Sales cycles get shorter for technology companies

Last week, when global business and technology consulting firm Capco clinched a deal from an UK-based card processing company in two days, it was more than pleasantly surprised.

After seeing practically no decisions on projects in 2008 and early 2009, the European consulting company had got used to customers keeping it waiting for months before releasing budgets.
Lately, though, it is observing the sales cycle — the duration taken to bag a deal — of a project is getting shorter by the day.
Ismail Amla, partner of Belgium-based Capco, says deals that have been thoroughly thought over in the last two years are now getting sanctioned in a jiffy.

“What we have seen lately is release (of order) under high demand. We are seeing sales cycle being cut to days. Last week, a card processing company in UK met us on Monday. On Wednesday, it cleared the project that involved preparing its technology roadmap over the next three years. Customer decisions are being made immediately,” he said.

Amla says one of the reasons why it is taking lesser time for technology consultants and vendors to win these deals is because customers are now racing against their deadlines to meet certain performance targets.

“The authorisation to start (a project) has just been released. The deadlines haven’t moved, though. So, orders are suddenly being released to meet deadlines for the same,” says Amla.

Ram Mohan C, senior vice-president and head - infrastructure management and tech support - Mindtree Ltd, has also seen sales cycle for projects getting crunched.

However, he believes it is currently restricted to just transformational space where there is urgency for customers to move to a new business model.

“Sales cycles for some transformational activities are becoming shorter and quicker. For example, if someone wants to move to cloud or move to software-as-a-service (SAAS) model, such orders are approved quickly,” says Mohan.

He says a transformational infrastructure management services (IMS) deal, which used to take nine months to clinch earlier, is now taking just 3-6 months.

Mohan feels shorter sales cycle is an outcome of smaller sized deals, which are common in the post-recession market.

“Earlier, a typical deal used to be for 5-10 years that has now come down to 1-3 years. Even their sizes have been slashed to $40-50 million from $100-200 million. The cut in the value and duration (of deals) has snipped the sales cycle time too,” he said.
Sid Pai, managing director of global outsourcing advisory firm TPI, is not seeing this trend of shorter sales cycle across all tech services deals.

“The trend is there in certain transactions which are well defined and do not require extensive scrutiny and evaluation to be approved. There, the tenure of sales cycle is getting shorter. The reduction in size of the deals has also spurred this trend,” he said.