1. Service-Model Thinking for Product-Model Folks: Are you a Grocer or a Chef? Rich Mironov SVPMA, 4 April 07

2. www.mironov.com2 An Unapologetic Product Guy  Consulting mostly to early-stage tech companies  …and big companies needing some start-up energy  Product strategy, market needs, business/service models  Repeat offender at start-ups  iPass, Wayfarer, Slam Dunk (VP Mktg), AirMagnet (VP Mktg)  Early brand-name experience  HP, Tandem, Sybase  MBA Stanford, BS Physics Yale

3. www.mironov.com3 I’ve Been in Tech So Long…

4. www.mironov.com4 …Newsletter on Startups & Products The secret life of Product Managers  “Parenting and the Art of Product Management”  “Goldilocks Packaging”  “Sharks, Pilot Fish, and the Product Food Chain”  http://www.mironov.com/articles/  Recent survey about PMs and service-versus-product http://www.mironov.com/more/survey_results/

5. www.mironov.com5 Service-Model Thinking  Most of us have grown up as “product” product managers  Service model: more than just hosting  Responsible for user’s positive experience  So… are you a Grocer or a Chef?

6. www.mironov.com6 Licensed Enterprise Software …is like delivering groceries Enterprise IT is responsible for:  Choosing the right items  Combining them correctly  Managing hours and uptime  Serving and helping users  Producing tasty results

7. www.mironov.com7 Hosted Software-as-a-Service …is like running a restaurant  Serving complete meals  Many customers  Hours and availability  End users interact directly  Need repeat buyers  One bad experience is never forgotten

8. www.mironov.com8 Product & Service Models Product Model  One-time fee or license  With or without maintenance Subscription Service Model  Monthly fee per user Transaction Service Model  Per fax, per download, per transplant, per report, per hour, per update…

9. www.mironov.com9 Four Key Service-Model Lessons Being the chef, not the grocer: 1.Build a multi-tenant infrastructure 2.Expect slower, incremental sales 3.Do continuous marketing 4.Get real user feedback

10. www.mironov.com10 1. Multi-Tenant Infrastructure  Personalized experience, menu of options  “No excuses” availability  Privacy and security  Usage reporting and billing  Helpful written help with human back-up

11. www.mironov.com11 Not a New Idea Well-designed software should be host-able But need to set priority for…  Details of user hierarchies  Reporting, billing, invoicing  Third party data security obligations See Luke Hohmann’s Beyond Software Architecture

12. www.mironov.com12 New Kinds of Service Metrics You need an Operations team and new skill set  Uptime SLA (“Application up 99.95% of the time except…”)  Response Time (“98% of log-in take <1.5 seconds…”)  System Capacity (“Add CPU when usage >60%...”)  Support Escalations (“P1 first response within 15 minutes…”)  Reporting (“Billing reports showing all customer transactions…”)  Software Updates (“Push software weekly at 1AM Sunday with roll-back…”)

13. www.mironov.com13 2. Incremental Sales Cycle Initial subscribers sign up more quickly, but…  Easy, cheap trial is #1 benefit of service model  Pioneers are really in extended trial  First taste must be great Revenue ramp is slower …upsell to more users …upsell premium features

14. www.mironov.com14 No More Shelfware  Purchased but unused software  Product model: sell extra licenses now  Get revenue (commission) now  Lock up the customer  Screw future revenue  Much harder with service model

15. www.mironov.com15 3. Continuous Marketing  “Drop-and-run” licensing model  Ship CD, recognize revenue, move on  New “shared success” service model  We can’t grow your account until you are happy  Constant upsell  continuous marketing  Touch users early, often and honestly  Good news: you have actual user names

16. www.mironov.com16 Frequent, Helpful Contact Friendly, low-pressure tone  Topic of the month  User profile (success story of the month)  New features  FAQs  Support contacts

17. www.mironov.com17 4. Getting Real User Feedback  Licensing model: second-hand feedback  Customer meetings, third party surveys, sales issues, annual user groups, online forums, industry analysts, product reviews…  What are their agendas?  Service model: your own log files  Precise, real-time, unemotional  What features are really being used?  Error reporting

18. www.mironov.com18

19. www.mironov.com19 Dare to Taste Your Own Food …use your own service if you can

20. www.mironov.com20 Take-Aways “Wrapping It All Up”  Service model adds new responsibilities and requirements  Initial revenue is slower  Installed-based marketing never stops  You have actual usage data You may be asked for a service model soon. Grab your cookbook!

21. Q & A

22. PM Survey Recap Time permitting… see http://www.mironov.com/more/survey_results.htm http://www.mironov.com/more/survey_results.htm

23. www.mironov.com23 180 Responded to PM Survey Pricing Model  Product/license48%  Subscription23%  Transaction 19%  Free, advertising, other10% Job Role  Product (service) management 38%  Product (service) marketing12%  Corporate marketing7%  R&D, sales, consultant, other43%

24. www.mironov.com24 Top-Line Observations  Products slanted toward enterprises/government  Services have more share of small/medium business  Subscription service sales cycles 33% shorter  Transaction services 49% shorter  Service PMs make little use of app logs to understand customers  24% vs. 1% for products  PMs say that customers use only half of features  We're dramatically overloading our offerings!  Service PMs use product registrations more than user profiles to identify users

25. www.mironov.com25 Selling and Upselling  33% faster close cycle for subscriptions  Service tilt toward small/medium businesses Different upsell models… ProductSubscriptTransxn Selling new versions/upgrades76%46%38% Selling more units83%46%50% Higher-priced subscriptions28%83%44% Adding more users47%68%29%

26. www.mironov.com26 Understanding Users “We know which features/functions our customers use via...” ProductSubscriptTransxn Personal discussions56%49%53% Tech support calls/cases38%32%24% Enhancement requests27%17%11% Transaction/activity logs1%24%21% Sales team feedback29%24%29%

27. www.mironov.com27 Over-Featured Products? “I think my typical customer uses...” Product:48% of available features Subscription: 48% of available features Transaction: 52% of available features

28. Thank You! Rich Mironov SVPMA, 4 April 07