It market evolution - WHY and HOW

Copyright © Consalta Ltd.
What’s in it for YOU?
David Balazic, MBA, Consalta Ltd.

• An internationally renowned Cloud business enablement consultancy specialized for IT
providers (more @ consalta.si).
• 70+ references in CEE (100+ globally as a partner consortium).
• Our client base includes IT providers from 35 up to 8200 employees.
• Working in partnership with associated consultants from Denmark, US and SAR we build
our expertise on real life international experiences backed up by latest industry insights.
• Based in Slovenia (CEE) with great insight into CEE markets, business
environment, relations and rhythm of business.
David
Balazic, MB
A
Dr. Andrej
Krenker
Assoc.
Anders
Trolle-
Schultz
Assoc. Kim
Andersen
Assoc. Max
Buchler

• Background
– Faculty of Electrical Engineering, Slovenia
– Sales and Marketing Academy, US
– Executive MBA program, Croatia
• Work
– 3 years in hospitality and entertainment (Sales & Marketing)
– 2 years in energy sector (Business development manager)
– 6,5 years at Microsoft (Sales director)
– 3 years at Consalta Ltd. (Managing partner & consultant)
• Pleasure
– Family, friends, sport & Cloud computing 

• Today’s IT market
• Reaching the customers
– Understanding the buying behaviors
– Articulating and communicating the value preposition
– Selling!
• Few best practices

1. Future Start-ups with tech related offering
– B2C: Killer app…next gen travel, socializing, dating etc.
– B2B or B2G: Business IT solutions…improving
processes, management etc.
2. People that just want to have fun …
– Tallinn is a great city!

WARM UP
COMPUTING

WHY
SHOULD YOU CARE?

• Industry hype?
• Market trends?
• Market growth?
• General education?
• Sounds cool?
• Can enable you to run your business better?
• Can enable you to serve your customers better?
• Common sense?

Why should you care about cloud computing?

• There are 3 major customer groups out there with different needs,
demands and buying behaviors:
• Their needs and demands are driving changes happening in IT
market
CONSUMERS
SMALL
BUSINESSES
ENTERPRISES

HOW CONSUMER GOT IT
• Bought computer (in some cases with
pre-installed software)
• Downloaded & installed the software
• Subscribed for the service
(Hotmail, Gmail, Facebook, LinkedIn
etc.)
• In some cases also paid for the
software  or service
• Concerns about
experience, design, trendiness, conne
ctivity…
MAIN CHALLENGE
• User experience, data sync between

HOW SMALL BUSINESSES GOT IT
• Bought few computer(s) & server (s)
• Bought the software and paid for
installation, customization, configuratio
n etc.
• Bought software with computer (or
server) and paid for customization
configuration etc.
• Concerns about cost of maintenance &
support, mobility, connectivity etc…!
MAIN CHALLENGE
• IT was HARD to afford upfront
investment

• Best PIZZA in town, fast
delivery…
• Cool web site, Online ordering
(well of course), Customer loyalty
and premium satisfaction
(customer relationship
management), Support for mobile
delivery guys
NEED BUY RENT (first
3 months)
DECISION
Facility (kitchen) 150.000€ 3.600€ Rent
Equipment 25.000€ 1.500€ Rent
3 delivery vans 30.000€ 1.500€ Rent
IT (computers,
server, software
licenses)
20.000€ Not an
option
Are you
kidding?
IT – up and
running in peak
periods
5.000€ Not an
option
Are you
kidding?
… … … Rent

HOW ENTERPRISES AQUIRED IT
• Bought hundreds computer(s), server
(s) or even own datacenter and
software licenses
• Launched a project tender and paid for
consultancy, installation, configuration,
maintenance etc. to get a SOLUTION.
• Planning for a worst case scenario.
• Concerns about security, privacy, data
leakage, maintenance etc…! AND
ROI!!!
MAIN CHALLENGE
• Pressure on getting more for less
money, low IT resources utilization

