A quick follow up on my previous post on cloud computing adoption patterns. I have been guest blogging on Compuware's CloudSeluth blog and have written a post on this topic titled Cloud and Bottom-Up Adoption. In it I reiterate some of the points I wrote about in the last post and which I presented in my CloudConnect keynote, but I added another angle, comparing the first attempt of creating a true public cloud, the Sun Grid, to the first successful attempt: Amazon Web Services.
The main difference between the two? You guessed it.
While the former (Sun) targeted the traditional IT customer, the CIO, Amazon went after developers, and that was the secret to their success.
For more, check out the full post here.
In July I wrote about the public beta launch of Totango and how it promised to help increase SaaS sales by better understanding customers, and especially their interaction with online channels, including the SaaS service itself.
Now, Totango has announced that it has analyzed and optimized the sales engagement or interaction with over one million prospects and customers of SaaS businesses. That’s a big number.
When looking at the research published by Totango here are some important takeaways for SaaS sales:
If you can, use a zero touch (self service) or low touch (inside sales) model. Using an inside sales rep (phone and email) is exponentially cheaper than using classic enterprise sales (somebody who gets on an airplane and wines & dines customers). And using a self-service sales model is exponentially cheaper than inside sales. David Skok has published some of the math in his presentation on building a sales and marketing machine (see slides 18, 19, 20). As I know from my own experience with many companies, and as Joel York has pointed out, some B2B sales are too complex for zero touch or low touch selling, but generally modern buyers expect to be in charge and don’t always appreciate a call with a rep. The trick is to figure out which prospects would benefit from a sales call and which would actually be hurt by it. Big data from solutions like Totango can help: A/B testing batches of leads can help you figure out what is the best next action for each specific situation.
Not all prospects are created equal. Totango found that the single most important indicator of a prospect’s likelihood to sign up for a paid service is his or her activity level during the free trial period. So if you know who your most active trial users are you can direct your inside sales team’s attention to these prospects. Free trial users who are still active during day 3 of their trial were 4 times more likely to convert into paying users than the average customer. Active trial users who were contacted by a sales rep were 70% more likely to buy the paid service than those who weren’t (but of course sales reps are likely to choose the best looking prospects to begin with). Since a sales rep doesn’t have enough hours in the day (and is too expensive as noted above) to contact ALL trial users, it’s important to have each rep start their day by calling those prospects most likely to convert. This will increase sales effectiveness and sales efficiency: Zack Urlocker from Zendesk is quoted on the Totango website as saying that they were able to increase free to paid conversion by more than 30% using this approach.
By definition, the all-important customer lifetime value metric in SaaS is determined not by the value of the initial sale, but by the value of ALL sales made by a customer over its lifetime including expansion sales and subscription renewals. The key to success upselling an account is to know what value the customer has received from the solution to date. If you know that a customer has been successful, it’s an easy sale. If you call a customer and find out they have discontinued using the service months ago, it’s an embarrassment. You should really receive an early warning indicator that an account is no longer using the service and proactively address and turn a customer before they cancel the service. Totango’s research found that most cancellations are followed by a period of non-use and that non-use is more prevalent than you might think: a full half of paid SaaS customers log in less than once a month or do not use their paid service at all. Another 19% is using their paid service less than once a week.
In summary, it seems to me that knowing your customer is rapidly going from a “nice to have” to a “must have”. Those early adopters of customer engagement software will be able to:
And those who don’t pay attention will very soon be at a very significant competitive disadvantage…
Check out this very cool infographic from Totango:
Next week in Tel Aviv I'm going to participate in a panel about "the future of clouds", moderated by the legendary Yossi Vardi. In preperation, I wrote down a few of the concepts I've been thinking about for the past several years and I thought I would share them with my readers to get some feedback. Keep in mind these are long-term predicitions and trends (in no particular order).
I'd love to hear some feedback on these trends. Do you agree? Disagree? Have I left something out? Please let me know in the comments.
One of the overlooked drivers of cloud adoption is the tightly integrated, I call it pre-integrated, ecosystem you get when you choose the right provider.
Because cloud environments are generally homogenous and consistent within their own boundaries -- and this is true for IaaS, PaaS and SaaS -- and because they are tightly controlled by the provider, the cloud provider is in a position to pre-integrate other systems, components and apps to the infrastructure (or the application, in the case of SaaS).
