David raised some great points during his presentation. One of them was to point out that the success of early Google Apps resellers was enabled by their position as “first market movers”. Now that there are more than 4,000 Google Apps Resellers world-wide with the majority of them in North America, the first market mover advantage is a thing of the past. So how can a reseller differentiate from the competition? The obvious answer is by offering a broader array of cloud services and/or providing a deeper level of integration/customization/business value than other resellers – to offer real solutions based on a combination of services as opposed to reselling and installing off-the-shelf GAPPS licenses. So selecting the right complementary cloud services will be critical to building a differentiated value proposition upon which to base your CSP business.
Todd and I have always felt that the two most critical questions to address in building a successful CSP business are (1) what hosted services should be packaged into cloud solutions for your target customer set and (2) what business model will generate the highest level of recurring revenue at the highest margin based on those services.
So the Cloud Alliance is an initiative that is addressing the first of these key questions and it represents an important step in filtering the overwhelming number of choices from the Google Marketplace on behalf of the Google Reseller community. The second question is a fundamental goal of our Cloud Solutions Provider Program.
As I think about the two key questions posed above, I can list at least 10 criteria that could and should be applied to a cloud service under consideration for your own Cloud Solutions Ecosystem. See if you agree with my 10 criteria and feel free to comment or offer some additional criteria of your own.
10 Criteria for Selecting Apps for a Cloud Solutions Ecosystem:
1. How completely is the app integrated with the Google Apps suite?
As David pointed out in his presentation, some apps in the Google marketplace are very loosely integrated while others are much more tightly integrated. Building on Google Apps as a messaging and collaboration platform is far more compelling when there is total integration (data, operational, and functional) between the Google Apps suite and a complementary app from the marketplace.
2. Does the app have the right features & functions?
Clearly you will want to evaluate a potential new service offering from the standpoint of its functionality. You want to hitch your wagon to a technology that will offer the most complete feature set in order to support a diverse set of requirements from your customers and avoid losing deals to a competitive offering that has more or better capabilities.
3. Is the solution customizable?
In order to enhance business value and to separate yourself from competitors, you are not interested in simply selling or referring off-the-shelf apps. You want to look for apps that can be customized to address the specific needs of your target customers. Is the app customizable? What technical expertise does this require? What customer problems can you solve - and what business value can you create – as a result of this customization?
4. Does the ISV and the app have brand recognition?
Perhaps this is not the most critical of the top 10 criteria, but as you establish your own brand identity in the marketplace, it can be helpful to hitch your wagon to the brand awareness of a very popular app. It can also be important to your current and future customers to view your ecosystem as a best-in-class portfolio of services containing established and recognized leaders in a variety of technologies and applications. Your ecosystem is a direct reflection of you company, representing the choices you have made on behalf of your customers to provide them with the best cloud-based IT service platform to run their business.
5. What is the cost of the solution?
The cost of the app is an important criterion because it is a direct source of revenue and margin for you and it also directly influences your customer’s buying decision. The price points for apps available in the Google market place vary significantly from virtually free to well over $100 per user per month. In the CRM space for example, Saleforce.com is $65 to $125 per user per month while Insightly is under $10 per user per month and the first 3 users are free. And, of course, these two ISVs have their own pros and cons with regard to feature/function, brand identity, ease of use and the level of Google Apps integration.
6. What is the end-user market focus?
At the core of understanding and positioning the value of every app in the marketplace is the end user market focus. Ask yourself what problem the app is trying to solve and who typically has this problem? Is it a business or consumer focused solution? If it’s truly a business-class application, does this sound like your target customer? Make sure there is a direct match so that each new app added to your own ecosystem complements other apps and contributes to the synergy of your total cloud solutions portfolio.
7. What is the ISV’s commitment to the channel?
The Google Marketplace tends to be a superstore of apps for anyone who wants to shop there – both customers and resellers. As a result, it can be hard to distinguish between ISVs and their applications from a “wholesale” versus “retail” perspective. As a CSP, you want ISV partners who are committed to building their business via the indirect channel and not simply a source of referrals for expanding their direct business. An ISV committed to the channel will have a reseller program with training, support, sales enablement tools and help in marketing the app or generating new leads. You want a business partner, not a vendor relationship.
8. What is the revenue sharing model?
David Politas did a nice job of explaining the ways ISVs approach the concept of revenue sharing with Google Apps Resellers: Referrals, in which resellers are informally compensated for referring clients to ISVs, Commission-based, in which the reseller is paid a commission for selling the product, but the ISV handles the billing and shares in ownership of the customer relationship, and Wholesale, in which the ISV sells the product to the reseller at a specified price and the reseller sells the product at a markup to clients while assuming responsibility most, if not all, of the customer relationship (e.g. billing, first line support, etc.). Each model has different implications for your revenue and margin potential, cost of service delivery and customer loyalty.
9. What is the revenue enablement potential?
The revenue enablement potential is the incremental revenue value of an app beyond the direct licensing business. In other words, what value added services can you wrap around the app to generate more business? As stated above, if the app is customizable, then you can charge more for tailoring the app to meet the business needs of your customer and charge a greater deployment fee up-front. If the app is customized, then you are the best choice for providing ongoing services like help desk support or cross selling other hosted services, like backup and recovery for the application database or single sign-on for enhanced application security. Look for apps that maximize the incremental revenue potential.
10. Does the technology fit your business & delivery model?
Last, but not least, be sure that you clearly understand how you will deliver and support this app as you scale your CSP business. Do you have the resources to integrate, customize and support the app to realize its full revenue potential? What will be the true cost of service delivery to your business and what level of gross margin will a typical deal generate based on service fees you generate and service costs you incur for a typical customer engagement. This is where the modeling tools in the CSP Service Pricing Blueprint will come in handy.
A Structured Approach to Building Your Ecosystem
Clearly not every app you add to your ecosystem will require this level of analysis and due diligence, but for those apps that will become your core services, these are the criteria that will drive the best choices for establishing and expanding your own cloud solutions ecosystem. The Cloud Alliance is an important step towards using a structured approach for maximizing the business value of your service portfolio. As a group, lets try to further refine this structured approach and use it for the most appropriate apps to add to your Cloud Solutions Provider business.