Chef says “I think you’ll like this combination!” and “How would you like that cooked?”
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…
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.
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.
Most feedback processes are heavily weighted by the objectives of the reporter. Sometimes difficult to tease out the actual information.
Alternative to “seeing if the dogs eat the dog food”
…Newsletter on Startups & ProductsThe secret life of Product Managers “Parenting and the Art of Product Management” “Goldilocks Packaging” “Sharks, Pilot Fish, and the Product Food Chain” http://www.mironov.com/articles/ Recent survey about PMs and service-versus-product http://www.mironov.com/more/survey_results/ 4 www.mironov.com
Service-Model Thinking Most of us have grown up as “product” product managers Service model: more than just hosting Responsible for user’s positive experience So… are you a Grocer or a Chef? 5 www.mironov.com
Licensed Enterprise Software…is like delivering groceriesEnterprise IT is responsible for: Choosing the right items Combining them correctly Managing hours and uptime Serving and helping users Producing tasty results 6 www.mironov.com
Hosted Software-as-a-Service…is like running a restaurant Serving complete meals Many customers Hours and availability End users interact directly Need repeat buyers One bad experience is never forgotten 7 www.mironov.com
Product & Service ModelsProduct Model One-time fee or license With or without maintenanceSubscription Service Model Monthly fee per userTransaction Service Model Per fax, per download, per transplant, per report, per hour, per update… 8 www.mironov.com
Four Key Service-Model LessonsBeing the chef, not the grocer:1. Build a multi-tenant infrastructure2. Expect slower, incremental sales3. Do continuous marketing4. Get real user feedback 9 www.mironov.com
1. 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 10 www.mironov.com
Not a New IdeaWell-designed software should be host-ableBut need to set priority for… Details of user hierarchies Reporting, billing, invoicing Third party data security obligationsSee Luke Hohmann’sBeyond Software Architecture 11 www.mironov.com
New Kinds of Service MetricsYou need an Operations team and new skill set Uptime SLA (“Application up 99.95% of the time except…”) Response Time (“98% of log-in 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…”) 12 www.mironov.com
2. Incremental Sales CycleInitial subscribers sign up more quickly, but… Easy, cheap trial is #1 benefit of service model Pioneers are really in extended trial First taste must be greatRevenue ramp is slower…upsell to more users…upsell premium features 13 www.mironov.com
No More 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 model 14 www.mironov.com
3. Continuous Marketing “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 15 www.mironov.com
Frequent, Helpful ContactFriendly, low-pressure tone Topic of the month User profile (success story of the month) New features FAQs Support contacts 16 www.mironov.com
4. Getting Real User Feedback Licensing model: second-hand feedback 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 really being used? Error reporting 17 www.mironov.com
Dare to Taste Your Own Food …use your own service if you can19 www.mironov.com
Take-Aways“Wrapping It All Up” Service model adds new responsibilities and requirements Initial revenue is slower Installed-based marketing never stops You have actual usage dataYou may be asked for a servicemodel soon. Grab your cookbook! 20 www.mironov.com
Top-Line Observations Products slanted toward enterprises/government Services have more share of small/medium business Subscription service sales cycles 33% shorter Transaction services 49% shorter Service PMs make little use of app logs to understand customers 24% vs. 1% for products PMs say that customers use only half of features Were dramatically overloading our offerings! Service PMs use product registrations more than user profiles to identify users 24 www.mironov.com
Selling and Upselling 33% faster close cycle for subscriptions Service tilt toward small/medium businessesDifferent upsell models… Product Subscript TransxnSelling new versions/upgrades 76% 46% 38%Selling more units 83% 46% 50%Higher-priced subscriptions 28% 83% 44%Adding more users 47% 68% 29% 25 www.mironov.com
Understanding Users“We know which features/functions ourcustomers use via...” Product Subscript TransxnPersonal discussions 56% 49% 53%Tech support calls/cases 38% 32% 24%Enhancement requests 27% 17% 11%Transaction/activity logs 1% 24% 21%Sales team feedback 29% 24% 29% 26 www.mironov.com
Over-Featured Products?“I think my typical customer uses...”Product: 48% of available featuresSubscription: 48% of available featuresTransaction: 52% of available features 27 www.mironov.com