Your direct selling company needs an ecommerce solution, an enterprise system (ERP), distributor tools, a commission engine, and more. Thanks to the rise of integrated solutions, you can now get the best of everything! In this podcast, Sean Smith, Vice President of Business Development at our sponsor InfoTrax Systems, joins Kenny to talk tech trends—specifically, how integration is changing the way InfoTrax and other software providers do business. Sean discusses how InfoTrax has evolved to collaborate with other platforms (including direct competitors), various ways that MLMs can use this trend to their advantage, and growth strategy for companies who are currently considering vendors.
Kenny: Hello and welcome to the MLM.com podcast. I’m your host Kenny Rawlins and today we’re joined by the Vice President of Business Development at InfoTrax Systems, Sean Smith. Hello Sean.
Sean: Hey Kenny.
Kenny: Thanks for joining us. We’ve got Sean in the room with us which is always a little bit different for me. Normally these are on the phone. Why don’t you go ahead and introduce yourself to our listeners? Give us a little bit of background on your extensive MLM experience.
Sean: Yeah well thank you. I think I’m that long-time listener, first-time caller in this situation. So hopefully I can keep up. But yeah, [I’m] Sean Smith, Vice President of Business Development here at InfoTrax. I oversee or work with all of the sales and marketing teams here. One of the biggest portions of my job is kind of setting the direction of how we’re going to go in to market, what products we’re gonna sell, how we’re gonna price and sell those products. And really that’s based around what we see going on in the space and trends in the overall IT industry—how people are buying software, how they’re buying enterprise systems like we provide. That’s my role and I’m excited to be here today. I think this will be fun.
Kenny: One of the perspectives that I think you bring is not just having worked with potential clients and with MLMs, but also working pretty extensively with other vendors and then also leveraging some of the research on IT outside of just our specific market in the MLM space. So, I’m excited to hear some of your observations. And I’m sure our listeners are excited to hear. So where do you want to start? What are some of the biggest shifts that you’ve seen in how people are doing business over the last two to three years?
Sean: To answer a little bit of your first question and then come into that question, for those that don’t know me, I didn’t come up the MLM space. I came from outside the industry. And I didn’t come up in the tech space either. I came from outside the industry on that as well. I have worked in other market segments, or whatever you want to call them, and then like you say I work with a lot of the vendors. I feel like it does give me perspective, when I look at IT, that I’ve never had any preconceived notions of how enterprise systems needed to be sold or what would work. For that reason, I think sometimes InfoTrax will kind of change a pricing philosophy or how we sell a product in ways that maybe other companies don’t. But I think that is kind of the biggest change you’re seeing—this big shift in the industry. InfoTrax comes from a world where we lived through the on premise licensed agreements, went from on premise licensed agreements to ASP—hosting a service application for people—and then have now moved into the cloud space. And that’s really the shift the market is going to. That’s where IT in general has gone over the last 10 years is to cloud-based products where people are buying a little more specific to their needs rather than trying to buy a full suite of something from one vendor. They’ll go out and say, “I really need—” in InfoTrax’s case, let’s call it a commission engine, “I need to go out and get a commission engine and I don’t necessarily have to buy a transaction engine or the e-commerce segments from InfoTrax. They offer those as well but I don’t have to get them there. I can go out and get a cloud-based commission engine, get a cloud-based ecommerce [platform] and tie those two things together. To answer that question in one word, it’s integration—that’s the big shift we’re seeing.
Kenny: I’ve been around InfoTrax and around the industry long enough to remember when the two options were: are you gonna go buy a complete package from a company or are you gonna build [software] in-house? It was very black-and-white, a very binary decision. Now it’s very much on a spectrum. You can build portions of it in-house. You can partner with a bunch of different solutions and integrate them together. So, the overall IT philosophy, like you say, its changing and I think it’s changing for the better of the client—or for the better of the business. They don’t have to pick who’s the best at one certain thing and then take what they’re average or below average at on a bunch of other things. You can take the best here and the best here and integrate them together. How is that changing your conversations with people—both other vendors and companies? I mean how are people adapting to that change?
