Discusses how to make a "as a service" profitable based on TSIA recommendations. These are the same methodologies that I employ.

1. Technology as a Service Trends
Methodologies and Strategies for a Thriving XaaS Business
Increasing profit in the new Technology as a Service (XaaS) economy
September 15, 2018
Prepared by Kevin Levine
kevlev@kevin-levine.com
(916) 759-2451

2. Agenda
• Technology review and TSIA?
• XaaS – Technology as a Service Profitability
• Profit horizons – Time to profit strategy
• Economic moats – Achieve profit goals
• Avoiding profit loss – The 3 killer Cs
• XaaS profitability
• The customer engagement model (Outcome
based)
• LAER – Land, Adoption, Expand, Renew
• PlMO – Plan, Implement, Monitor, Optimize
• Profit horizons effect on LAER investments
• The effects of churn and overcoming it
• Outcome chain to increase adoption
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• Outcome engineering – Center of Excellence
• Customer success capability considerations
• Trends impacting technology companies
• Customer success strategies
• End-user adoption
• Customer outcome organizational focus
• Customer success outcome pricing
• Organization and revenue allocation
• Required skills for customer adoption
• Where to start

3. Technology Revenue
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Profit (cloud 20)
• 45% were unprofitable
• 15% were marginally profitable (5% or
less)
• 35% were VERY profitable (over 10%)
Profit of XaaS companies tracked by TSIA
Infor 33.1% Veeva Systems 18%
Salesforce 25% LogMeIn 11.3%
Google 23% (2016) Rackspace 11%
Webex (Cisco) 21.9% Constant Contact 10%

4. Technology Services Industry Association (TSIA)
The authoritative leader in profitability
• Founded 2009, 500 organizations, 35K members
• SFDC, VeriSign, Microsoft, and ServiceNow
• Customer success, support, education, managed and
professional services
• Analyze member data to locate trends impacting
business performance
• Offer guidance to trend challenges
• Identify capabilities that are critical to the success of
technology companies
• Trends and best practices to run a successful business
• Deliver and measure customer success
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5. Profit Horizons
Dictates market strategy and key financial indicators
• Future Value Aggregator (FVA) – Profitability 5+ years
• Unit of future value – Monetizable at scale (i.e. Number of subscribers)
• Experiment with revenue models
• Goal: Attract new customers
• Mid-Term Wedge (MTW) – Profitability 3 to 5 years selling core
subscription
• Can manage churn, costs, and commoditization
• Reached profitability
• Current Profit Maximizer (CPM) – Profitability 1 to 3 years
• Mature XaaS offering ready to show it’s abilities
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6. Profit Horizons
Profit horizon drives:
• Portfolio and pricing
• Offering and pricing to impact financial keys
• Customer engagement model
• Growth strategy planning and execution
• Financial keys
• Method to measure progress
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7. Economic Moats
Economic moats - Increase XaaS success
1. High switching costs – Customer commitment
2. Unique capabilities – Special sauce features
3. Economies of scale – Cost-effective growth
4. Network effect – De facto standard
5. Diverse revenue streams – Additional offerings
6. Virality – New customer acquisition savings
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8. XaaS Profitability
Reaching profitability
• Why economic moats and best practices?
• To avoid the 3 killer Cs
• High selling costs – Expensive customer acquisition costs
• High customer churn – Lost logos
• Rapid commoditization - Price wars
• Economic moats, best practices, and customer outcome focus helps to ensure profitability
• Continuous attention to the Killer Cs
• Adoption, expansion, and renewal are the lifeblood of a profitable XaaS offer
• Best practices are per vertical that define world class implementation and usage
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9. The Customer Engagement Model
Supplier (LAER)
• Land
• Adopt
• Expand
• Renew
Customer (PIMO)
• Plan
• Implement
• Monitor
• Optimize
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10. Profit Horizons Effect on LAER Investments
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5+ years to profitability
3-5 years to profitability
1-3 years to profitability

