Everyone is talking about cloud computing and Software-as-a-Service (SaaS) these days. Almost every technology vendor has announced a cloud strategy – even the traditional software zealots. But what do cloud computing and SaaS mean for product managers? The impacts are more significant than you may think. From pricing and profitability measurement to sales and marketing, cloud is having a noteworthy influence on the day-to-day activities of product managers.

1. Designing Products for the Cloud Considerations for Product Managers By Steve Keifer

2. What is Cloud Computing? “A standardized IT capability (services, software or infrastructure) delivered via Internet technologies in a pay-per-use, self-service way” “Cloud computing is Internet-based computing, whereby shared resources, software, and information are provided to computers and other devices on demand like the electricity grid.” Source: Forrester Source: Wikipedia

3. Confusion Abounds “The interesting thing about cloud computing is that we've redefined cloud computing to include everything that we already do.” “I can't think of anything that isn't cloud computing with all of these announcements.” Larry Ellison CEO Oracle Oracle World 2008

5. Commoditized and standardized hardware and software platform

6. Ability to quickly move, change, add and delete applications

7. Massive scalability both upwards and downwards with same economics

8. Pay by consumption units (e.g. gigabytes, CPU cycles)

9. No upfront implementation fees or long term contracts

10. Multi-tenant architecture with shared infrastructureBattle Between the Cloud Idealists versus the Cloud Washers

11. Is Life Different in the Cloud?

12. Impacts on Product Management “No member of the development effort faces greater change in moving into the SaaS world than the product manager.” “Not only are on-demand products different from their on-premise counterparts, but the development processes required to create, maintain and enhance a SaaS product are different. SaaS Dictates Different Product Management Priorities – November 2008

14. Flawed understanding of customer's requirements increases likelihood that product fails in market

16. Users can vote to promote ideas for inclusion in upcoming release

17. Instead of holding big meetings to wrangle over features, developers can move forward knowing what people want Salesforce.com Idea Exchange

18. Try Before You Buy “Conspicuous Value” - Value proposition must be immediately obvious, without a salesperson standing at customer's shoulder to explain Customer should be able to demo a product, move to sandbox, and take online training in a matter of days

20. You can’t spend enough time with the customer to help with his education, and that means he’s on his own more often.

21. The customer isn’t paused until the next sales meeting, waiting to be feted and wowed by your solution selling greatness.

22. That’s now a small channel to his mind.

23. He’s on the Internet, researching, browsing your website, browsing your competitors websites.Everyone is Researching Products & Price on the Internet These Days Nick Van Weerdenburg http://testdrivenmarketing.com/286/is-sales-become-marketing-technical-support

25. Limited upfront fees

26. Scale up according to demand

27. Scale down to reduce costs

28. Predictability of future costs

29. Fund more projects simultaneously

31. Subscription models - size of company - revenue or employees; business entities

32. Bracketed tiers

33. Add-ons - new modules, storage, supportMany Pricing Models Emulate Mobile Phone Schemes

34. Implementation Fees Most significant cost outlays for providers occur upon activation or installation of the service Customers seeking to preserve cash and avoid large upfront payments Attracts customers with weak financial viability or poor credit history

35. Contract Terms Customers want the flexibility to terminate contracts and switch to alternative vendors Investors want the predictability of long-term contracts with monthly recurring revenues and highly visible backlogs

38. When prices go back down automatically restart“Pork-Belly” Commodities Pricing

40. Per Transaction

41. Per Mailbox

42. Per Document

43. Free Trials

44. Tiered Pricing

46. Predictable costs

47. Minimal downtime

48. Minimal testing

49. No customization

50. Changes occur via configurationThe Enterprise Software Upgrade Treadmill leads to Upgrade Fatigue

51. Multi-Tenant Common, Shared Platform Single, Dedicated Platform

52. Supporting Customization “This public cloud business is only a sustainable business model if a provider …does not follow the demand of its largest customers to offer more customized solutions” Source: Forrester Research - The Evolution of Cloud Computing Markets (July 2010) Big Customers Want to Bully Vendors

53. Service Interruptions Workday's SaaS for human resources, financial applications and payroll was down for 15 hours September 2009 Amazon EC2 cloud disruption in Northern Virginia data center for 5 hours December 2009 Google 2 hour 20 minute outage for all enterprise applications due to power failure February 2010 Overheating problem in Wikipedia's European data center caused 1 hour global outage March 2010 Intuit Turbotax, Quickbooks Online, Quicken online sites for 36 hours June 2010

54. Trust by Salesforce.com

56. Performance concerns

57. Known bugs

58. Security breeches

59. Financial results

60. Regulatory compliance

61. Technical interoperability

62. Data center locations

63. 3rd party providersSource: Altimeter Research - Customer Bill of Rights – Software as a Service

65. Backup & Recovery Policies

66. Health & Performance Monitoring

67. Disaster Recovery Strategies

68. Call Center Response Times

69. Data Center Maintenance WindowsWhat is the Role of the Product Manager?

70. Integration – Bridge to Other Apps Connecting Cloud and SaaS-based Products to Behind-the-Firewall Enterprise Applications

72. Multi-year contractual relationships with high renewal rates

73. Opportunity to leverage economies-of-scale and shared resources

74. Lower margins, but bigger overall spend

75. Capturing the 3/4 of IT spend not addressable with selling a server or software license

76. Lower R&D expenses due to single code base and minimal customizationValuations depend upon achieving expected financial metrics

78. Growth of net new subscribers

79. Annual recurring revenue per account

80. Length of contractual relationships

81. Customer lifetime value

82. Number of users per account

83. Current to initial contract value (Same store sales)

84. Backlog

85. New bookings

86. Deferred revenuesNew Metrics beyond Revenue, Profit and Loss

87. Additional Resources http://www.pragmaticmarketing.com/publications/topics/08/saas-product-management http://www.forrester.com/rb/Research/saas_dictates_different_product_management_priorities/q/id/45055/t/2 http://www.quantumwhisper.com/product-management-tidbits/bid/19051/SaaS-Product-Management-Challenges http://techprodo.com/wordpress/?p=92 http://blog.softwareinsider.org/2009/10/12/research-report-customer-bill-of-rights-software-as-a-service/ http://www.forrester.com/rb/Research/how_secure_is_cloud/q/id/45778/t/2 http://chaotic-flow.com/saas-competitive-advantage-saas-economics-101-e-book/ Pragmatic Marketing Forrester Research Product Management Tidbits TechprodoBlogspot Altimeter Group Forrester Research Chaotic Flow SaaS Product Management SaaS Dictates Different Product Management Priorities SaaS Product Management Challenges SaaS Product Management – Is there a Difference? Customer Bill of Rights – Software as a Service How Secure is Your Cloud? SaaS Economics 101

88. Contact Details More Thoughts on Product Marketing & Product Management Blog – http://outsideinmarketing.wordpress.com Twitter - @stevekeifer SlideShare – http://www.slideshare.net/stevekeifer LinkedIn – http://www.linkedin.com/in/stevekeifer

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