Sales Cycles Stall

Like anything, there are some exceptions. Some say they have seen a definite shortening of sales cycles, while others say some deals are taking as long as a year to close. Those in the latter camp say that's often with specific product types, but they accept it as a sign of the times and are still optimistic about business incrementally picking up.

"Companies are under more and more pressure to justify their investments," says Chris Younger, president of Expanets, an Englewood, Colo.-based solution provider, which late last month agreed to be acquired by Avaya. "That creates a much higher demand on the reseller today to help the customer justify and rationalize their investments." That overall shift, Younger maintains, has lengthened the sales cycle.

Indeed, a vast majority of solution providers say sales cycles have either stayed consistent or dragged out, according to our State of the Market research. More than half (54 percent) of all midsize and large VARs say their sales cycles have not changed, while more than one-third (34 percent) say lead times have increased during the past 12 months to 18 months. Sixty-two percent of small VARs say their sales cycles have remained the same, while 26 percent say they have increased.

Among the variables are size of the customer, the products it buys and, of course, the customer's need. Younger says where ROI drives the decision these days, 40 percent of all deals are closed, while if it's a routine, competitive bid, Expanets wins the sale 20 percent of the time.

Overall, his sales cycle has increased to about 60 to 75 days. Before the downturn, sales cycles were roughly 30 to 45 days, Younger says. To compensate for the ROI requirements that customers now face, Younger says he is stepping up his efforts to help his sales staff show customers the cost benefits of the technologies they are selling.

In many cases, even with apparent needs, some solution providers say it can take as long as a year to close a deal.

"If a customer needs a printer, server or to add a system, generally the time it takes to close those deals is pretty quick," says Scott Holcomb, CEO of Holcomb Enterprises, a Mission Viejo, Calif.-based VAR. "But if you're trying to replace, upgrade or change things, that's a long sell-in some cases, a year. Some of our clients still haven't gotten off the dime."

According to our State of the Market research, only 15 percent of large VARs are seeing sales cycles of two months or less, while 29 percent of midsize VARs are closing deals in that same time frame. Small VARs are having the most success cutting their lead times--42 percent say they're doing so in two months or less. That's not surprising because their deals typically are smaller and require fewer sign offs.

There are some that have seen a remarkable improvement in sales cycles, some as recently as this quarter. Sales cycles that were once four to six months are down to about two to four months, according to Michael Fong, CEO of Calence, a Tempe, Ariz.-based network integrator. "Those that are looking are definitely making more accelerated buying decisions," Fong says.

John DeRocker, co-owner and vice president of sales and marketing at Nexus Information Systems, a solution provider based in Plymouth, Minn., also has seen a notable shortening of sales cycles. For the first nine months of this year, standard procurement was pretty static, DeRocker says. This quarter it's up 50 percent. Sales cycles have improved accordingly, from 30 to 60 days to just 15 to 30 days.

"People can't wait anymore," DeRocker says. "Their budgets are coming toward the end, and they're spending them now in the fourth quarter."

That spike includes everything from PCs to servers and other goods. Moreover, DeRocker is talking to customers about their 2004 budgets, and it appears this is not a one-quarter wonder. "They've waited for the last two to three years to refresh their things. Now they have to do it," he says. "They can't wait a fourth year."