In traditional IT, integration is one of the most complex, painful and costly processes. A pre-integrated ecosystem allows making these integrations simply by flipping a switch.
My first exposure to the concept of pre-integration was in January of 2006, when Salesforce.com launched the AppExchange. This was more than two years before Apple launched the AppStore, mind you. And the idea wasn't fully baked yet, but it was certainly an "a-ha" moment. And it goes to the heart of what's so revolutionary about cloud computing.
Today, for example, you can with a few clicks of a button, integrate between Salesforce.com's CRM app and Google Adwords, Marketo, LinkedIn, VerticalResponse, Zendesk and hundreds of other applications. Again, with traditional on-premise CRM such integrations would have been an expensive and lengthy proposition.
But a pre-integrated ecosystem doesn't only apply to SaaS. It also works well with PaaS and IaaS clouds.
The first chance I got to implement the concept was with the Heroku founders, James, Adam and Orion, in early 2009 with the Add-Ons that can be added to any app a user developed and runs on the Heroku PaaS. A perfect example of pre-integration at Heroku was New Relic, which is Application Performance Managemet (APM) as-a-Service. You basically get New Relic APM capabilities with a click of a button. In the on-premise world, implemeting an enterprise-grade APM (Wiley, for example) takes months of professional services to implement.
In Infrastructure-as-a-Service, there are many examples of a pre-integrated ecosystem particularly around AWS and the OpenStack framework. In particular there are many management and monitoring tools that have pre-integrated with these two cloud platforms, but other software categories as well.
The notion of pre-integration can be taken even further.
When I hosted the cloud track at QCon 2010, one of the speakers was Thor Muller, CTO & Co-Founder of GetSatisfaction, and in his presentation he introduced me to a phrase I've been using ever since: "daisy-chaining services".
My favorite example, one from SaaS for small business, involves daisy-chaining Bidsketch, Freshbooks, Highrise and RightSignature.
Bidsketch is a SaaS product for creating and sending proposals. It lets an individual or company create a proposal and share it with a prospective client who can then log in and view the proposal on Bidsketch, make comments and changed and ultimately approve the proposal. As all of this happens, Bidsketch automatically updates the events in the Highrise (CRM) entry for that client ("Proposal sent", Proposal approved", etc.).
Once the proposal is approved, Bidsketch then activates another service: RightSignature, which is used for electronic, online signatures. Both sides can sign the approved proposal, and this fact is updated in Biksketch: proposal signed. In turn, Bidsketch, again updates the Highrise CRM system. Bidsketch can then automatically create an invoice in the Freshbooks invoicing service -- and Freshbooks will then update Highrise that an invoice was sent, payment was received, etc.
Customers are increasingly becoming aware of the importance of ecosystems of cloud services -- and specifically of the value of pre-integration.
I was recently asked to recommend a CRM system to one of the startups I am on the advisory board of. As much as I dislike the complexity and poor peformance of Salesforce.com, I had no choice but to tell them it's the only way for them to go -- for the simple reason that it's the only CRM SaaS offering that is guaranteed to be pre-integrated not only with every app they need today, but also with ones they will need in the future, which may not even exist yet.
Case in point, when Totango -- another company I am an advisor to -- recently launched its customer engagement SaaS offering (an emerging category, see David Skok's post), it immediately started with support for SFDC. And you can safely assume that any other startup that launches a product that could benefit from integration with CRM, will first support Salesforce (or Highrise if it's targeting SMBs).
In summary, the breadth and depth of ecosystems is becoming a critical factor in how customers choose which cloud services to bet their business on.
I'm hoping to write a separate post on what this means to startups and other cloud services providers. Suffice it to say for now, it's something you should be thinking about...
Today, my friends at Totango announced their $3.8 million Series A funding and the public launch of their service. I've been involved with the company since the beginning (in fact, before the beginning) as an advisor and I wanted to give my take on why I think what they are doing is so significant to SaaS companies and to cloud companies in general.
