Category Archives: Cloud

Posted on Mon, Nov 20, 2017 @ 4:00 pm

You have a cloud solution. Congratulations! Now, how do you sell it?

After you built your cloud solution, your next key decision is choosing the right go-to-market (GTM) strategy. There are many factors you’ll need to consider here, including subscriptions, pricing, and sales channel.

When crafting the GTM strategy for a cloud-based solution, you need to look at the subscriptions or offerings you will provide to your customers. Remember that customers like having options from which to choose, but too many options actually can deter them from making a decision. That’s why most cloud solution providers settle on three or four subscription options.  How these subscriptions are structured depends on the solution provided. Some solutions lend themselves to a feature-based subscription model, e.g., the Silver subscription has 10 features, the Gold has 20, and the Platinum has all of them. On the other hand, some solutions lend themselves to a usage-based subscription model, e.g., the Silver subscription provides up to 1,000 transactions a month, the Gold provides 5,000, and the Platinum provides 10,000.  Defining usage-based subscriptions should be done with operating and transactional costs in mind. Defining feature-based subscriptions can be a bit more confusing.

When considering a feature-based subscription model (one of the most common), an important thing to keep in mind is this question: What are the fire breaks between each subscription level?  Why would a customer want to purchase a higher cost subscription level rather than a lower cost one?  What are the “carrots” you can use to entice a customer to move up to a higher subscription? There are many ways to think about this, but there are often two major lines of thinking. One is to place entire features in only one subscription level, e.g., reporting is only in the Platinum subscription level. The second way to think about this is to spread out a feature over multiple subscriptions, e.g., canned reporting is available in the Silver package, basic report configuration in the Gold, and customized report wizards in the Platinum. The idea here is to whet their appetites with a feature in a lower subscription, knowing that once they see it they will want more, when they ask for more you have the perfect answer…upgrade to the next subscription level, and you can have it.

So, now that you have your subscription levels defined, you have to figure out how to price each level. Pricing is an art and has many components to it in order to get it right. Some factors to consider when defining pricing for a cloud-based solution are the length of your costs, license term, revenue recognition and generally accepted accounting principles (GAAP), and the value of building a stream revenue base.

When thinking about pricing, the first thing to consider is your cost. Building, delivering and hosting a cloud-based solution is free for your customers, but certainly not for you. One of the most difficult things to understand is how much it will cost to host and maintain a new cloud-based solution. Work with your cloud provider to estimate compute and storage cost. Doing so on a “per transaction” basis often can help. Then, you can estimate how many transactions each subscription level might generate per month, and you can include this in your pricing model. The next step is to think about the license term. Most smaller, less expensive solutions choose a month-to-month subscription, which give the customer the option to exit every 30 days without penalty. For larger solutions with higher costs for onboarding a customer, some will choose a quarterly or even annual license model. It all depends on the investment made in onboarding on both sides of the table.

One of the most important things to consider when defining the pricing model for a new cloud-based solution is GAAP and revenue recognition. Many companies trying to make the move to providing on-premise monolithic software solutions are used to recognizing all of the revenue from that sale up front. However, revenue can only be recognized on a monthly basis when you’re selling a cloud-based solution, regardless of how you price it. Revenue is based on how your product is consumed. This changes the revenue recognition model, which can affect any factor within an organization, such as profitability, sales channel, and sales model to name a few.  An organization launching a cloud-based solution has to be prepared to build a stream revenue model business instead of an up-front, license revenue model business.

Cloud-based solutions are often billed monthly or quarterly (depending on the size and complexity of the solution), and because of this, they typically have a lower billable price point.  Due to low initial revenue streams, it often does not make financial sense to use traditional sales channels to sell these solutions. It is difficult and often cost prohibitive to pay a sales rep commission on a monthly service. Consequently, the price point and resulting compensation is so low that most field sales reps won’t even want to sell the solution. Because of this, most companies that offer cloud-based solutions use a sales channel other than field sales. Some will use inside sales reps and others will use digital sales channels, using products like Salesforce’s Marketing Cloud to market and sell online solutions to customers. While the GTM channel is an important choice to make, regardless of the outcome of that choice, enabling the customer to see and use the solution before they purchase it is a key component to success.

