Chefs and Grocers (SaaS Models)


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A humorous webinar from early 2008 about comparing enterprise (installed) software companies to grocers and SaaS companies to chefs. Grocers deliver ingredients for their clients to cook up; chefs have to deliver hot and tasty meals - fully cooked.

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  • Grocer says: “Here’s what you ordered!”
  • Chef says “I think you’ll like this combination!” and “How would you like that cooked?”
  • Licensed sales processes are all designed to get payment, not necessarily to get happy users.
    . Customer meetings, third party surveys, sales issues, annual user groups, online forums, industry analysts, product reviews…
    What are their agendas?
  • Service model: your own log files
    Precise, real-time, unemotional
    What features are being used? Segments?
    Error reporting
  • Restaurant must serve many diners, with each getting a pleasant personalized experience.
    Fixed but extensive menu gives some personal choice (features, options). With applications, need limited range of personalization depending on app. Application preference levels: each user, each customer, supervisory roles, how deep?
    Availability: must keep restaurant open for posted hours, even if few diners. Nothing worse than coming there, finding doors locked. App hosting: always up except for very limited maint hours.
    Privacy and security: must protect each user’s data from others and from provider’s employees, may include existence of subscription. (Option for private dining room. Do not see other diners.)
    Charged for what was ordered/eaten, varies by diner. (Prix fixe is a possibility.) For applications, clear pricing model and back-up details if transaction- or usage-based. Local language, currency, time zone? etc
    Upset diners never come back. Frustrated users never forget. Allow customers to brand/customize look?
    Truly helpful online help: licensed software “help files” are generally worthless; online services are held to a higher standard. Human support: all online help eventually fails. Now what?
    [Alternate analogy: hotels versus sleeping at home. Must provide level of security and privacy to match home, plus services to make visit attractive.]
  • Conceptually, well-designed software applications should be hostable. In practice, companies that don’t plan to host apps soon trade off the many detailed requirements for other features/needs. E.g. multi-level permissions that let a customer’s master-admin see and sub-manage preferences for all users at that company, without seeing any users at other companies. If you are serving a very large customer, this might require 2-3 levels of admin scope.
  • Completely new skill set and operational experience required. Classic software licensing companies don’t even have a department to assign usage costs. Generally requires a new “Operations” group with hosting or IT experience, plus new sets of processes (testing, release, roll-back, incremental update, etc)
    SLA: Service Level Agreement
    Analogy: Chef has to correctly cook and serve meat, while grocer depends on customers to safely prepare, serve, decide portions, plan for number of eaters, cost out foods…
  • Licensed software PMs struggle with how to get customers to do semi-annual updates and let go of version N-3.
  • Compare to your first 5 minutes in a new restaurant: atmosphere, first taste of food, service, noise. Very easy to be turned off on first visit. One bad taste and you’ll never be back. Must be hugely impressive to recommend to friends
    Now consider visit to survey tools site; search engine; music page; online office supply… most early subscribers to a service are really just trying it out. Ready to cancel within 30-day test period or otherwise run away.
  • Installed base marketing: Read and re-read your privacy policy
    Be prepared to fix any problems they report
    iPass example: Must get each end user to install laptop software. “What can we do to help?”
  • Top responses to AirMagnet newsletters were usually not to specific month’s content. Instead were: how to get upgrades, tech support contact info, upcoming releases, sales contacts for add’l software copies, unsolicited success stories. Reponses to specific items/articles were secondary.
  • Alternative to “seeing if the dogs eat the dog food.”
