Is the Cloud a paradigm shift for ISV’s or not? Sales

This blog in this series discuses the paradigm shift for ISV’s

The top 5 paradigm shifts I see for Sales in the Cloud:

1. Shorter sales cycles

One of the important characteristics of the cloud is: pay as you uses. Customers do not need to  invest and can just get a subscription for a few users and a short period of time. Most business managers can spent the subscription fee out of their operational expense budget. So decisions can be taken by the manager itself, which mostly results in a shorter sales cycle.

2. Commission

The turn over of a customer is not clear, not only in the beginning but also during the total time the customer is a customer. So how are you going to compensate your sales for getting the customer in. A percentage of the licence value isn’t possible anymore, because the customer just pays you the subscription fee, not the whole amount in the beginning. And if you give your sales rep. a fixed amount, you could have a liquidity problem. Most times I see sales getting a certain percentage of an expected 3 years revenue of the first innitial deal. Business consultants are then charged for up-selling and will be paid based on extra revenue and reducing churn.

3. Margin for channel

On average the prices for SaaS-functionality is lower than sort of the same functionallity on premise software. Further more, a part of the cost is not only related for the Intellectual property, (the software) but also directly related to hosting infrastructure, and management employees. So we see that for SaaS services their isn’t that much money available for the channel. In the US, 50 % of the SaaS providers, have less than 15 % of the revenue available for the channel. And also the money is retrieved during a period of time, so not at the beginning of the contract. How are you financing your channel? Keep in mind that most of the SaaS companies, in order to be scalable, reduce the number of implementation days required to implement the service. Also reducing this is reducing the possible income for the Channel.

4. Who is the customer

As “traditional” ISV you are normally dealing with the IT-manager or CIO. But in the Cloud-world, 50 % of all services are already bought by the business users. So are you addressing the right person and do you have sales contacts inside the user organisation of your customer. Do you know what the user wants?

5. Contract, contracts, contracts.

In the Cloud world, the sales focuses on contracts. It is not that relevant what the total sales volume per new customer is, because this can be increased by up-selling. It is necessary to have as much as possible qualified customers. So you need hunters in you’re direct sales channel. Not farmers. Up-selling can be done by business consultants and the service organisation is responsible for keeping the customer. But sales should focus on contracts. So do you have the right sales people on board?

This is just my top five. I think and please respond that others have other top fives.

Is the Cloud a paradigm shift for ISV’s or not? Software Development

This blog in this series discuses the paradigm shift in development.

The top 5 paradigm shifts I see for development in the cloud:

1. Shorter, smaller development cycles

In the traditional world your talking about a new release, every 6 till 12 months or even longer. In the Cloud you have much shorter development cycles. Some companies are releasing each months some each week and some even each day. The functionality change is smaller than during those long cycles, but the shorter cycles have a great advantage. First, the time to solution is much shorter. If you want to develop a new function, you can release it quickly and it can be used quickly in the field. Testing is simpler due to the fact that you just open a small part of the software to be adjusted. Testing can be done in the field, if you find a bug, you can always quickly create and release a new version.

2. Scalabillity

In the Cloud you have multi tenant software. You have one instance for all customers. Totally different than on premise. But this also leads to scalability problems. How does the software scale by adding 1 user, or 10 users, or 1000 users, or more than 1 million in a weekend, as currently happens with new social media apps? You need to write your software with as less as possible code-lines. Keep it efficiënt.  Keep in mind that their is scarcity. If not in the network or in processing power it could be somewhere else. In your database server, your application server or some where or what to think about big data. There will be always a bottleneck and this bottleneck appears at moments that you didn’t expect it.

3. Applications will be designed around content, not (only) for retrieving content

In the old days, business applications where designed to get content. E.g. ERP. We need an invoice, we need an order, we let the people in the core business process add this data in systems in order to generate this information. Data will be entered often twice or more during the complete process, by people who aren’t educated for this action and who do not have explicit interest in having the data put in correct. A small percentage of data entered wrong.
In the Cloud designers look at what data is already available. Smart phones give you the owners and the GPS locations at which they are. So you do not need to ask the user this data.
I sent my e-mailings based on the data of Linkedin, because my business relations keep this data actual. I know that 5 % of my relations change jobs each year, which makes my CRM database already outdated within one year.