Predictable Bursting
Services with micro seasonality trends
Peaks due to periodic increased demand
IT complexity and wasted capacity
Server/Software Cost
Unpredictable Bursting
Unexpected/unplanned peak in demand
Sudden spike impacts performance
Can’t over provision for extreme cases
Growing Fast
Successful services needs to
grow/scale
Keeping up w/ growth is big IT
challenge
Cannot provision hardware fast enough
On and Off
On & off workloads (e.g. batch job)
Over provisioned capacity is wasted
Time to market can be
cumbersome

• walmart.com
• target.com
• toysrus.com
• barnesandnoble.com
Source: Alexa
~4x normal load
(Holiday shopping)
Jan 2011 Jan 2012
• turbotax.com
• taxcut.com
• hrblock.com
• taxact.com
~10x normal load
(Tax season)
Jan 2011 Jan 2012
Source: Alexa

• Customers could share the hardware and the software across
applications, across organizations…
• Customers could scale up/down to closely match application needs
& pay only for what they are using…
• Resilience was baked in: we could inherently deliver a 99.95% SLA
• Building applications was easier, faster, & customers could reach
new markets
• We could offer customers less risk for their investment

Let’s move back to the

Common sense –
localized power generators
replaced with common
power plant – economy of
scale!
Craftsman A
Craftsman C
Craftsman D
Craftsman E
Craftsman B

Common sense –
localized servers
replaced with common
datacenter – economy
of scale!
Company A
Company C
Company D
Company E
Company B

• Cloud vendors are generating value from the economies of scale:
– Buying hardware cheaper (cca 40%)
– Buying software cheaper (cca 50%)
– Achieving highest operational efficiency (automation - do more with less
people)
– Paying lower costs for electricity, cooling
– Achieving highest standards for security, availability etc.
– …
• Cloud vendors can provide IT cheaper!

Infrastructure as
a Service (IaaS)
Traditional IT
Data
Applications
Operating system
Server
Storage
Network
Facility
Data
Applications
Operating system
Server
Storage
Network
Facility
Platform as a
Service (PaaS)
Data
Applications
Operating system
Server
Storage
Network
Facility
Software as a
Service (SaaS)
Data
Applications
Operating system
Server
Storage
Network
Facility
PaaS SaaS
IaaS
More control <Organization has> Less control

TIME FOR AN EXERCISE

¸FOR CUSTOMERS
Advantages:
– Affordability & lower financial
risk
– Time to market
– Scalability (for up & down)
– Consumerization
• Challenges:
– Trust
– Knowledge
FOR YOU
Advantages:
– Lower infra/dev entry costs
– Geo reach
– Predictable revenue streams
– Gives you insight/feedback
about your app usage
Challenges:
– Revenue builds up more
slowly
– Picking “the right” vendor

WHO buys and HOW

Laggards /
Skeptics
(cca 16%)
Late majority /
Conservatives
(cca 34%)
Early majority /
Pragmatists
(cca 34 %)
Early adopters
/ Visionaries
(cca 13,5%)
Innovators /
Enthusiasts
(cca 2,5%)
Early Markets
Mainstream Markets
Late Markets

LaggardsLate majorityEarly MajorityEarly
Adopters
Innovators
Traditional On-premise ITCloud
vendors, gl
obal and
local...
Current Cloud Services players in the technology adoption circle

LaggardsLate majorityEarly MajorityEarly
Adopters
Innovators
The growth of the
Cloud will require
crossing the Chasm
Traditional On-premise ITCloud
vendors, gl
obal and
local...

Be aware of the implications to your business!