As I've written many times before -- and at this point is pretty much generally accepted -- the move to a service delivery model for software (SaaS) and other aspects of IT (PaaS and IaaS) is changing every aspect of the business: engineering and operations, but even more interesting to me, the business side of the house, including marketing, sales and customer success. This is especially true for B2B companies.
About a year and a half ago, Guy Nirpaz, now Totango co-founder and CEO, and I spent an afternoon in a coffee shop on The Embarcadero in San Francisco thinking about where all this leads to. What new business needs arise from this model?
Then, as now, I had the advantage of working with multiple companies who were on the cutting-edge of this trend, companies such as Heroku, Twilio, Sauce Labs and New Relic. From that vantage point I could see a curious phenomenon. In theory, given that the entire interaction of customers with their products was online, they could truly understand what customers and prospects (in free trials) are doing. They should have been able to answer questions such as how are we doing on all of the key performance indicators of our business? Whice trial users are ramping up their activity and are ready to buy? which ones are having problems? What features of our product are the most and least popular? and many other questions.
That was one of the promises of the cloud delivery model, but in reality it didn't quite materialize.
Don't get me wrong. Almost every company in the space, startup or established company, has some sort of "dashboard" for tracking KPIs and some aspects of customer usage, but these tools are usually done in a rush and as an afterthought. They are crudely developed by an engineering team that provides this because the business folks are demanding it but there heart isn't really in it.
This results in half-baked solutions. For example, it is very common that every time a business person asks a simple question, a developer has to stop what they are doing and work through a series of SQL queries and other coding tasks to get them the answer. And that is assuming they have properly instrumented the application to track all of the relevant activities, events and metrics in the first place.
As you can imagine, with such a high barrier (and a lot of tension arises because of this), these types of analyses don't happen often. Not only are they not being done consistently and continuously, they are not being done methodically. There were no "best practices" as to what we should be looking at and what it means.
It is this problem that Totango addresses.
Totango has many great things in the work but it begins by focusing on sales. And not no-touch sales, but SaaS companies that have inside and field sales people who need to sell, renew and upsell accounts.
Companies such as Zendesk and Jajah have already been using the service in private beta and proving the value. It's worth checking out (it's free for now).
Today VMWare is about to make a big announcement about CloudFoundry.com. I'm writing this post before the actual announcement was made and while on the road, so more details will probably emerge later, but there is the gist of it:
VMWare is launching CloudFoundry.com. This is a VMWare owned and operated platform-as-a-Service. It's a big step in the OpenPaaS intiative they have been talking about for the past year: "Multiple Clouds, Multiple Frameworks, Multiple Services".
For those of you keeping track, CloudFoundry is the official name for the DevCloud and AppCloud services which have come out in various alpha and beta releases in the last few months.
The following diagram summarizes the basic idea behind CloudFoundry.com:
In other words, in addition to running your apps on VMWare's own PaaS service (CloudFoundry.com), VMWare will make this framework available to other cloud providers -- as well as for enterprises to run in-house as a private cloud (I'm told this will be in beta by the end of this year). In fact, they are going to open source CloudFoundry under an Apache license.
They're also going to support multiple frameworks, not just their own Java/Spring framework but Ruby, Node.JS and others (initally, several JVM-based frameworks). This concept is similar to the one from DotCloud, which I discussed in What's the Best Platform-as-a-Service.
On the services front, they are going to provide multiple services provided by VMWare itself, and eventually, open it up to the ecosystem for third-parties (similar to Heroku Add-Ons or Salesforce.com AppExchange).
Where it says in the diagram above "data service", for example, VMWare already has three offerings: MySQL (similar to Amazon RDS), MongoDB and Redis. For "message service" they will offer their own Rabbit MQ and other messaging services.
Finally, you'll notice there is reference to a "Downloadable 'Micro Cloud'" in the diagram. This is a free offering from VMWare that lets you run a CloudFoundry cloud on a single VM, which you can carry around on a USB memory stick or run on an Amazon Machine Image (which is what Michael from RightScale is going to demonstrate today). The idea behind the Micro Cloud is to appeal mostly to developers and let them easily do development in any physical location and seamlessly load their app to a CloudFoundry cloud when they are ready.
The Micro Cloud is one more aspect of this intiative that is intended to appeal to developers and encourage bottom-up adoption for the VMWare cloud. I've discussed the idea of developers being the driving force of cloud adoption before, and you can read more about it in this post.