Sean: Yeah, I think it’s a big shift for some people and it’s not for others. And it kind of relates to their backgrounds. That’s the biggest thing that we see. We go in and we have conversations with people and sometimes we’re convincing them that cloud-based options are a better option. Companies are coming in and saying “what we’re really looking for is on premise” and we’re telling them “no you’re really not.” You know cloud-based is so much cheaper, requires so much less in-house overhead, and like you pointed out you can get a specialty of a product you can really go out and say “I’m gonna focus on getting a specialty in this area or in this segment of the market” and then tie it to another specialty product and have the best of those two products working together. Other times we come into people who cloud-based is kind of where they came into the industry and so that’s what they’re looking for. And in that situation, it’s interesting because they come in with a specific list of questions saying, “Does your product meet these cloud-based and integration needs that I have and if they do then that’s what I’m looking to buy.” It’s interesting to watch the bigger companies try and adapt to that. By bigger companies, if you’re talking like an ERP—we’re talking an SAP or an Oracle, and Oracle just recently purchased NetSuite in an effort to try and conquer the more cloud-based market that they’re seeing. Now Oracle as far as at least the owner of Oracle was an early investor in NetSuite so for them to purchase NetSuite I think was a natural path of progression. But it leaves companies like SAP out trying to do the same. SAP has brought in their Hybris e-commerce solution right that’s an example of a great ecommerce cloud solution that SAP now offers as kind of an addition to their typical on premise SAP solution. So, you’re seeing big companies try and figure out how to span this gap of what’s providing more of a specialty and not necessarily providing everything because clients really see the value of the lower cost of tying a few great pieces together rather than trying to buy some giant system.
Kenny: So, you mentioned lower cost. I am curious, what should people be expecting as they’re either a startup or even as they grow? Does it really end up being lower cost? And where are those costs spread out?
Sean: Yeah and I mean I think it really does end up being lower cost and I’ll give you a great example. I’m not going to use any provider names this time because I don’t want to disparage anybody. Going back to ERP, there’s several big players out there that will come in and put in a great ERP system for you that can do everything you can think of. But the price tag is going to be everything you could think of plus a little bit more. So, in this example let’s just call it a full enterprise ERP comes in to a large company and it’s great for their major markets—the ones where they’re bringing in the most revenue—and they don’t mind spending millions of dollars implementing this ERP. But then they go into open let’s say a startup market or to bring up a new market for them in another country and even a couple million-dollar price tag is way too much for that implementation. So now you get companies who—and this is largely why I think Oracle bought NetSuite—but you get companies who for example were putting in the large name-brand ERP in their main market then when they went to go to a start-up market they actually chose a whole different provider for the ERP in that market because it was cheaper and allowed them to come up with a cheaper launch cost and put them in a position where that market could fail. If it wasn’t successful—everybody hopes it will be but they’re not always—if it wasn’t successful, that market could be allowed to fail because they hadn’t invested so much money that they couldn’t necessarily turn around and pull out.
Kenny: We talked about initially choosing whether to go in-house or to go and partner with somebody, and now in today’s world it’s not just that you can integrate you can have different solutions for different markets pretty easily because you can then tie in integrations as needed. Like you say, that’s another element to all of this that people need to realize is a well done solution is one that allows you flexibility to meet market needs. I’ve seen that a lot in working with large companies. You’ve got the same basic company in a bunch of different markets but the actual business practices end up varying quite a bit both to meet the cultural needs of a market but also to meet the maturity needs. If you’ve got a huge call center and a huge staff in the US and Canada but you’re just barely getting on the ground in Latin America or in some of the European countries, you’re really in a lot of ways a different company on a different maturity phase and some of the ways you operated when you were first starting up are the ways they’re gonna want to operate. I’ve seen companies fail in launching [some market] just because of the bureaucracy that they’ve built in that naturally comes along with that. So, I think that’s a good point in the flexibility. And the other thing is launching markets. You’re seeing people want to launch markets very quickly and you’ve got to have flexibility in that sense as well.
