Monetizing Cloud Apps - Phil Wainewright

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Join Phil Wainewright, Software industry analyst, blogger and consultant, as he walks the audience though SaaS app monetization best practices. Phil covers topics including but not limited to service pricing, packaging, GTM best practices, and more. The presentation was prepared for and presented at SafeNet's LicensingLive - Monetizing Software in the Cloud event series in April 2011.

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  • It’s more than just cloud computing
  • The social dimension reminds us that it’s all about enabling people to interact and collaborate more effectively.
  • Lower cost, faster time to live
  • Everything moving the Web – the need to stay competitive
  • Keeping pace with technology change
  • The need to become more responsive and flexible
  • It’s not just a relocation exercise. To exploit all the potential of the bigger picture, I’ve discussed, software has to change when it moves into the cloud environment.
  • Virtualization and automation are both good and provide benefits, but they’re not the whole story. A collection of single instances on a cloud is still a wasteful, hard-to-maintain edifice.
  • Multi-tenancy is a vital ingredient
  • Cloud readiness equally important (nb emphasize business angle, recall connected world context)
  • Different layers of cloud. Putting software onto cloud infrastructure (eg on Amazon) isn’t enough on its own to deliver cloud scale unless you rearchitect for multi-tenancy. {NB multi-tenancy removes costs, emphasize the business benefits)
  • Subscription Widely used, familiar model Can be complex to administer Variable resource usage makes it difficult to predict costs when starting up Advertising Can help fund freemium and viral marketing but doesn’t play well in the business market Transaction fees Often overlooked, highly proven model Works great for Google, PayPal, Groupon Digital goods (and services) Any virtual content, function or service you sell within your own online service Aggregated data Confidentiality issues in the business market More of a value-add than a money-maker
  • Subscription Widely used, familiar model Can be complex to administer Variable resource usage makes it difficult to predict costs when starting up Advertising Can help fund freemium and viral marketing but doesn’t play well in the business market Transaction fees Often overlooked, highly proven model Works great for Google, PayPal, Groupon Digital goods (and services) Any virtual content, function or service you sell within your own online service Aggregated data Confidentiality issues in the business market More of a value-add than a money-maker
  • Subscription Widely used, familiar model Can be complex to administer Variable resource usage makes it difficult to predict costs when starting up Advertising Can help fund freemium and viral marketing but doesn’t play well in the business market Transaction fees Often overlooked, highly proven model Works great for Google, PayPal, Groupon Digital goods (and services) Any virtual content, function or service you sell within your own online service Aggregated data Confidentiality issues in the business market More of a value-add than a money-maker
  • Subscription Widely used, familiar model Can be complex to administer Variable resource usage makes it difficult to predict costs when starting up Advertising Can help fund freemium and viral marketing but doesn’t play well in the business market Transaction fees Often overlooked, highly proven model Works great for Google, PayPal, Groupon Digital goods (and services) Any virtual content, function or service you sell within your own online service Aggregated data Confidentiality issues in the business market More of a value-add than a money-maker
  • Subscription Widely used, familiar model Can be complex to administer Variable resource usage makes it difficult to predict costs when starting up Advertising Can help fund freemium and viral marketing but doesn’t play well in the business market Transaction fees Often overlooked, highly proven model Works great for Google, PayPal, Groupon Digital goods (and services) Any virtual content, function or service you sell within your own online service Aggregated data Confidentiality issues in the business market More of a value-add than a money-maker
  • Subscription Widely used, familiar model Can be complex to administer Variable resource usage makes it difficult to predict costs when starting up Advertising Can help fund freemium and viral marketing but doesn’t play well in the business market Transaction fees Often overlooked, highly proven model Works great for Google, PayPal, Groupon Digital goods (and services) Any virtual content, function or service you sell within your own online service Aggregated data Confidentiality issues in the business market More of a value-add than a money-maker
  • Intensive use costs more than occasional Storage, emails, heavy transactions and frequent API calls all add to costs
  • I’ve singled out the most notable. A lot of what you do is business as usual of course – planning, scoping, project management, etc.
  • Monetizing Cloud Apps - Phil Wainewright

    1. 1. Monetizing Cloud Applications Phil Wainewright Software industry analyst, blogger and consultant http://www.zdnet.com/blog/saas
    2. 2. <ul><li>Cloud in context </li></ul><ul><li>How to implement cloud </li></ul><ul><li>Monetizing cloud </li></ul><ul><li>Subscription strategies </li></ul><ul><li>Taking cloud to market </li></ul><ul><li>Top tips for cloud monetization </li></ul>Agenda
    3. 3. What do we mean by cloud? cloud computing
    4. 4. What do we mean by cloud? cloud computing software as a service social networking mobile web WorldWide Web
    5. 5. What do we mean by cloud? Software (SaaS) Platforms (PaaS) Infrastructure (IaaS)
    6. 6. What do we mean by cloud? IaaS: you host your app on the cloud Applications Objects Runtime Middleware Database O/S Virtualization Servers Networking
    7. 7. What do we mean by cloud? PaaS: you build your app on the cloud Applications Objects Runtime Middleware Database O/S Virtualization Servers Networking
    8. 8. What do we mean by cloud? SaaS: you get your app from the cloud Applications Objects Runtime Middleware Database O/S Virtualization Servers Networking
    9. 9. What’s driving cloud adoption?