All in all, a very smart, if not unexpected, move by VMWare. But it remains to be seen how VMWare will handle the inevitable conflict between being a cloud provider and hoping to be the provider of infrastructure software for other providers. Case in point: VMForce, the joint offering announced by VMWare and Salesforce.com several months ago.
Officially, both companies say everything is on track for the VMForce offering, and VMWare says VMForce is "powered by CloudFoundry". But as I am quoted in this TechTarget article, the companies were already on a collision course, especially after Salesforce.com's Heroku acquisition.
From talking to some of the folks at VMWare, it's clear that they too believe that the future of computing is PaaS -- something I believe strongly in. It will be interesting to see how they execute on this grand vision.
Zack Urlocker wrote a nice piece on GigaOm about the Consumerization of IT, a topic that's near and dear to my heart, as readers of this blog probably know. The main focus of Zack's post was that enterprise software needs to be more simple and with less features, similar to consumer software and electronics.
But he also writes:
In a recent presentation, Lew Cirne, CEO of application performance management vendor New Relic, revealed the company now has 5,000 customers and just one sales rep. That’s astonishing.
Again, as regular readers of my blog probably know, this is a pet peeve of mine, which I write about often (for example, here, here and here). And it's not that astonishing if you know what's going on at many cloud and SaaS companies. You need only look at companies such as Amazon Web Services, Heroku and Twilio, to name a few, who are enjoying similar or greater efficiencies in their sales and marketing efforts, and whose customers include large enterprises, not just SMBs (as do New Relic customers).
As full disclosure, I've worked as an advisor with New Relic, Twilio and Heroku, and am now working with companies such as Xeround, Sauce Labs and others (including large publicly-traded telco and hosting vendors), and we are successfully building similarly effective no-touch sales models.
The reason I mention this is because despite the fact that there is a now a growing list of companies wh are having success with this model in the B2B/Enterprise space, there is still much resistance to this model by boards and investors and it's a shame because they are giving their portfolio companies bad advice.
More than a year ago I wrote Marketing Cloud Computing: Uncharted Territories, but these territories are now a lot less uncharted, and we're starting to see a playbook emerge for this model. I am going to write more about this playbook in coming posts.
Although it announced it a few weeks ago, today Autodesk is launching its cloud service, AutoCADWS, and its iOS apps (iPod Touch, iPhone, iPad) for storing, editing and sharing Autocad DWG files in the cloud.
It's a nice follow up to my Oh, SaaS, is there anything you can't do? post from a couple of months ago. This isn't quite a true SaaS application (yet), but it shows, once again, how cloud computing can apply to a wide variety of applications and how companies are re-thinking the delivery models of their products.
At the time of me writing this post the link to the cloud service, AutoCAD WS, wasn't live yet, but according to the company it should be launched today. My wife is an interior architect and I'm sure she's going to want to play around with this new service. The iPhone and iPad apps are already available on the iTunes store (for free).
I am looking forward to speaking to some of the Autodesk executives to better understand what their plans are for the cloud, as I understand they have a lot more goodies in store.
UPDATE: The AutoCAD WS site is now live.
Here's the data point I found most interesting:
I have followed many cloud surveys and reports that measure cloud traction of the different providers (see for example Guy Rosen's State of the Cloud). It has consistently been the case that Amazon is ranked #1 and Rackspace #2 (which is what prompted my Rackspace: The Avis of Cloud Computing post). The Zenoss survey suggests a different story with Google App Engine and Microsoft Azure coming in at #2 and #3 respectively, pushing Rackspace to #4.
Also, GoGrid's penetration, as well as RightScale's (which is a very different animal than the other players on the list) is very impressive.
Note that the wording of the question in the survey was a bit ambiguous: "What are your cloud computing plans for 2010?". I say ambiguous because the survey was conducted Q2 2010, so probably close to the middle of the year. But in any case, it has a forward looking element to it, which gives a little indication of the trends as they are happening.
Anyway, lots of interesting info on both cloud and virtualization. Check out the full survey results (requires registration).
Thinking Out Cloud is a blog about cloud computing and the SaaS business model written by Geva Perry.