Posts Tagged ‘Rackspace’

So you want to sell outcomes?

November 7, 2013

In the book B4B, we predict that technology customers will begin pressuring technology providers to commit to outcomes.  In other words, customers will not want to pay for technology up front and hope they achieve some target outcome. Customers will want their technology providers to assure the outcome is achievable. This is not how the vast majority of technology providers are paid today. In today’s model, technology providers are paid up front for their technology wares. Then, the customer pays more to the technology provider (or service providers) to achieve a target outcome. If the customer never crosses the outcome goal line, the technology provider is rarely forced to provide a refund. How many tens of thousands of ERP and CRM systems have been purchased in the last twenty years? How many thousands of those implementations failed? Yet, how few times we have read where the technology provider was being held accountable for the failure. That painful gap between the promise of what was sold up front and the reality of what was delivered is closing.

With the release of B4B, we have been overwhelmed by the support of the general premise: successful businesses will be committed to their customers’ success. This means technology providers will commit to helping their customers achieve specific business outcomes. Enterprise technology customers are loudly telling us this shift is long overdue.  Technology providers are quietly agreeing. In fact, we are beginning to see real world examples of technology providers committing to outcomes.

In my keynote at TSW in October, I mentioned four technology companies that are selling outcomes:

Google

Google makes almost every bit of its profits by selling ads. If you have ever leverage Google Ads, you know that you only pay Google if and when a potential customer clicks on your ad. You don’t pay Google just for the privilege of displaying the ad.

Rackspace

Graham Weston, the co-founder and Chairman of Rackspace, spoke at TSW. Rackspace has built their entire business model on the premise that customers should only pay for the computing power they need to consume right now.

Satmap

SATMAP has advanced artificial intelligence and pattern recognition technology to help optimize call enter interactions. What is really interesting, is that they will install that technology at no charge to the customer. They will only get paid when the customer achieves specific KPI improvements such as higher customer satisfaction ratings or higher agent productivity. From the Satmap website:

ALL RESULTS, ZERO RISK

We partner with clients to provide SATMAP both on a licensed and on a pure benefit-share basis.

In both cases, SATMAP requires no up-front capital investment. We take care of setup and deployment; you see the results.

Redflex

Redflex sells red light camera technology to cities. Like Satmap, Redflex does not charge cities huge upfront fees for the technology and implementation of the technology. Instead, Redflex takes a percentage of every ticket issued to motorists that run a red light.

These examples are excellent reference points for technology companies that want to get into the business of selling outcomes.  They represent the three types of outcomes technology companies can potentially market:

  • Type 1: Consumption as an Outcome. The customer only pays when they actually consume something. The outcome is the usage. Google Ads and Rackspace are Type 1 offers.
  • Type 2:  KPI as an Outcome. The customer only pays when they have achieved an agreed upon target KPI. For example, customer retention rates improving by 5%. Satmap has a Type 2 offer.
  • Type 3: Financial Improvement as an Outcome. The customer only pays when specific financial gains have been achieved (cost savings or increased revenue). Redflex has a Type 3 offer.

Figure 1 shows this spectrum of outcome based technology offerings. If you want to get in the business of selling outcomes, this taxonomy is a great place to start the conversation. Especially since it gets harder as you move from Type 1 to Type 2 to Type 3 offerings. So, what types of outcome offerings is your technology organization developing? If the answer is “none” I strongly recommend you send a copy of B4B to your Product and Sales leadership teams–and hope they read it before your customers do.

Outcome Types

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The TSIA Cloud 20: Growth vs. Profitability

September 18, 2012

This Thursday I will be hosting a webcast that analyzes the financial performance of 20 public cloud computing companies. Below is a graph of their quarterly revenue growth:

The quarterly revenue growth (year over year) for these twenty companies is averaging 24%. This comapres with flat top line revenue growth for the broader technology sector as shown ihn one of the guages on the Cloud 20 dashboard I will present in the webcast.

Do growth is great for cloud computing companies. But what about profitability? How are the financial busines models shaping up for this new breed of technology provider? Join me on Thursday to find out:

http://cysalesteam.com/tsia/event/the-tsia-and-pwc-cloud-20

The Cloud 20

September 28, 2010

The impact of cloud computing on technology services is a area TSIA continues to study with great interest.

I’ve just completed a review of the financial performance of companies in The TSIA Cloud 20. This is an index of twenty of the largest cloud computing players. In March, when we took the last snapshot of The Cloud 20, I made three observations:

  • •Cloud computing revenues are less than 5% of total technology solution revenues.
  • •Currently, SaaS models are at least 50% less profitable than the traditional enterprise software business model.
  • •YET: “Cloud 20” revenues grew 3% last year while “Service 50” revenues shrank 8%.

After reviewing the current data, there are three new ratios I have observed:

  • •49%
  • •80/20
  • •2X

To find out more about these three ratios, join me for the Cloud 20 webcast this Thursday:

http://webcasts.tsia.com/home/listing/tabid/64/listingkey/59/the_tsia_cloud_20.aspx