    10. 10. What’s driving cloud adoption?
    11. 11. What’s driving cloud adoption?
    12. 12. What’s driving cloud adoption?
    13. 13. How to implement cloud Software
    14. 14. How to implement cloud Software Virtualization
    15. 15. How to implement cloud Software Virtualization Automated ops
    16. 16. How to implement cloud Software Virtualization Automated ops
    17. 17. How to implement cloud Software Virtualization Automated ops Multi-tenancy
    18. 18. How to implement cloud
    19. 19. How to implement cloud
    20. 20. How to implement cloud Software Virtualization Automated ops Multi-tenancy Cloud scale
    21. 21. How to implement cloud Software Software (SaaS) Platforms (PaaS) Infrastructure (IaaS)
    22. 22. Cloud transition strategies
    23. 23. Cloud transition strategies Private
    24. 24. Cloud transition strategies Private Public SaaS PaaS IaaS
    25. 25. Cloud transition strategies
    26. 26. Cloud monetization strategies Subscription
    27. 27. Cloud monetization strategies Advertising Subscription
    28. 28. Cloud monetization strategies Transaction fees Advertising Subscription
    29. 29. Cloud monetization strategies Digital goods Transaction fees Advertising Subscription
    30. 30. Cloud monetization strategies Aggregated data Digital goods Transaction fees Advertising Subscription
    31. 31. Cloud monetization strategies Aggregated data Digital goods Transaction fees Advertising Subscription $
    32. 32. Subscription strategies
    33. 33. Case study: Mailchimp <ul><li>Sep 2010, one year after introducing freemium </li></ul><ul><ul><li>We are adding over 30,000 new users and 4,000 new paying customers each month. </li></ul></ul><ul><ul><li>Since starting freemium the number of paying customers has increased over 150% and profit has increased over 650%. </li></ul></ul><ul><ul><li>Our profit has increased mainly because our cost of acquisition has been dropping. It decreased 8% in just the last quarter to under $100 </li></ul></ul><ul><li>For every one paying customer, you’ll have ten free users </li></ul><ul><ul><li>“ we’ve been laser-focused on the ‘1’ side of that 10:1 ratio. We’d never consider freemium until our ‘1’ was big enough.” </li></ul></ul><ul><li>Source </li></ul><ul><ul><li>http://blog.mailchimp.com/going-freemium-one-year-later/ </li></ul></ul>
    34. 34. How much does free cost? <ul><li>Mass markets demand massive scale </li></ul><ul><li>Pare down overheads: </li></ul><ul><ul><li>Development </li></ul></ul><ul><ul><li>Sales and marketing </li></ul></ul><ul><ul><li>Operations </li></ul></ul><ul><ul><li>Support </li></ul></ul><ul><ul><li>Performance, resilience and DR </li></ul></ul><ul><li>Watch out for application overheads and extras </li></ul><ul><li>Beware of mismatched customer profiles </li></ul>
    35. 35. How much does it cost to charge? <ul><li>Sales and marketing costs </li></ul><ul><li>Meeting service level expectations </li></ul><ul><li>Customer administration costs </li></ul><ul><ul><li>Measure usage </li></ul></ul><ul><ul><li>Bill for it </li></ul></ul><ul><ul><li>Collect payments </li></ul></ul><ul><ul><li>Manage disputes </li></ul></ul><ul><ul><li>Monitor and report on service compliance </li></ul></ul>
    36. 36. Case study: Box.net <ul><li>Manual processing failed to handle rising ‘000s of online customers </li></ul><ul><ul><li>Increasing rate of failed recurring monthly payments </li></ul></ul><ul><ul><li>Difficult to access customer billling history </li></ul></ul><ul><ul><li>Resource-intensive to manually re-bill missed payments </li></ul></ul><ul><li>Automation significantly improved cash collection </li></ul><ul><ul><li>“ We were literally losing money because we couldn’t track down failed monthly payments.” – Aaron Levie, CEO </li></ul></ul><ul><li>Source </li></ul><ul><ul><li>Box.net </li></ul></ul>
    37. 37. Case study: Large CRM vendor <ul><li>Reliance on manual contract processes </li></ul><ul><ul><li>Adding extra seats is a pain </li></ul></ul><ul><ul><li>Upselling during the contract term is discouraged </li></ul></ul><ul><ul><li>Downsizing or downgrading waits till renewal </li></ul></ul><ul><li>Restricted scope for add-ons </li></ul><ul><li>High churn rates; focus on momentum growth </li></ul><ul><li>Source </li></ul><ul><ul><li>Various </li></ul></ul>