Sean: Yeah and I think that the big advantage this gives these companies—the big thing we’re always talking about here and that we talk about with a lot of the clients we go and partner with and work with—is actually the percentage of spend on an IT infrastructure. This is across the whole company not just percentage of spend on one provider. Gartner did a study—I mean this was back in 2013 so I bet these numbers have even changed a little bit—but back in 2013, Gartner was saying that a midsize company—and they peg midsize companies as really a hundred-million to a billion dollars in annual revenue—a midsize company is going to spend, on average, 4.1 percent of revenue on IT and that’s all IT across the company. So, if you’re in a direct sales platform—like we provide—that’s their e-commerce solution, their Commission engine, the distributor dashboards that people are accessing on a daily basis, as well as all those ERP tools that cover their financials, their warehouse management systems, even their HR systems. All of that together, companies on average are going to spend around that 4% mark. Well if you take and say, like you were discussing, if you’re in US and Canada with a very large presence, 4% of revenue could be 30 million dollars a year. But you go and launch a startup company, even though startups typically have kind of a higher percentage of spend because they’re just getting off the ground, let’s say it’s even 5% rather than 4%. Well five percent of a startup is a couple thousand dollars a month. It’s a much different scale and sometimes it’s hard for executives of large companies to think that way about the new market they’re trying to bring up. They immediately go well we’re using Large Provider A here in the US, why don’t we just also put that into that small market? And Large Provider A is two million dollars to launch even in a start-up market. That’s not going to work for that size of client.
Kenny: Yeah and it’s a different mindset. Like we’ve talked about, there are different cultural needs and different government reporting. So, the partner that you’re partnering with in one market may not be an expert or have that ability to meet the needs of a specific market. One of the other questions I’ve got is you’re obviously working with a lot of different vendors that then need to be integrated with and even some of our competitors. Are you finding that people are open to this more integrated method? Is this something that the industry’s accepting? And what would you say to people who are either starting up or looking to change their IT direction?
Sean: Yeah so, a couple points to your question there. To what you said early on there, we work with a lot of vendors that we have to integrate with and in some scenarios, we work with companies that could be seen as our competitors and sometimes we work with companies that straight are competitors of ours. We have clients where, just like we were talking about, they may have used us in one market and when they went and launched another market, they picked a competitor of ours. But they want those markets still to share data in certain places whether it’s in the financial reporting that goes ahead of the executives or whatever it is. So oftentimes we’re integrating not only with vendors who we work with on a regular basis but sometimes we’re integrating with people that we would see as a competitor. And I would say that the biggest things people want in all of those situations is they just want a solution that works without a lot of overhead. And that’s really the advantage of this more integrated cloud-based approach. If you’re gonna put in an on premise system, it’s not just hardware you’re bringing in-house, its expertise, its hiring more people that have to really help to support that whole thing front to back. Going with a cloud-based solution you’re not only then avoiding that hardware and personnel overhead, it adds this great flexibility where you can ramp up and ramp down without having to decide “Am I laying people off? Am I going to stop leasing this equipment?” From that perspective it really is all about flexibility and it gives our clients great flexibility in their spending but to your point it’s also about something that works. That’s really the biggest thing I think people are looking to gain out of this. Back to what we talked about at the beginning, whereas before you tried to buy your whole solution from one provider hoping that one person could come in and maybe not be an expert at everything but provide you enough of everything to cover your needs. Then a lot of their costs goes into customizing because they’re not experts in certain areas. Then you’re trying to take that system and bend it to your will or make it work better for you through customization. And you get a lot of additional expense through that. Now I see companies putting instead of customization expense what I would call integration expense. If somebody’s not an expert is something, let’s let them not do that and let that go and bring in somebody who is an expert and put in a good integration where they’re going to share data in the right places. This is kind of our little soapbox that we stand on is that somebody should be the master of the data that they’re in charge of, but then they should share that data to the appropriate places for the right reporting, the right business processes to take place, and overall hopefully a smoother run of the entire company.