Free trials are key to a successful launch of any cloud-based solution. For one thing, people have come to expect a free trial, so not having one will be a major strike one in any cloud solution launch. Secondly, customers have a need to see the solution before they purchase it, so they can understand how it works and ensure the solution fits their needs. Remember, cloud-based solutions typically have no customization (custom coding) and minimal configuration (settings). Enabling a free trial will allow your customers to see the value your solution can bring out of the box. A few notes to ensure your free trial is a successful one:

  1. Full Features – Regardless of the subscription model chosen above, the free trial should ideally contain the full feature set and no usage restrictions to enable the customer to get the full experience of the solution.
  2. Nurturing Programs – Many forget that a free trial is great, but it is just that: Free. What often happens with free stuff? It’s free, so it has little to no value. Users often forget about free trials and don’t use them. Nurturing programs are essential to converting as many free trial users to paying customers as possible. Here are some major components for a successful nurturing program:
    • Welcome emails
    • “Did you know?” emails, in which features and use cases are outlined
    • “We noticed you haven’t logged in. Can we help?” emails

Nurturing programs should not stop after the free trial is over and should continue after a purchasing decision is made. Never forget that you could potentially lose every customer every month in the cloud model. Because of this, you need to keep in touch with your customers to ensure they know you are there. Do you have a new feature? Did you just learn about a new development or trend in the market? Let your customers know about these important updates, because this shows them you are a partner and not just a solutions provider.

We hope you enjoyed our 3-part blog series on cloud solutions! If you didn’t catch the first two in the series, click here to get started. If you would like to set up a time to learn more about how we can help you build an effective cloud solution, contact us here.

About the Author

Abdul Rafay Mansoor is a technical architect at ObjectFrontier, Inc., and his work primarily involves presales consulting. Abdul has been a developer for more than a decade, and he began taking on presales consulting roles a few years ago. Abdul’s area of interest is cloud native development, and you often will find him passionately advocating cloud adoption to our clients.

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Posted on Thu, Nov 9, 2017 @ 12:35 pm

So, you’ve decided to build a cloud-based solution, but where do you go from here? There are a few key things that should be thought through, realized, and decided upon even before you start building your cloud solution. They revolve around what a customer of a cloud-based solution is looking for (hint, they aren’t looking for hundreds of features), which cloud service provider to choose, and why. Technically, cloud solutions are really Software as a Service (SaaS), so keep this in mind as we further explore and define cloud solutions.

Customer Expectations. As we discussed in our previous blog, features and functionality will not ensure you are a winner in the cloud space. Instead, they are table stakes. Without feature parity with your competition, your solution will not even be considered. Be confident in the knowledge that your competition has the same features as you. They know what your solution has, because they have an account on your system and have been using it since it’s been launched. Yup, they’re watching every move you make. Instead of features being the main leverage used to create differentiation, customers are defining a new paradigm.

In order of importance, the most common components customers say are essential for a cloud-based solution (in addition to security) are ease of use, service, support, scalability, performance and availability. More important than having hundreds of features is having usability, support and performance. The second group of components customers look for includes out-of-the-box integrations, insightful analytics, simple reporting, and lastly, a robust feature set.

Interestingly enough, people expect to use a cloud-based solution with no training, get the solution up and running in 10 minutes, and have easy access to helpful, on-demand support. OFS recommends you achieve these goals through being involved in implementation from the beginning and using tutorials, context-specific self-help systems that utilize videos, and chatbots to provide customers with self-service help on demand. For more information on how chatbots can help you provide excellent service to your customers, please see our blog series on chatbots here.

Cloud Service Providers. One of your most impactful decisions in this process is choosing which cloud service provider should host your new solution. There are many from which you can choose, and here are a few top examples:

  • Amazon Web Services (AWS) is the leader in cloud computing, with many services—including many fully managed services—and lots of community. However, a lot of AWS services seem to be going to vendor lock-in.
  • Microsoft Azure Cloud Services is considered the next leading cloud services provider after AWS. Azure is well suited to the Windows\.NET client base. Azure has adopted open source in big data, but every service coming from the traditional Microsoft stack (SQLServer, etc.) is going to be a vendor lock-in.
  • Google Cloud Platform (GCP) does not offer as many services and as much community support as AWS or Azure yet, but GCP is differentiating itself by not using vendor lock-in. Instead, this provider uses more open-source technologies.

Each cloud service provider has its own platform with its own APIs, management and reporting consoles, and technology stack. This is how these providers can offer differentiated services to their customers. There are so many factors that go into selecting a cloud solution that some businesses are not afraid to pick a multi-vendor configuration.

