer are past.

Needless to say, we’re excited to have Declan join us to give concrete and specific feedback to our portfolio companies, provide our investment team a CIO’s perspective on potential investments, and help our operating team expand the CEA50. Please help us in welcoming Declan!