February 2011

Hey this used to be an easy answer (you owned them and you had possession of them), but these days of LinkedIn, Twitter, Facebook, etc., it is not so simple. Here are some thoughts on this software sales compensation issue.

1) Where are Your Sales Leads Stored (aka who has possession of them)?

Old days = CRM (internal) software and a Rolodex (internal, but portable) (yep, business cards are not dead)

Now = CRM (internal), Rolodex (internal, but portable), and LinkedIn, Twitter, Facebook, etc. (external)

2) Solution?

• Create  a Policy To Address It
  • Clarify that sales contacts, whether stored internally or externally, are the property of the company
  • Clarify that this applies to social media accounts (such as LinkedIn, Twitter, and Facebook)
  • Add other clauses to address this issue the way you want to address it (your company may want to deal with this differently)
    • FYI: some companies even prohibit employees from connecting with sales leads and sales contacts (i.e., they cannot accept invitations) via social media. In other words, the sales reps must reply that they cannot connect. It sounds tough, but it is true.
• Address it in Your Employment Agreements
  • Same as above
  • Also prohibit sales reps from soliciting the leads after they leave (it may be hard to police, though)
  • Non-competes in employment agreements may be more important now, as the worst-case scenario is if a sales rep goes to a competitor with all the leads and sales contacts.

At the …

This is an issue near and dear to me, as I have spent a large part of my career drafting and negotiating enterprise license agreement. However, what I have found is that many growing software companies are trying to figure out how to design their enterprise license agreement, so some thoughts on it would/should be helpful.

What is Enterprise Licensing?

Essentially, most software companies have a licensing model wherein they provide their software to their customers based on some License Metric – Software (user, computer, device, division of a company, revenue, etc.). This often works well for small and medium size customers, but not necessarily for large customers (enterprise customers looking for an enterprise license agreement). If you think about it, enterprise customers want an agreement with something more: flexibility, discount/predictable pricing, and ease of administration if they are going to commit to a large license purchase of your software. So long story short, an enterprise license agreement can mean many different things to different software companies and enterprise customers, but you need to define what it means to your company and to your large customers. By the way, some customers call an enterprise agreement an agreement under which they can purchase software at a discount company wide for a certain period of time. I am not saying they are wrong (I think that is simply a pricing agreement though), but the key here is to figure out what your enterprise customers need or want.

Factors to Consider