4. Platforms.

In the Cloud developers are trying to create platforms. How can a new customer add value to the total group of current customers. If you are successful, your current customers will help you to gain new ones. It is e.g. not interesting to have your own Twitter platform,  if you are the only one that reads your own tweets.
It is difficult to create such an environment in the old world, on premises. Customer have their own instants and are not gaining anything from another customer except discussing in a user group about the new functionality.


5. Agile / scrum

Although agility and Scrum is not something that only can be used in the “Cloud” world, it is very useful in the Cloud and most ‘SaaS’-companies are using this type of development method now. It is surely a game changer and can be advised for all ISV’s to use. But it is also a culture change compared to the old developments methods.

This is just my top five. I think and please respond that others have other top fives.

Is the Cloud a paradigm shift for ISV’s or not? Market-Shift

Last week we had a session with over 20 ISV’s at IBM’s  Office in Amsterdam. This session triggered me to start with a blog about the possible paradigm shift the Could is for ISV’s. Let’s discuss about it and focus on several area’s of the business of ISV’s. Maybe we can find the most important game changers and together develop some answers how to respond.

Lets start this series with the market shift. The top 5 paradigm shifts I see in the market are:

1. Consumarization

In the old days the employees had the best ICT-tools at work. Nowadays employees bring their own devise to the office. They use all type of tools in their private situation. Tools like dropbox, gmail, google-apps and zoho-apps, using all kinds of apps on their tablets and smart-phones. They are used to have fabulous User experiences and than.... they come to work. Get to work with “enter, enter, tab”-apps in their office environment and are really unsatisfied. Business applications designed and developed in the nineties do not meet anymore current requirements. Everything needs to be click-able and without any manuals.

2. Functionality for everybody

Was it not long ago, that you had to be a big company in order to invest in ICT-tools, now, every small company even Soho’s, can get the functionality they need, almost for free. Nicolass Car was right, when he wrote his book, does IT matters? So functionality ISV’s sold for high prices to big companies, can now be used by everybody. Corporate companies can no longer get competitive advantage with commodity ICT tools.

3. A global competition

In the old days, many ISV’s had their regional distribution network. Licences were sold either through partners or directly to the customer. Setting up a world wide distribution network was expensive, difficult and could take years to setup. Now, companies can offer their services through the web. Their service is globally available and they can compete with each local provider if they wish or if the customer wants them to.

4. “Classic” market is declining.

If we look at the overall growth-rate of the ICT-market for-casted by Gartner and Forrester, we see a total growth of a few percent. But if we are looking at the figures for the Cloud market, we see a growth of above the 20 %. Due to the fact that the Cloud market has reached more of 15 % of the total ICT spending, the growth figures are solely coming out of the growth of the Cloud market. Which isn’t strange due to the fact that in current time of crisis, companies are not willing to invest in new software licences and special developments. Innovations without doing investments are very nice ways to keep adopting to market changes.

5. Mobillity

In the old days it was already very special to work on a distance. We created with WAP, used Citrix or Windows Terminal Server and VPN’s connections to make it possible to work on other places. But nowadays, we have more mobile devices connected to the Internet than fixed. And we all want to work on different places with different applications on smart-phones, tablets, game devices, Ipods, etc. A world that didn’t exist some years ago.

This is just my top five. I think and please respond that others have other top fives.

ISV’s need to respond to those changes. Need to adjust if they want to survive.  If they not do, others will.
The challenge is, how to do this. Stay tuned with this blog and we will see if we all together can generate some answers.

Next paradigm shift discussions, will go into subjects like development, design, sales, services, pricing, testing, technology, organisation and other subjects. 

Cloud Pricing speaker and workshop announced

Cloud University is proud to announce Jim Geisman as speaker during the launch (May 30th). Jim will also host a one-day bootcamp on May 31st, please find more info here.

Signup link now available!

Signup for the launch day (May 30th, Amsterdam) is now available here.