1. © 2011 Forrester Research, Inc. Reproduction Prohibited 1 © 2009 Forrester Research, Inc. Reproduction Prohibited The Lync Business Opportunity For Partners Michael Speyer Senior Consultant Forrester Consulting Month Day, 2011

2. © 2011 Forrester Research, Inc. Reproduction Prohibited 2 Agenda  Study purpose, methodology and summary findings  1000 seat Voice deployment: deal analysis  Revenue, expense and income analysis

3. © 2011 Forrester Research, Inc. Reproduction Prohibited 3 What is a Partner Total Economic Impact study? Business Value Revenues Margins Business risk More accuracy Higher success Total Economic Impact™ (TEI) Revenues Expenses Flexibility “Options” created Base for future Valued financially Expenses Startup Ongoing

4. © 2011 Forrester Research, Inc. Reproduction Prohibited 4 Due diligence:  Review existing relevant Forrester research, consult with Forrester analysts.  Interviews with Microsoft marketing, sales and partner management leads. Partner interviews:  Fourteen in-depth interviews with Microsoft partners –5 Global Sis –9 National and Regional Sis –All interviewed partners had performed many OCS deployments, ranging from 200 – 10,000 seats TEI methodology and approach Construct financial model using TEI framework Write case study Perform due diligence Conduct partner interviews Formulate typical deal

5. © 2011 Forrester Research, Inc. Reproduction Prohibited 5 Summary of findings Economic impact of a 1000 seat full Lync deployment including Voice  One-time assessment, design and deployment revenues: $175,000 –Average gross margins + incentives: $84,253 (48%) –3-year ROI: 177%, breakeven period of 16 months  Support revenues: $84,000 –Assumes managed services @ $7/seat/month –Potential for annual recurring revenues  Observations about the more successful practices –Lync is usually part of a larger portfolio of Microsoft practice areas –Services are packaged and offered as standard offerings –Lync is used to ‘pull through’ other revenue opportunities e.g. hardware, software, managed services, telecom services. –Sales and marketing efforts are focused (not random)

6. © 2011 Forrester Research, Inc. Reproduction Prohibited 6 Evolution of Lync deals  Lync (OCS) deal progression has typically been: –IM/presence  Conferencing  Voice integration  PBX replacement  The deal mix is evolving: –Yesterday: 90% IM/P, 10% voice –Today: 75% IM/P, 25% voice –Tomorrow (next 12 months): 50% IM/P, 50% voice Base: 353 voice purchasing decision makers in North American enterprises “What are your firm’s plans to adopt the following landline voice technologies/services? “ Source: Forrester Research, “Networks And Telecommunications Survey, Q1 2010”

7. © 2011 Forrester Research, Inc. Reproduction Prohibited 7 Agenda  Study purpose, methodology and summary findings  1000 seat Voice deployment: deal analysis  Revenue, expense and income analysis

8. © 2011 Forrester Research, Inc. Reproduction Prohibited 8 Lync business opportunity framework Workflow and Network Assessments Pilots Design and deployment Support Hardware resell and incentives Staffing and trainingSales and marketing Support systems Demo lab Custom app dev Revenues and margins Expenses

9. © 2011 Forrester Research, Inc. Reproduction Prohibited 9 Lync business opportunity – Assessment services  Assessment services include business productivity, workflow, business value (ROI). o Difficult to monetize, treat as pre- sales activities  Network assessment services are critical to successful voice pilots and deployments. o $5,000 - $25,000 revenues o 30% - 40% gross margins o This is a ‘must-have’ service offering Workflow and Network Assessments Pilots Design and deployment Support Hardware resell and incentives

10. © 2011 Forrester Research, Inc. Reproduction Prohibited 10 Lync business opportunity - Pilots  “Pilots drive business !!!” o Successful pilots of the full stack demonstrate Lync’s capabilities. o Establish a toe-hold for future Lync voice expansion (the PBX / gateway integration is already done) o Typical deployment scenarios are branch office, mobile worker or limited (250 seat) in-office. o Breakeven to 10% gross margins Workflow and Network Assessments Pilots (voice) Design and deployment Support Hardware resell and incentives

11. © 2011 Forrester Research, Inc. Reproduction Prohibited 11 Lync business opportunity – Design and deploy  Bread and butter service o Design, deploy, acceptance testing o Typically 50% - 70% of project revenue o Revenues scale with project scope and complexity o 35% - 45% gross margins o Knowledge transfer can be monetized o Training o Documentation Workflow and Network Assessments Pilots (voice) Design and deployment Support Hardware resell and incentives

12. © 2011 Forrester Research, Inc. Reproduction Prohibited 12 Lync business opportunity – Support services  Support offers significant revenues opportunities o Voice buyers expect support o Potential for long term, recurring revenue streams o 30% - 45% gross margins  Many flavors of support o Short term, post deployment ($ for hours) o Maintenance (multiple blocks of hours) o Remote managed services ($/seat/month) Workflow and Network Assessments Pilots (voice) Design and deployment Support Hardware resell and incentives

13. © 2011 Forrester Research, Inc. Reproduction Prohibited 13 Lync business opportunity – Hardware and software  Hardware o Voice deployments need headsets, desktop / conference phone, gateways etc. o 2% - 10% gross margins o Establish relationships with hardware vendors / distributors  Software incentives o Microsoft solution incentive on net new license sales o 10% - 20% incentives Workflow and Network Assessments Pilots (voice) Design and deployment Support Hardware resell and incentives

