JCL Blog

Lowering Sales Costs

SoftwareAdvice.com had a great post recently about Oracle's next acquisition.  I encourage you to click through to the piece if for no other reason than to look at the great chart of Oracle acquisitions from PeopleSoft to the present.  

Clearly Oracle knows it is an enterprise computing company.  Selling to the enterprise is difficult and expensive and no one knows how to sell to the enterprise like Oracle.  Detractors often claim that acquisitions are a waste of money, and the recently announced Intel/McAfee deal will certainly add fuel to that fire, but when talking about the enterprise -- the cost of selling and long sales cycles is enough to make sense of many deals.

Ironically, Glen Hodges, President of McAfee until 2006 explains the Intel/McAfee deal with the same lowering the cost of selling angle in this post in the NY Times.  He points out that Intel's excellent channel partner program is underutilized and that the $7.8B price tag for McAfee could make sense just by having more for Intel to push through its highly efficient sales channel.

Now back to one of my favorite rants -- Salesforce.com.  One of the potential acquisition targets for Oracle listed in the SoftwareAdvice.com post is Salesforce.com.  Even Larry Ellison is not that crazy.  True, Salesforce.com proves the point that selling to the enterprise is difficult by spending over 50% of revenue on sales and marketing and combining the Salesforce.com and Oracle sales teams would represent hundreds of millions of dollars of savings.  But Wall Street never seems to notice this fact about Salesforce.com and has priced the stock at 193 times earnings!  In March I thought investors had lost their minds when the P/E was 114!  The industry is still in the low 20s.

Lowering the cost of selling is as important now as ever.  And it is on its way to even more significance as the talk of a double dip surges.