By Saeed Khan
In the technology industry, 2010 will be remembered for a number of things. From a consumer perspective, the winner was the iPad. No other technology product had more buzz about it than Apple’s tablet.
From a business perspective, the winner was “the Cloud”. The buzz was everpresent around cloud computing.
There were over 90 Cloud Camp events held around the world. From Beijing to Bratislava, and Brasilia to Boston, CloudCamp covered a lot of territory.
SalesForce.com’s DreamForce 2010 conference had former US President Bill Clinton (one of it’s keynote speakers) being introduced by Stevie Wonder. You know a high tech segment is hot with this caliber of celebrity speakers!
For those not familiar with Cloud Computing, it is a broad umbrella term that refers to several different types of externally (beyond the firewall) hosted and managed applications, platforms or infrastructure that deliver computing capabilities to business (or consumers). If you want to learn more, check out Wikipedia’s overview of Cloud Computing.
For Product Managers, there are a number of significant differences between Cloud based services and traditional on-premise equivalents. And the combination of these differences makes focused Product Management an even higher priority than for other types of software.
As an introduction, the following is a list of some of the key differences that Product Managers (and Marketers) should keep in mind as they consider creating or managing Cloud-based services.
1. The user and the buyer are usually the same
Selling on premise software into enterprises usually required finding an sponsor or champion who saw the value of your product. This was typically the user or management representing the user.
But the actual buyer, i.e. the person signing the PO, had to be convinced that spending money on your product was going to be beneficial to them. i.e. It fit into their top priorities. And then in many cases, there was also a technical buyer who played a role in making sure your product fit into whatever environment or architecture that was in place.
Overall, the mix of the user, economic buyer and technical buyer required a complex sales process as well as the need to address the requirements of all of these parties. This was necessary as “the business” was often times the user, but “IT” was responsible for implementing and managing the product. Thus the classic tension between IT and business users.
With Cloud software, whether application, platform or infrastructure, the buyer is often times the user.
For example, Cloud applications (i.e. SaaS applications like Salesforce.com, Eloqua, SuccessFactors etc.), are typically focused on departmental needs, and are purchased and used by those departments.
Cloud infrastructure – e.g. storage or computing services – are purchased by those who need it to build or integrate with applications.
2. Buyers are very informed, and much more vocal
A PM friend, who has been involved in a market leading Cloud offering for almost 5 years told me that he spends a lot of time with his sales team helping on deals. Because the buyers are usually the (business) users, they are very particular about ensuring that the offering fits their needs.
And given the age of Social Media we live in – there’s a lot information posted on the Web — in blogs, on LinkedIn, Twitter and other forums — that buyers scrutinize and reference during the sales cycle. Overall, selling Cloud products is not necessarily easier than enterprise software.
3. Focus on delivering ongoing user value is of prime importance
This may sound odd, but for anyone who has worked on traditional enterprise software knows, a lot of focus of new functionality in enterprise software products is on the new user, and not necessarily on the existing user.
Once customers have bought and implemented a product, their needs, while important, are not as important as the needs of prospects who have yet to buy.
Why? Because customers have already paid for the product. Yes, they need support and are paying an annual maintenance fee (usually 20% of the original license price), but overall, new customers make up the bulk of the new revenue.
Now contrast this to Cloud revenue models which are typically subscription, usage or utility based. Revenue from an existing customer is not substantially different in a given time period than for a new customer. In fact, existing customers will likely be using more of the product than new customers, so over time, existing customers become more economically important.
4. Usability and User Experience are much more important
Given the focus on delivering value and buyer/user overlap, Cloud products — applications in particular — must be easy to learn and easy to use.
There are no 5 day in-class training courses just to get started, with Advanced training required before getting fully “up to speed”. Training is necessary in many cases, but it is usually a fraction of that needed for traditional enterprise products.
Given that these Cloud products are much more focused in terms of domain — e.g. departmental apps, storage services etc. — they don’t try to be all things to all people. Quick time to value is a hallmark of most Cloud services, and to some extent can be considered part of the culture of the Cloud.
5. Customers size varies significantly
Given the low barriers to entry for using Cloud products — configuration and setup can be anywhere from almost immediate to perhaps a week or two of effort before getting started — companies of all sizes can make use of Cloud technology.
This was certainly not the case with a lot of enterprise software which had high price points and typically significant efforts for training and configuration, which limited it to “larger enterprises”.
Because of this varied profile of customers, understanding “customer requirements” takes more time and effort. For example , the needs of departments in large companies may be significantly different than the needs of teams (or individuals) in small companies.
6. Switching costs are much lower
That old friend of enterprise software – customer lock-in – is much harder to find with Cloud solutions. Given that the time and complexity to get up and running on most Cloud offerings is much lower than similar on premise software, the flip side — time and complexity to leave — is also much lower.
This ties back into the need to deliver ongoing value to customers, because once they stop seeing value in continuing to pay you, then leaving for another provider is not that difficult.
7. Customer usage information is always available
One of the big upsides of Cloud for Product Managers is the fact that because the service is centrally hosted by the provider, it’s possible to track product use and issues for every customer in great detail.
With on premise software, only indirect information about product usage — usually through Customer Support cases opened — is available. But for Cloud, reports and dashboards can be created to track who is (and who isn’t) using the product (or parts thereof).
This gives the potential unprecedented insight into all aspects of product use, including potential issues and problems, uptake and evaluations.
Conclusion
This is a short list of some of the key differences between Cloud and on-premise software, and I haven’t even mentioned the whole area of managing all the infrastructure, security, data etc. that is a part of these services.
All of this should be seen as a real opportunity for Product Management to step up and show how to leverage the deep usage data and customer relationships that are a reality with the Cloud to build strong, vibrant and profitable businesses.
Saeed