Whether you’re interested in using just one vendor, or you think a multi-vendor configuration is right for you, here are the most important factors to consider in your decision:

  1. How many services does this provider offer, and how many of them are fully managed?
  2. What is the community support like for this platform?
  3. Will I experience vendor lock-in issues with this service provider?
  4. What is the availability, durability and performance offered in this service provider’s SLA (9s)?
  5. Will I need to be aware of conflicts of interest if I choose this service provider?
  6. Is this service provider compliant with industry standards like PCI and HIPAA?
  7. What is the cost structure for this provider?

All the factors above will influence your choice, but the major advantage of cloud is the pay-as-you-go model: You don’t really commit to anything, so you can start experimenting with any or all platforms and mix and match, too. In addition, the new container-based architecture introduces a lot of flexibility.

To learn how you can effectively market and sell your cloud solution, stay tuned for our final blog in this series, “What are Cloud Solutions Anyway? Part 3,” coming next week. What are some of your observations about working with cloud solutions? Do you have any additional suggestions for what to consider when choosing a cloud service provider? Are you planning to implement a cloud solution for your business? Contact us here to talk with one of OFS’s tech experts, or leave us a comment to start the discussion!

About the Author

Abdul Rafay Mansoor is a technical architect at ObjectFrontier, Inc., and his work primarily involves presales consulting. Abdul has been a developer for more than a decade, and he began taking on presales consulting roles a few years ago. Abdul’s area of interest is cloud native development, and you often will find him passionately advocating cloud adoption to our clients.

 

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Posted on Thu, Nov 2, 2017 @ 7:51 am

SaaS. Public Clouds. Private Clouds. If you’re in the software industry, chances are you hear these terms pretty much every day. From your boss to your colleagues to the software industry gurus you follow on Twitter, cloud solutions are what everyone is talking about right now. But with so much noise out there, you may be asking these questions:

“What exactly are cloud solutions?”

“How relevant are they to my industry?”

“Why should I build my next solution in the cloud?”

These are very good questions we hear from many of our clients, too. As we move into an era of solutions that include Google Docs, Office 365, Mint.com and many others, it’s important to understand what these cloud solutions are and what they aren’t, as well as how customers interact with them. In this blog series, we not only want to answer your questions, but we also want to give you ideas for how you can build successful cloud solutions that speak to your customers’ needs.

To ensure we’re on the same page as you are when you read this series, it’s a good idea to start with a clear working definition of the cloud. The cloud is nothing new. In fact, the cloud has been around since ARPAnet first linked two computers together in 1969. Up until recently, the cloud consisted mostly of web and file servers hosted on different Internet-connected networks and really didn’t have too much more to offer. It remained “the Internet” for years. However, once companies started to build and deliver applications and complete solutions on the Internet, they decided to rename the Internet as “the cloud” to breathe new life into the same infrastructure. The Internet was a network of connected computers and web/file servers, and now it is a network of connected cloud solutions and cloud service providers.

While cloud solutions are very different from each other, they typically have a few common characteristics that define them as such. Cloud solutions often offer benefits such as instant provisioning of new customers and users. This requires scalability, which is provided by virtualized resources with the ability to expand and contract servers and compute power on the fly based on need. First, a cloud solution is typically deployed (installed/configured) on a group of servers hosted and maintained by a third party. With this model, the customer’s main benefit is that his or her IT department typically is not involved in the installation, configuration, or maintenance of the solution. Believe it or not, since budgets continue to shrink and more IT departments are outsourced, many IT departments are advocating for cloud-based solutions because they don’t have to be involved as much over the lifecycle of the solution. Overall, the total cost of ownership of a cloud-based solution is often much less than purchasing and maintaining a software solution in house. Secondly–and this might go without saying–cloud-based solutions are almost always accessed by people using a web browser through the Internet using standard web ports (e.g., 80 and 443) with little to no software installed locally to make the solution work. A good cloud solution will work from any network on any computer that has a modern web browser. Lastly, most cloud-based solutions are multi-tenant to achieve economies of scale for the provider.

There are two ways you can architect a multi-tenant solution, and it is extremely important to understand the difference between them. The first way to implement a multi-tenant solution is cheaper but less secure. You would have a single database that contains all data from all customers in the same tables. Naturally, this is easier to build and cheaper to run. However, this makes a lot of customers nervous because their data is commingled with their competitors’ data in the same table. The only thing separating one customer’s data from another is a customer ID field on each record. The second way to implement a multi-tenant solution is more expensive but also much more secure: Have a unique database for each customer who uses the solution.  Naturally, with one DB per customer, there is no commingling of data. Each DB can be encrypted with its own unique encryption key, and there is almost no chance one customer can gain access to another’s data.