Lead is Cash and Marketing is the King

Traditional marketing - OUTBOUND
• Telesales
• Conferences
• Public Relations
• Direct Mail
• Events
• Print Advertising
Online marketing - INBOUND

DemandGen report
(http://www.slideshare.net/G3Com/c
ontent-preferences-surveyfinal)

• 9 out of 10 business buyers say
when they are ready to buy, they
will find you
• 81% of them start the process
with a web search
• 78% are looking for information
around their business challenge
• 84% said word of mouth
recommendations influence their
purchase decisions
• 58% engage with peers, 48%
follow industry
conversations, and 41% read
research papers and postings
from thought leaders

• SEO: Search Engine Optimization
• Dynamic content & blogging: Define your strategy & rhythm
• Social Media: LinkedIn, Twitter, Facebook
• Marketing Automation: automated emails for
downloads/clicks/registrations
• Lead Tracking & Analytics: Higher conversion rates of leads
to sales when tracking

Inbound marketing-
dominated
organizations
experience a 61%
lower cost per lead
than outbound
marketing
dominated
organizations.
Source: The 2012 State of Inbound
Marketing
(www.HubSpot.com/SOIM)

• Ads created in 2006 printed in newspapers or shown
on TV are gone. But a blog post or video from 2006 is
still alive in cyberspace
Campaigns are
temporary, the Internet
is forever
• Customers are in control & have ways to avoid noise
(spam blockers, filtering, etc). High quality blogs/sites
with proper content and SEO let customers find you
Campaigns are about
the company, inbound
marketing is about the
customer
• In the past, marketing was event driven, now the
conversation continues. If you have a LinkedIn &
Facebook page, customers expect you to engage
them
Campaigns are
slow, but conversation
is dynamic

YOUR AUDIENCE IS DIFFERENT
•Market to the CIO, COO, CEO, CFO & CMO
•CMOs are continuing to have more cloud buying
power
•By 2014, 50% of cloud services purchases will
be made by CIO & CFO together
DIFFERENT PERSPECTIVES
• The CIO views the cloud very differently
from the CMO, CFO, etc
• Consider these perspectives when
delivering marketing materials/campaigns
DECISION MAKERS WANT CLEAR
DETAILS
•Cloud is disruptive & buyers are cautious and
confused
•Traditional IT services can be marketed with
vague benefits (Higher ROI! Lower TCO!)
•This approach isn’t effective for cloud services
CUSTOMER IS BUYING A RELATIONSHIP
•Customers know they are entering a relationship
that will evolve
•Your marketing strategy should acknowledge
this
•Your marketing should highlight opportunities for
customers to buy more services.

• Start Small
• Connect the Dots
• Ripple Outward

Regardless of the mix of Outbound
vs. Inbound Marketing…
…the web is the backbone of
every campaign
Trade
Shows Channel
Marketing
Direct
Sales
Events
Channel
Sales
Tele
Marketing
Advertising
Public
Relations
Keep The Conversation Going!
Keep the conversation going
online

TIME FOR AN EXERCISE
REACH

Reaching the customers

Christopher McDougall,
Born to Run

Consumer
Small
business
Medium
business
Enterprise
Web /
Marketplace
Telephone /
Telesales
Partners /
resellers
Personal

Selling price Sales Force
Customer
acquisition
cost
Customer
relationship
Available
user training
Typical
customer
profile
High External High Personal Significant Enterprise
Moderate Inside Moderate Telephone Moderate
Department
SMB
Low None Low Web Minimal
SMB, SOHO,
Individual

Introducing

CLOUD
COMPANY PROFILE:
Initial research started in 2009, company founded in
2011. Service is based on the technology developed by
founders. Today 25 emp., 1.7M$ VC investment, HU
OFFERING:
Simple and secure online content sharing. A “Dropbox
like” service, however encrypting everything you store in
Cloud, easy to use. Advanced and cross platform
technology.
TARGET CUSTOMER(S):
Private users and businesses that require “higher level”
of security in Cloud (concerned or regulated).
TARGET MARKET(S):
Global!
PRICING & BUSINESS RELATIONSHIP:
Freemium (acquiring customer base), Premium and
Enterprise offering launch planned for Sept 2013.
STORY
MARKETING
NOW: Free PR, digital marketing, thought leaders
FUTURE: Conferences, articles, blogging
SALES
SMALL & MEDIUM BUSINESSES: Online / indirect
ENTERPRISES (when ready): 1:1 / direct
CHALLENGES ON THE WAY:
• EXPERIENCES: Company was started by 3 UNI
students (2009 initial research, 2011 founded)
• MONEY: No strong history or culture of VC in
Hungary (hard to get investment money)
• USER BASE: time needed to acquire user base
• SHIPPING: For all platforms, features & conversion
process (from free to paid users)
• MANAGEMENT: Company grew to 25 people in 3
years (still hiring) and needs to professionalize
people management, compensation etc.