  • © Enthiosys / Rich Mironov, 2008. All rights reserved
  • Chefs and Grocers (SaaS Models)

    1. 1. 1 © 2008, Enthiosys Inc,, 650.528.4000 Grocers and Chefs: Service-Model Thinking for Product-Model Folks with Rich Mironov CMO, Enthiosys
    2. 2. 2 © 2008, Enthiosys Inc,, 650.528.4000 An Unapologetic Product Guy • CMO at Enthiosys, a product mgmt consulting firm – Innovation Games® and customer needs assessments – Market-driven roadmaps – Business model analysis and pricing strategy – Interim executive / Agile PM coaching • Early brand name experience – HP, Tandem, Sybase – MBA Stanford, BS Physics Yale • Repeat offender at start-ups – iPass, Wayfarer, Slam Dunk, AirMagnet
    3. 3. 3 © 2008, Enthiosys Inc,, 650.528.4000 Product Bytes Newsletter • Monthly thought piece on the secret life of product managers • Focus on technology, organizations and start-ups – “Parenting and the Art of Product Management” – “The Accidental Agilist” – “The Roadmap Less Traveled” – “So Your Product Wants to Be a Service...” – “Avoiding the Post-course Correction” – “A Planetary View of Agile Product Management” •
    4. 4. 4 © 2008, Enthiosys Inc,, 650.528.4000 Service-Model Thinking • Most of us have grown up as “product” product managers • Shift to hosted services is led by consumer online and social networking players • Service model is more than just hosting an existing desktop or server-based application • Responsible for end user’s positive experience • Most of what we’ve learned from product managing licensed software is different in the SaaS world
    5. 5. 5 © 2008, Enthiosys Inc,, 650.528.4000 Licensed Enterprise Software …is like delivering groceries Enterprise IT customers are responsible for: • Choosing the right items • Combining them correctly • Managing hours and uptime • Serving and helping users • Producing tasty results
    6. 6. 6 © 2008, Enthiosys Inc,, 650.528.4000 Hosted Software-as-a-Service …is like running a restaurant • Serving complete meals • Many simultaneous customers • End users interact directly • Hours and availability matter • Need repeat buyers (WOM) • One bad experience is never forgotten
    7. 7. 7 © 2008, Enthiosys Inc,, 650.528.4000 Product & Service Models • Licensing (Product) Model – One-time or annual fee – With or without maintenance – Pay before you play • Subscription Service Model – Monthly fee per user • Transaction Service Model – A la carte – Per fax, per download, per transplant, per report, per hour, per update…
    8. 8. 8 © 2008, Enthiosys Inc,, 650.528.4000 Five Service-Model Lessons Being a chef, not a grocer: 1. Presentation (UED) really matters 2. Build (rent) multi-tenant infrastructure 3. Daily, not annual, releases 4. Expect slower, incremental sales 5. Do continuous marketing
    9. 9. 9 © 2008, Enthiosys Inc,, 650.528.4000 1. Presentation Matters • Traditional IT product customers buy via second-hand experiences – Demos, data sheets, feature lists, references, development specs, futures, salesmanship – “Let me tell you how good it’s going to be” • Service-model prospect try your service – End users, not through intermediaries – Immediately, anonymously – Skip tutorials, FAQs, marketing text – Is free version compelling? – 5 second rule, easy enough for Mom
    10. 10. 10 © 2008, Enthiosys Inc,, 650.528.4000 UED is Your Friend • User Experience Design – a/k/a UX, UXD, UI, information architecture… – Maps out exactly how user interacts with your app • Product managers are not UED professionals – More than just “arts and crafts,” “taste” or button color – Detailed, thoughtful application-wide design for how users interact, how ideas are shown, how data flows • Consumer online service set the standard – Social networking, online email, user communities – Corporate software vendors have arrived late – Corporate user expectations are defined by off-hours apps
    11. 11. 11 © 2008, Enthiosys Inc,, 650.528.4000 Read Your Logs • Enterprise PMs are used to having no usage data • Web activity logs tell you exactly what’s happened • Did a navigation change improve feature usage? • Test, measure, adjust, test, measure, adjust…
    12. 12. 12 © 2008, Enthiosys Inc,, 650.528.4000 Five Service-Model Lessons Being a chef, not a grocer: 1. Presentation (UED) really matters 2. Build (rent) multi-tenant infrastructure 3. Daily, not annual, releases 4. Expect slower, incremental sales 5. Do continuous marketing
    13. 13. 13 © 2008, Enthiosys Inc,, 650.528.4000 2. Multi-Tenant Infrastructure • Personalized experience, menu of options • “No excuses” availability • Privacy and security • Usage reporting and billing • Helpful written help with human back-up and user forums