11. The Effects of Churn and How to Overcome it
Effects of churn
• Revenue waterfall
Minimize churn (5% or less)
• Increase adoption
• Who - Usage
• Quantity – Usage amount
• Stickiness – Usage level
• Data Quality – Data integrity/completeness
• Efficiency – Usage ease
• Effectiveness – Outcome impactful
• Customer Journey mapping
• Identify and resolve customer pain points
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12. TSIA’s Outcome Chain Increases Adoption
Outcome chain benefits:
• KPI benchmarking and outcome engineering
• Map capabilities to outcomes
• Outcome investment vs. cost focused
conversation to land your service
• Scalability – Use software to automate
services (self-serve)
Outcome Engineering – The ability to consistently
help customers achieve targeted business outcomes
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13. Outcome Engineering (OE) Center Of Excellence
Building outcome chains
• SME brainstorm
• SME content
• Analyst productizes
Customer outcome engineering
• Locate cooperative customer
• Understand KPIs
• Build tools to monitor and measure KPIs
• Improve outcome results
• Base your success upon the success of your
customer
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14. Customer Success Capability Considerations
Organizational capabilities – The ability to perform actions that achieve desired results
If your not exploring some of the following capabilities, you’re at risk at falling behind
• Predictive analytics - Win new revenue with existing customers
• Data handshake – Develop supplier to customer relationships that foster new outcome offers
• Influence on product dev. – Data and support experiences influence product dev. priorities
• Service enablement analytics – Analyze data to increase product quality and reduce service costs
• Role clarity – RACI chart to communicate Sales from Service roles and responsibilities
• Expand selling – Expand account consumption and presence to increase revenue at lower costs
• Service compensation – Service/support drives expansion revenue while seen as a trusted adviser
• Consumption benchmarking - Compare initial customer KPIs to industry benchmarks
• Consumption analytics – Analyze customer data to recommend outcome improvements
• Customer adoption framework – Model for assessing adoption and product leverage
• Customer Success Playbooks – Value, event, or time triggered workflows
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15. Customer Success Capability Considerations
• User adoption KPIs – Used to determine at what level customer has adopted technology
• Customer Success organization establishment – Customer success financial model
• Customer Success funding – Suitable/scalable model for funding customer success activities
• Customer Success compensation – Promotes account revenue growth
• Creative offer journey mapping – What new offerings will help your customer more?
• Customer journey mapping – Examine where practices can improve the customer’s outcomes
• Business decisions based on customer lifetime value – Defines where to place your resources
Out of 3000 TSIA inquires (2017):
• Best Practices for Creating Customer Success Capabilities and Organizations was number 1
• 4 of the top 10 were customer success related (other 3 follow)
• Key Performance Indicators (KPIs): Customer success
• Adoption monitoring and health score
• Improve customer experience
• 90% of majority revenue subscription based businesses have a customer success organization
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16. Trends Impacting Technology Companies
XaaS technology trends
• Extreme cost optimization
• Blurring sales and services roles
• Changing compensation models
• Incentivizing customer satisfaction teams
• Commission sales on “Land” activity mostly
• Customer success
• Is different from customer support, it means adoption, expand, renew
• Customer satisfaction does not equate to customer experience
• Understanding adoption
• Good adoption, Measure adoption, Drive adoption, Assess adoption ROI
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17. Customer Success Strategies
• High adoption
• Beneficial to revenue waterfall
• Cuts sales costs
• Builds moats
• Powers social marketing
• The LEAR Model
• Both LEAR and PIMO move customers rapidly across the stages of
technology adoption, resulting in high renewal and expansion
• Answer the following questions to drive customer adoption
• What does good customer adoption look like?
• How is customer adoption measured?
• Who is responsible for driving customer adoption?
• What practices accelerate customer adoption?
• How is ROI for customer adoption activities assessed?
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18. End-User Adoption
Consider the following to increase end-user adoption:
• Stickiness – What offer features are used and are there any additional ones that might
improve customer outcomes?
• Data Quality – The degree to which a set of characteristics of data fulfills requirements
(i.e. accuracy, completeness, validity, and consistency)
• Efficiency – Are there ways to minimize the time and expense necessary to leverage
your offer as compared to other customers?
• Outcomes – Does using your service critically impact their performance metrics?
• Who’s using your offering? How frequently? How much?
• Out of all the users who could use your service, what percentage are?
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19. Customer Outcome Organizational Focus
Organizational focus
• Make customer facing roles responsible for
adoption and map them to the LAER life cycle
• Who in your company is or should be responsible
for customer adoption (your engagement model)?
• Sales oriented roles should focus on landing new
business
• Customer adoption teams consist of Outcome
Engineering, Customer Success and Customer Service
teams
• LAER process and analytics can surface 80% of
expansion opportunities and renewal threats. The other
20% can be fielded by enhancing opportunity skills
within your customer growth teams.
• Make renewal a process not a heroic event
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20. Customer Success Outcome Pricing
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Customer Success
• Optimize service costs
• Foster account growth
• Enhance customer experience
Land - Outcome Chain Pricing
Customer
Selectable

21. Organization and Revenue Allocation
Organizational structure and revenue allocation
• Structure
• Executive owns customer success, renewals,
expansion, and service delivery
• SVP of Infrastructure reports to Executive and owns
customer engagement technology platform
• Reinvested revenue
• More evenly across functions
• May take time to fully implement
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22. Required Skills for Customer Adoption
Customer Growth Team Skills
• Opportunity recognition skills
• Vertical industry experience
• Process Expertise
• Soft service skills
• Product/technical expertise
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23. Where To Start?
Getting Started
• Consolidate portfolio management
• Identify key members of your technology platform infrastructure team
• Establish analytics and customer success teams
• Move renewal and expansion away from sales so they can focus on new business
• Collapse service delivery P&Ls
• Add a Chief Customer Officer (CCO) for customer experience and Chief Revenue
Officer (CRO) for revenue generation. High influence but small staff.
• Centralize and standardize wherever possible
• Share resources across organizational lines to:
• Create new offerings
• Build service enablement into the product
• Increase adoption with high-potential customers
• Leverage adoption practices across regions
• Marketing educates sales pipeline and customers
• Create vertical solutions via outcome engineering and success science
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24. Thank you
Technology as a Service Trends
Methodologies and Strategies for a Thriving XaaS Business
Increase profit in the new Technology as a Service (XaaS) economy
Kevin Levine
kevlev@kevin-levine.com
(916) 759-2451