Kenny: Yeah. I think those are the things that people need to take into consideration when they’re looking for partners. What’s their mindset when it comes to integration? And what’s their mindset when it comes to, like you say, that data sharing? And then what does it look like as you’re planning to evolve as you grow? Are there pieces that you can break off and take on your own if you open a new market? And if for whatever reason you don’t use that vendor for that same role in a new market, how are they gonna handle that? You have more experience than I have [in this], but I’m finding that most vendors are either adapting to that new way of thinking or they’re phasing out just because that’s the way you have to do it it seems like.
Sean: Yeah and it’s an interesting balance. Understanding what you’re really good at, understanding the core of the service you provide, and then not being afraid to give up the things that you’re not very good at. But there’s also this balance of if I give that up, am I a less attractive provider than somebody else who may be as good at both things? Finding that spot where you feel good about what you do, you know your core value, and you really understand what you’re gonna provide to people, and I think—just to pitch InfoTrax for a second, it is my job—InfoTrax is really good at understanding that we start at the core of our commission engine. Everything we do surrounds the direct selling commission plan, multi-level commissions, and how you’re gonna pay people, and what activities and incentives they’re going to get out of that payment, and kind of branches out from there. And we’re not afraid to give up things that are kind of outside that realm. Really the purchase of the actual product isn’t necessarily so commissions-related that we have to do it. If they want to pick an e-commerce solution that somebody’s buying that product though—whether it’s in Magento or WooCommerce or something like that—and then they pass an order to our commission engine, we’re okay with that structure. That’s something we’ve kind of had to grow into, not being afraid to say, “Hey if we don’t do that piece of the system in certain markets or you know in certain ways for our clients, that’s ok with us. We know our core and we know where we stand what we’re good at.” And to your point the companies that can’t find that balance and don’t know what they’re good at, really kind of came in as a jack of all trades master of none, and now they can’t decide which one they want to try and master, we do see those falling by the wayside and not being selected as frequently.
Kenny: Yeah. I think we’ve reached a good place to kinda wrap up. I do want to kind of put you on the spot just because a lot of our listeners are potential startups or people who are in the early phases of growth and I do think you get a good breadth of kind of where the industry is going and what’s going on and not even related necessarily the integrations or potentially related to integrations… What are some of the things that you’re seeing or some of the things you would recommend to somebody either kicking the tires or early in the phases of their MLM experience?
Sean: Yeah, I would say the biggest thing, if you’re kicking the tires on a system and you’re trying to decide… InfoTrax for a long long time positioned ourselves as the insurance policy you buy against success. Basically, saying that if your company does make it, if you’re one of the ones that grows into something, you need to be on a platform that can sustain that growth. I wouldn’t say that that’s necessarily changed, but the way we look at that growth strategy—and that’s what I would call it is a growth strategy—has changed. And that’s what I think you need to look for in your provider. They need to be able to show you “Look this is our growth strategy. You’re coming in today as a startup or even a small size company who’s trying to get on a better platform, and that’s great.” How is that system going to look? Or what’s the structure of it that they’re gonna recommend when you’re 250 million a year, 500 million a year, a billion dollars a year? If they can’t adequately show to you “This is our growth strategy. You’re gonna use us maybe for everything upfront and then as you grow here’s pieces that you may consider bringing in around our system or even replacing on our system to handle your growth as you go forward.” If your provider can’t spell that out for you in a good way then I think that’s the provider to let go and go pick somebody else.
Kenny: Perfect. Well we appreciate your time and look forward to having you on in the future.
Sean: Yeah thank you it’s been fun being here.
Kenny: And that concludes today’s episode of the MLM.com podcast. Again, I’m your host Kenny Rawlins and we want to give a special thanks to Sean Smith for joining us and letting us in on his expertise and insights. We also want to give thanks to Adam Holdaway and Jana Bangerter for production support. We hope you’ll join us again next time.