    14. 14. 14 © 2008, Enthiosys Inc,, 650.528.4000 Not a New Idea Well-designed software should be host-able, but typically is not set up for… • Massive scalability, data distribution • Multi-level self-service (user, admin) • Reporting, billing, invoicing • Complex user/partner hierarchies • Third party data security obligations • Automated alerts, capacity planning See Luke Hohmann’s “Beyond Software Architecture”
    15. 15. 15 © 2008, Enthiosys Inc,, 650.528.4000 New Kinds of Service Metrics You need an Operations team and new skill set • Uptime SLA (“Application up 99.95% of the time except…”) • Response Time (“98% of log-ins take <1.5 seconds…”) • System Capacity (“Add CPU when usage >60%...”) • Support Escalations (“P1 first response within 15 minutes…”) • Reporting (“Billing reports showing all customer transactions…”) • Software Updates (“Push software weekly at 1AM Sunday with roll-back…”) Most licensed software companies lack these skill entirely
    16. 16. 16 © 2008, Enthiosys Inc,, 650.528.4000 Get Yourself a Platform? • Dozens (hundreds) of companies offer flavors of SaaS hosting and platform services – Blending of traditional “managed service” and “software-as-a-service” labels • New kinds of application hosting – Cloud computing (Amazon, 3tera), email (gmail), social networks (Ning), BPM (Cordys)… • Determine your strategic value – Unique application knowledge and time-to-market? – Will you compete with your platform partner? – Assess business risk, switching costs
    17. 17. 17 © 2008, Enthiosys Inc,, 650.528.4000 Five Service-Model Lessons Being a chef, not a grocer: 1. Presentation (UED) really matters 2. Build (rent) multi-tenant infrastructure 3. Daily, not annual, releases 4. Expect slower, incremental sales 5. Do continuous marketing
    18. 18. 18 © 2008, Enthiosys Inc,, 650.528.4000 3. Daily Release Cycles • Product folks traditionally think about quarterly updates and annual feature releases • Agile creates 2-4 week release opportunities – Continuously move small features off backlog – Multiple teams can produce daily updates • SaaS deployment means you control production and staging versions of software – Users get new code with every browser refresh • Operational process burden to make updates perfect – Data integrity, UED consistency, failover, rollback
    19. 19. 19 © 2008, Enthiosys Inc,, 650.528.4000 The Opposite of Release Trains • “What’s the smallest possible change I can serve up today that will improve user experience or application function?” • “Can we create operational procedures to safely push small changes daily or hourly?” • “Taste test: let’s assign 2% of users to the new version and compare results.”
    20. 20. 20 © 2008, Enthiosys Inc,, 650.528.4000 Five Service-Model Lessons Being a chef, not a grocer: 1. Presentation (UED) really matters 2. Build (rent) multi-tenant infrastructure 3. Daily, not annual, releases 4. Expect slower, incremental sales 5. Do continuous marketing
    21. 21. 21 © 2008, Enthiosys Inc,, 650.528.4000 4. Incremental Sales Cycle Initial subscribers sign up more quickly, but… • Easy/free trial is #1 benefit of service model • Pioneers are really in extended trial • First taste must be great Revenue ramp is slower • Upsell to more users • Upsell premium features
    22. 22. 22 © 2008, Enthiosys Inc,, 650.528.4000 No More Shelfware • Shelfware = purchased but unused software • Product model: sell extra licenses now – Get revenue/commission now – Lock up the customer – Screw future revenue • Much harder with service models – Easy to count users – Discounts last forever
    23. 23. 23 © 2008, Enthiosys Inc,, 650.528.4000 Five Service-Model Lessons Being a chef, not a grocer: 1. Presentation (UED) really matters 2. Build (rent) multi-tenant infrastructure 3. Daily, not annual, releases 4. Expect slower, incremental sales 5. Do continuous marketing
    24. 24. 24 © 2008, Enthiosys Inc,, 650.528.4000 • “Drop-and-run” licensing model – Ship CD, recognize revenue, move on • New “shared success” service model – We can’t grow your account until you are happy • Constant upsell  continuous marketing • Touch users early, often and honestly • Good news: you have actual user names 5. Continuous Marketing
    25. 25. 25 © 2008, Enthiosys Inc,, 650.528.4000 Frequent, Helpful Contact Friendly, low-pressure tone • Topic of the month • User profile (success story of the month) • New features • FAQs • Support contacts, sales contacts
    26. 26. 26 © 2008, Enthiosys Inc,, 650.528.4000 Dare to Taste Your Own Food …use your own service.
    27. 27. 27 © 2008, Enthiosys Inc,, 650.528.4000 Take-Aways “Wrapping It All Up” • Service model adds new responsibilities but gives you direct user feedback • User experience is crucial • Software happens continuously • Revenue ramps more slowly, so installed-based marketing never stops • Have your cookbook and chef’s hat ready!
    28. 28. © 2008, Enthiosys Inc,, 650.528.4000 Q&A Rich Mironov CMO, Enthiosys