CLOUD
COMPANY PROFILE:
Spin-off from an advertising (online) agency, 4y ago they
had an idea about the innovative product. Founded in
2009, founder coming from a music industry, VC
investment,
OFFERING
Professional white label music streaming services
supported with data analytical solutions. Advanced &
cross platform technology.
TARGET CUSTOMER(S):
Telcos (streaming services.), Retailers (background
music srv)
TARGET MARKET(S):
Asia, CEE, India, “Exotic markets” - emerging markets
where big guys are not present yet…or gave up.
Small company with flexible terms! Project
transactional (selling the license and services) or
revenue sharing (usually includes some prepayment -
STORY
MARKETING
Conferences, trade shows (e.g. Barcelona 3G), direct
meetings & contacts. No digital / online marketing (yet).
SALES
Direct 1:1 sales approach (enterprise customers).
Utilizing Skype, Lync etc. a lot!
• BIZSPARK PLUS: Limited period of a discounted
price for the platform is coming to an end – full
expense soon!
• POTENTIAL OUTAGES: Realizing that few sec of
outage is a normal behavior for Cloud.
• LACK OF “BIG BUSINESS” EXPERIENCES: First
project was not financially profitable, charging too
little!
• PEOPLE: Fire as soon as you realize they are not a
good fit for the company. Motivation is not limited to
$!
• FUNDS: No strong history or culture of VC in

CLOUD
COMPANY PROFILE:
Idea in Feb2012, beta program in Nov2012, company
founded in Dec2012, launch in FEB2013, 3 founders (2
with tech, 1 with marketing background), bootstrapped,
RO
OFFERING
Online rendering services for 3D projects.
TARGET CUSTOMER(S):
Self employed, Small & mid sized companies,
(architecture, media, design and movie with post
production studios).
TARGET MARKET(S):
Global!
Pay as you use (prepayment and use it from that credit),
monthly subscription + prepayment (subscription
gives you the right to lower rates and more resources).
Limited trial option.
STORY
MARKETING
Social media, adwords, blogging, events for the target
audience. Direct contacts with individuals (not the
company).
SALES
Primarily online (directing them to the website), for bigger
projects could be direct 1:1. Utilizing Skype a lot!
- CUSTOMERS: how to reach the right people with the
right message (avoid spammer perception)
- TECHNOLOGY: trying to use cloud services in an
optimum fashion – adapting the solution for a particular
cloud platform (WAS, AWS…). Looking for cost
effectiveness!
- MONEY: Founded with personal savings. Hard to explain
the service & market and get understanding from
investors.
- NICHE PRODUCT: Unfamiliar service to the investors or
general public.
- USER PERCEPTION: some users are expecting to get a

1. Internet, broadband, Web browser, and HTML
2. PC/laptop computers
3. Mobile phones
4. E-mail
5. DNA testing and sequencing/Human genome mapping
6. Magnetic Resonance Imaging (MRI)
7. Microprocessors
8. Fiber optics
9. Office software (spreadsheets, word processors)
10. Non-invasive laser/robotic surgery (laparoscopy)
From the Wharton School of Business

David Balažic, MBA
e: david.balazic@consalta.si
m: +386 31 699 622
in: http://si.linkedin.com/in/davidbalazic/
www.consalta.si

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