& & & & By Matt Jarzemsky& &

& & & & (This article was originally published Tuesday.)& &

& & & & --BMC Software's new sales strategy caused attrition problems, hurting financial results& &

& & & & --Company spending more on personnel to remedy staffing woes& &

& & & & --BMC faces tough hiring climate for software sales& &

& & & & NEW YORK (MarketWatch) -- BMC Software Inc. & & & /quotes/zigman/69106/quotes/nls/bmc BMC& +1.67%& & & & changed its sales strategy. Now it's working to change its sales staff.& &

& & & & The business-software maker has shifted its focus in recent years to selling comprehensive services rather than single products, a pivot that's expected to better align it with how companies purchase technology. But the change has had a costly side effect: difficulty retaining and hiring experienced salespeople, which was a factor in BMC's October decision to cut its financial targets.& &

& & & & In mid-2011, BMC boosted efforts to staff up and reduce employee turnover, while trying to maintain its financial performance. It faces a tough hiring climate, competing for talent with fast-growing companies like Google Inc. (GOOG) and Facebook Inc. as well as start-ups that offer the windfall promise of an initial public offering.& &

& & & & "We believe that we've made good progress with our key initiatives such as hiring, attrition, sales leadership and organizational efficiencies," a BMC spokeswoman said. A report card on that progress is set to come Feb. 1, when the company reports its fiscal third-quarter earnings.& &

& & & & Increasingly, BMC is selling packages of software and services meant to simplify companies' information technology, a strategy that's gaining favor in the tech sector because it can generate recurring revenue and help a vendor capture a larger share of its customers' budgets. For years, International Business Machines Corp. (IBM) has seen rising sales of services contracts bolster growth in its overall business.& &

& & & & But the switch to that approach can be jarring for salespeople used to making frequent commissions on sales of individual products.& &

& & & & BMC's account executives "may not sell a lot for three quarters because they're working on a large standard transaction," Chief Executive Bob Beauchamp said in October.& &

& & & & He said that as a result, the company saw "lower-than-expected hiring in the [fiscal] first quarter and higher-than-expected attrition in the first half. Additionally, we've seen a reduction in the overall mix of tenured sales representatives."& &

& & & & Attrition, Beauchamp said, "is unbelievably expensive." It hinders the process of working with the same client over several quarters to complete a big deal.& &

& & & & BMC employed 6,200 full-time employees at the end of March. A company spokeswoman declined to break out the number of salespeople in its work force.& &

& & & & Evercore Partners analyst Kirk Materne said, "When you have sales turnover, you're replacing experienced, productive salespeople with inexperienced salespeople. In the near term, the challenge is, how do you maintain margins as you're swapping in a lower-margin salesperson for a higher-margin salesperson?"& &

& & & & BMC has shown signs of progress in amending its staffing woes. Beauchamp said at an analyst conference in November that the company was "really doing quite well in terms of our hiring plan," while attrition levels were "quite good."& &

& & & & He said the company had changed its commission structure "in order to give our salespeople the opportunity to make a lot of money."& &

& & & & In the quarter ended Sept. 30, BMC's sales and marketing costs rose 7.2% from a year earlier. It spent $5.6 million more on sales personnel than in the year-earlier period, mostly due to an increase in headcount, according to a regulatory filing.& &

& & & & BMC's shares have fallen about 30% the past year, with a big part of the decline following the company cutting financial projections in late October, in part due to the staffing woes.& &

& & & & But while the decision to pare the outlook might have hurt the shares, Evercore's Materne said it also will make it easier for the company to live up to expectations.& &

& & & & BMC's attrition issues come as Silicon Valley start-ups and fast-growing tech giants have made software salespeople a hot commodity, even as the overall U.S. unemployment rate remains historically high--at 8.5% in December.& &

& & & & "Salespeople are very simple minded--it's, I want to work at a company that's the most attractive and most in demand where I can sell a lot and make a lot of money," said Igor Sill, managing director at Geneva Venture Partners, a San Francisco-based advisory firm for software companies.& &

& & & & Google hired a record number of new employees in 2011. Salesforce.com Inc. (CRM) said in November that it added 600 employees to its payroll in the third quarter and plans to continue hiring to compete with the likes of Oracle Corp. (ORCL) and SAP AG (SAP, SAP.XE).& &

& & & & "At a cocktail party, I want to say I work somewhere like Google or Salesforce.com and be a with-it guy," Sill said. & & &