Now that we have working definitions of the cloud and cloud-based solutions, let’s talk about the words public clouds, private clouds, and SaaS. The servers and data in a public cloud are hosted on a provider’s network intended for multiple customers to connect from any place with an Internet connection. In a private cloud, a solution and all of its data is hosted within the firewall of a single customer’s network and is only accessible by that one customer’s users.  Software-as-a-Service (SaaS) is nothing more than a deployment and a model (and sometimes a monetization method) and basically means that users access the hosted solution on demand, as they need it, with little to no installation required. SaaS is the opposite of an on-premise solution. Knowing this, you can see how certain industries would be pulled toward cloud solutions.

If you think about why customers are entertaining cloud-based solutions, it will become clear why most industries today are moving towards them. Costs are a driving factor for every business as they are all going up, like costs for personnel, health care, raw materials, and IT. At the same time, customers are demanding things to be built faster, delivered more quickly (increased costs again) and at a lower price. As a result of this and the current economic climate, most companies are seeing their department capital budgets going down, which means they have less money to invest in costly on-premise solutions. With that in mind, it is no surprise that cloud-based solutions are most relevant in industries that are being forced to operate on leaner budgets, such as higher education, facilities management, healthcare, and legal. Based on a quick review of publically available RFPs, you will find that even the federal government is moving to cloud-based solutions for some of its needs. These industries are moving to cloud-based solutions due to the tremendous cost savings as well as the other benefits they provide.

The benefits of cloud-based solutions are rather substantial for both the customer and the solution provider. Let’s look at why cloud solutions are important from both sides of this table.

The Customer. More customers are demanding services in the cloud for a number of reasons. First of all, many are becoming more cost-sensitive about large purchases and are moving from a CAP-EX operating model to an OP-EX model, meaning they don’t want to commit to purchasing a system for $50-$100k up front. Instead, these customers desire a low monthly payment with no commitment and quick onboarding. Secondly, internal IT costs are rising. We have been hearing from our customers that internal IT department chargebacks for hosting a new application are often just as much, or more, than the license of the application. Lastly, on the same point, IT departments themselves are asking for more cloud-based services since they are running “leaner” than they have in the past.

The Solution Provider. The number one reason you should be thinking about building your next solution in the cloud is simple: Your competition is already doing it. If you take a step back and think about it, the reasons become clear. In a world of cloud-based applications and agile development, you can provide new features and defect fixes every day if you want to, but in reality, the release schedule usually is once every two or three weeks. The point is when there are new features to be rolled out, all you have to do is update a single cluster of servers in a cloud instead of rolling out an update to each of your customers, getting it installed, and dealing with the support fallout of incorrectly applied upgrades and patches. Secondly, when all of your customers log into the same multi-tenant environment, you are able to accumulate all of their usage data in one place. Check out our blog on machine learning and data lakes to understand the benefits.

When all of your customer usage data is stored in one place, you can…

  • Understand usage patterns and see what features customers are and are not using
  • Perform A/B testing of new features/ideas in a real environment
  • Directly market and sell additional functionality (upsell) to specific sets of customers with specific usage patterns. For example, you can say, “We noticed you use feature X. Do you know that if you upgrade to the premium package, feature X is expanded in a way we think would be useful to you?”

Lastly, here’s what we consider the real value of a cloud-based solution: analytics. With cloud solutions and their no-commitment monthly payments comes the reality that you could lose every customer each month. They simply are not locked into any commitment, which is one of the main selling points to the customer in the first place. As a software industry, how have we retained customers in the on-premise world? Implement and release new features before the competition does. With cloud-based solutions, your competition can do that just as quickly as you. So, what is the new way to provide differentiated value to your customers? It’s through using insightful analytics and reporting.

To learn how you can select the right provider to help you build your cloud solution, stay tuned for next week’s blog, “What are Cloud Solutions Anyway? Part 2.” Or, contact us here to set up a time to talk with us about your questions and interest in implementing cloud solutions.

About the Author

Abdul Rafay Mansoor is a technical architect at ObjectFrontier, Inc., and his work primarily involves presales consulting. Abdul has been a developer for more than a decade, and he began taking on presales consulting roles a few years ago. Abdul’s area of interest is cloud native development, and you often will find him passionately advocating cloud adoption to our clients.

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