    38. 38. Subscription strategies Price Volume Price
    39. 39. Subscription strategies <ul><li>Volume based </li></ul><ul><ul><li>Per seat </li></ul></ul><ul><ul><li>By company size </li></ul></ul><ul><li>Usage based </li></ul><ul><ul><li>Pay-as-you-go </li></ul></ul><ul><ul><li>Prepay with top-up </li></ul></ul>
    40. 40. Subscription strategies <ul><li>Volume based </li></ul><ul><ul><li>Per seat </li></ul></ul><ul><ul><li>By company size </li></ul></ul><ul><li>Usage based </li></ul><ul><ul><li>Pay-as-you-go </li></ul></ul><ul><ul><li>Prepay with top-up </li></ul></ul><ul><li>‘ Pay monthly’ plus: </li></ul><ul><ul><li>Overage </li></ul></ul><ul><ul><li>Upsell </li></ul></ul><ul><ul><li>Top-up </li></ul></ul><ul><ul><li>‘ ringtones’ </li></ul></ul>
    41. 41. Case study: Intuit <ul><li>‘ Connected services’ account for 60% of revenues (and growing) </li></ul><ul><ul><li>Of which $1+bn SaaS, $2+bn total </li></ul></ul><ul><ul><li>TurboTax Online (2/3s of TurboTax total) </li></ul></ul><ul><ul><li>Payroll, Merchant Service, QB Online </li></ul></ul><ul><li>Intuit Partner Platform </li></ul><ul><ul><li>Founded on QuickBase infrastructure </li></ul></ul><ul><ul><li>Partnerships with MS Azure, Salesforce.com </li></ul></ul><ul><ul><li>Leverages installed base and partner ecosystem </li></ul></ul><ul><li>Source </li></ul><ul><ul><li>CTO Tayloe Stansbury, conference presentation, and Procullux research </li></ul></ul>
    42. 42. Case study: BlackSpider <ul><li>Multi-year contracts helped finance business </li></ul><ul><ul><li>Sales team incentivized to sell two- and three-year contracts </li></ul></ul><ul><ul><li>Reduced commission for contracts <1 year </li></ul></ul><ul><ul><li>Customers like budget certainty </li></ul></ul><ul><li>Requires a pragmatic approach </li></ul><ul><ul><li>Works best with strategic infrastructure </li></ul></ul><ul><ul><li>Less effective when money is tight </li></ul></ul><ul><ul><li>Contracts should remain flexible </li></ul></ul><ul><li>Source </li></ul><ul><ul><li>Former principal </li></ul></ul>
    43. 43. Taking cloud to market
    44. 44. Trusted advisor role Trusted advisor
    45. 45. Trusted advisor role Strategic guidance Trusted advisor
    46. 46. Trusted advisor role Sourcing Strategic guidance Trusted advisor
    47. 47. Trusted advisor role Config & delivery Sourcing Strategic guidance Trusted advisor
    48. 48. Trusted advisor role Integration Config & delivery Sourcing Strategic guidance Trusted advisor
    49. 49. Trusted advisor role Extensions Integration Config & delivery Sourcing Strategic guidance Trusted advisor
    50. 50. Trusted advisor role Extensions Integration Config & delivery Sourcing Strategic guidance Trusted advisor
    51. 51. 5 top tips for cloud monetization <ul><li>Target your most profitable prospects </li></ul>
    52. 52. 5 top tips for cloud monetization <ul><li>Target your most profitable prospects </li></ul><ul><li>Remember, it’s a service, not a toolkit </li></ul>
    53. 53. 5 top tips for cloud monetization <ul><li>Target your most profitable prospects </li></ul><ul><li>Remember, it’s a service, not a toolkit </li></ul><ul><li>Keep it simple – match proposition to value </li></ul>
    54. 54. 5 top tips for cloud monetization <ul><li>Target your most profitable prospects </li></ul><ul><li>Remember, it’s a service, not a toolkit </li></ul><ul><li>Keep it simple – match proposition to value </li></ul><ul><li>Deliver – and price – like a service provider </li></ul>
    55. 55. 5 top tips for cloud monetization <ul><li>Target your most profitable prospects </li></ul><ul><li>Remember, it’s a service, not a toolkit </li></ul><ul><li>Keep it simple – match proposition to value </li></ul><ul><li>Deliver – and price – like a service provider </li></ul><ul><li>Collect the cash </li></ul>
    56. 56. Q & A

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