On the 12th of February, Microsoft Austria invited to the event “Road to the Cloud” - and this time they were focussing not on the technical aspects of the Cloud but on the business side of it. Especially ISVs face huge challenges when it comes to move the “old” systems/software towards SaaS (Software-as-a-Service). Christian Nagel and Rainer Stropek were the presenters.
From Applications to Apps (Christian Nagel)
There will be an enormous shift coming towards ISVs: the move from Applications to Apps. This is characterised by:
- more and more devices will be connected and interact with each other (Internet Of Things)
- mobile devices will continue to grow (since 2010 Tablets)
- the grow in SaaS will continue (customers are buying services, not applications or servers, SaaS will also extend on-premises applications)
As a conclusion, the following statement by Gartner sums this up clearly:
”By 2017, the CMO will spend more on IT than the CIO and control most of the technology spending.” Gartner
Because SaaS is not sold to the IT department, but to the decision makers directly.
In general, as an ISV one should start thinking about topics like
- should I offer software that is licensed in a traditional way (you buy it, and its yours) or with an “Abo” model where you pay monthly for the service). This brings a huge change to your company as we will see in the next sessions!
- Data could be an asset as well (not just the service around it that exposes it)
- then the already known topic on “native app or not"
- Apps are not longer a “Consumer Feature” where only some games are available - Bring-your-own-Device (BOYD) will become stronger in the future and employees want to use their (private) devices to access company services/data
A good sum up of this change can be found in this video by David Chappell from TechEd 2014 Europe (until minute 10).
Cloud Models and Business with the Cloud (Rainer Stropek)
Rainer was presenting two sessions "Cloud Models: Private, Public and Hybrid" and "Business with the Cloud". When moving from a classic software packaging mechanism (think distributing your software via an MSI package) to a cloud-based service is changing almost everything in your organisation.
But its not only WHEN the revenue comes in:
- whats your pricing model? (annually, monthly)
- whats your target market and geo presence (which cloud data centers can you use?)
- whats your business goal: cloud first or cloud both strategy
- complexity of your software solutions (restrictions from the chosen cloud provider, available services you can use etc)
- APIs (integration, enabling partners etc): a core topic!
- single tenant or multi-tenant (this is a huge topic, especially if there is already a code base that was NOT designed to be multi-tenant capable)
- what are you customers needs in terms of availability, recovery time, performance etc (auto-scale)
- how easy can you manage your cloud expenses, provision new services etc
The cost for cloud services were compared with the cost for a Hotel (not for electric energy!): If you book a hotel room and you do not sleep in it, you still have to pay for it. So unfortunately its not easy to calculate the cost (compared to the fixed costs when you buy the HW and maintenance for on-premise datacenter)
Both Christian Nagel and Rainer Stropek are quite experienced when it comes to offer SaaS products or Apps that rely heavily on cloud services. Throughout the session, they brought numerous examples on how they managed the new challenges. This is a great help and made the sessions quite interesting.
1) Abo vs Buying Software
As a core topic for me it turned out that the move towards an SaaS model where the customer is actually renting the software is a big change when it comes to CRM: with a classical approach, the customer is buying the software at the beginning and later uses it (or not, nobody knows or cares). With the abo model, it is very important that the customer actually uses the software, because if not: he will be reminded each month through the invoice that he is paying for a service that he is not using. So keeping the customer happy is quite important (direct connection to the customers, CRM is much more important, new versions/features for the customers make them use the software even more etc)
2) How to slowly embrace SaaS
Another interesting thought was that you can still stay with your classic selling approach of your software but offer Add-Ons in the Cloud for additional revenue. This way you slowly extend your experience with SaaS.
3) Customer Lifetime Value (or CMRR = customer monthly recurring revenue)
Coming with the SaaS model, volume of sales is not important anymore - its the value the customer generates in his whole lifetime. If you have a sales and distribution department, you will face severe changes on how they are paid with this model. Also, the focus moves from “getting the customer to buy the software” to “keeping the customer happy for a long time”. The “churn rate” will be a key figure for your calculations.
4) Royal Server
Since for now I offer Software in a classic model, this event provided me with a lot of hints and topics to think of.