5 Criteria for Right-Sizing AR Teams

Note:  This was cross-posted from IIAR board member Evan Quinn’s blog: link.

An AR friend of mine recently asked if there was a formula or guideline for right-sizing AR teams. Unfortunately, there is no simple formula to the staffing question, but off the top of my head there are five factors that contribute to determining a reasonable headcount model for right-sizing an AR team, whether full-time employee or 3rd party agency or contractors.

1. Enterprise focus: Vendors that have more of an enterprise focus will tend to need to more AR staff per revenue dollar than consumer-oriented IT vendors. E.g., IBM, which is essentially 100% enterprise focused, would likely have more AR headcount/revenue than say Acer which sells plenty of PCs to consumers.

2. Sales model: Vendors with a higher percentage of sales through a direct sales force will tend to require more AR headcount/revenue dollar versus vendors that depend heavily on an indirect channel sales model. Why? Because direct sales is more directly impacted by IT buyer influencers, like Gartner and Forrester, than through the channel.  There is nothing like your own sales force calling the AR team and saying, “Hey, Gartner is in this deal, and…”

3. Product/service Diversity: Vendors with more diverse product lines tend to require more AR headcount/revenue than vendors with vendors with less diverse product/service lines. For example, say there was a pure-play storage vendor, and competing vendor who offers both storage and security.  Everything else being equal, the latter firm (storage and security) would tend to require a few more AR headcount because of a more diverse product line.

4. Geographic Diversity: Vendors with a true global reach will tend to need more AR personnel, just for geographic coverage purposes. E.g., say there were two 2 billion/year revenue enterprise-oriented vendors with similarly diverse product lines and similar sales models; but one has geo splits of 60% US, 35% EMEA, 5% APJ. The other vendor has 40% US, 35% EMEA, 25% APJ – you might expect another headcount to support APJ at the latter vendor.

5. AR Program Model: I like to think of AR programs as coming in “small, medium and large” models. That doesn’t indicate the headcount, but indicates the role of the AR team in the overall context of the vendor, thus:

· Small – An AR program that basically chases PR: AR has little budget, analysts are treated as an extension of media, there is little market intelligence buying; minor analyst event spending; little to no spending on analyst advisory or custom research projects. The “small” AR model usually has AR reporting into PR, or into a very PR-oriented head of Corporate Communications.

· Medium – An AR program that focuses on core AR work versus media-think: MQs, Waves and market share are treated seriously. But advisory and custom research projects with analysts are relatively few and far between, and AR plays only a minor role in co-marketing, events, or market intelligence buying. Most of the spending with analyst firms does not come from the AR budget, though the AR team has a enough discretionary budget to capture the interest of analyst firm account managers.

· Large – The AR program is treated as a strategic element of sales/marketing: Perhaps more than 50% of the all spending on analyst firms emanates from the AR budget, and the AR team carries strong influence on other analyst-related spending like events and custom research projects. AR is directly involved with market intelligence buying, is front-and-center in analyst firm negotiation, and senior management and the strategy team at the vendor are willing to engage with top analysts.

Naturally the “large” model will yield more AR headcount/revenue than the small model.

In summary, IT vendors that are (1) enterprise-focused, (2) largely use a direct sales model, (3) have diverse product/service lines, (4) are geographically diverse and (5) take their AR seriously and empower it as a strategic function should carry more AR headcount/revenue than similarly-sized vendors that do not exhibit that criteria.

Of course, this simple 5 criteria analysis only scrapes the surface.  Plenty of other factors go into determining headcount, such as how important are metrics to the AR team?  Does the AR team maintain internal and external web portals, or participate actively in social media on an on-going basis (versus just as tracking tool at vendor AR events)?  Does the AR team travel extensively?  Is the team heavily weighted AR experience-wise to one end of the scale or the other (in theory more experienced AR people should be a little more efficient and effective per headcount)?  Does the AR team work with a wider set of influencers and experts, or only strictly industry analysts?

Next post will focus on 5 gotchas for wrong-sizing AR teams.