14. © 2011 Forrester Research, Inc. Reproduction Prohibited 14 © 2011 Forrester Research, Inc. Reproduction Prohibited,Revenues Gross Margins GM % Assessment and pilots Workflow / business value assessment services$3,000$30010% Network assessment and readiness$16,000$5,60035% Voice Proof of Concept$20,000$2,00010% Deployment Design and deployment services$100,000$38,00038% Training, knowledge transfer$36,000$14,40040% Hardware and incentives Hardware resell~($256,950)$10,4734% Software incentive~($264,900)$13,4805% Total one-time services, resell and incentives$175,000$84,25348% Support (1 year’s revenue) Option 1: Blocks of hours$30,000$9,00030% OR Option 2: Managed services @ $7/seat/month$84,000$31,50037.5% Other Application development (Communications Enabled Business Process) $50,000$20,00040% Lync revenue analysis – 1000 seats, all workloads (IM/P, conferencing, PBX replacement)

15. © 2011 Forrester Research, Inc. Reproduction Prohibited 15 Risk factors and revenue variance  The market for Lync Voice is relatively new but buyer interest is increasing –Momentum is in your favor  Voice deals can take 3 – 6 months to close –IM/P and conferencing deals close faster (4 – 6 weeks) –Must be able to sell to multiple decision makers (Voice, data/network, business) –Potential for lower utilization rates for services professionals during ramp up  Overall project revenues may vary considerably –Project scope, complexity, type of Lync workloads  Revenues from network assessment s are highly variable –Driven by the state and complexity of the underlying network –Network readiness offers additional revenue opportunities but requires highly specialized skill sets.  Must have a Voice support strategy –Voice has to be bullet-proof

16. © 2011 Forrester Research, Inc. Reproduction Prohibited 16 Lync business opportunity – Staffing and training  Deployment professionals o Voice-specific expertise is essential  Sales, solutions architects  Support professionals  Training expense of $30,000+ at startup, excluding lost billable hours  Additional ongoing hiring and training expense commensurate with business growth Staffing and trainingSales and marketing Support systems Demo lab Custom app dev

17. © 2011 Forrester Research, Inc. Reproduction Prohibited 17 Lync business opportunity – Sales and marketing  Marketing o Collateral, events etc. o $20,000+ expense annually o Packaged deliverable development o Helps formalize services offerings o Informs customers about what’s needed for different deployments Staffing and trainingSales and marketing Support systems Demo lab Custom app dev

18. © 2011 Forrester Research, Inc. Reproduction Prohibited 18 Lync business opportunity – Optional investments  NOC and support staff are necessary for remote managed services offering –Capital investment+ recurring expense  Build a demo lab to showcase your capabilities and Lync –Capital investment+ recurring expense  Use custom app dev to differentiate –Service verticals –Staffing expense –Development risk Staffing and trainingSales and marketing Support systems Demo lab Custom app dev

19. © 2011 Forrester Research, Inc. Reproduction Prohibited 19 © 2011 Forrester Research, Inc. Reproduction Prohibited Comment Assumptions Number of new hires21x delivery professionals, 1x sales Recruiting expense25% of salary Per person training cost$5000 Startup expenses Recruiting expense and non-billable hours during ramp up $135,50025% of salary recruiting expense Training expense$15,0002x new hires, 1x existing hire Marketing$40,000 Total startup expense$192,500 Lync startup costs

20. © 2011 Forrester Research, Inc. Reproduction Prohibited 20 Agenda  Study purpose, methodology and summary findings  1000 seat Voice deployment: deal analysis  Revenue, expense and income analysis

21. © 2011 Forrester Research, Inc. Reproduction Prohibited 21 Lync can generate 177% ROI over 3 years and breakeven in 16 months StartupYear 1Year 2Year 3 Number of deals359 Total incremental revenues525,0001,177,0002,095,000 Total gross margin252,758535,763955,773 Total costs(192,500)(157,500)(165,000)(40,000) Contribution to business(192,500)95,258370,763915,773 3 Year ROI177% Breakeven16 months

22. © 2011 Forrester Research, Inc. Reproduction Prohibited 22 Interview insights: Best practices for developing a successful Lync practice  Network assessments and readiness are critical for successful Voice deployments  Voice pilots drive business –Limit their duration to push the customer forward  Training is critical –Must know Windows Server, Exchange, Lync  You must have support offers for Voice customers –Need an experienced Voice resource to solve the tricky challenges –Consider establishing a managed services (MSP) practice. It offers recurring revenue streams  Be a one-stop-shop, to whatever extent possible –Create partnerships with hardware vendors

23. © 2011 Forrester Research, Inc. Reproduction Prohibited 23 Michael Speyer +1 617.613.6349 mspeyer@forrester.com www.forrester.com Thank you

24. © 2011 Forrester Research, Inc. Reproduction Prohibited 24 Appendix 1: 3 Year Lync P&L, all numbers AssumptionsStartupYear 1Year 2Year 3 Number of deals359 RevenuesProfessional services175,000525,000875,0001,575,000 Support (Managed services )84,000252,000420,000 Application development50,000 100,000 Total incremental revenues525,0001,177,0002,095,000 Gross MarginsProfessional services60,300 180,900301,500542,700 Support (Managed services )30,000 - 94,500157,500 Application development20,000 - 40,000 Software incentive40,44067,400121,320 Hardware resell 31,41852,36394,253 Total gross margin 252,758535,763955,773 Costs New hires214- Recruiting, 6 month ramp up(137,500)(112,500)(110,000)- Training5,000 (15,000) (5,000)(15,000)- Sales and Marketing(40,000) Total costs (192,500)(157,500)(165,000)(40,000) Contribution to business (192,500)95,258 370,763915,773 3 Year ROI 177% Breakeven 16 months