The impact of the cloud and PaaS on marketing

When it was operating at full capacity, the Ford River Rouge complex in Dearborn, Michigan had more than 16 million square feet of factory floor space, operated its own docks, ran an internal railroad of more than 100 miles, maintained its own furnaces to make steel and glass, and generated its own electricity. From 1927 through the 1960's, the sprawling complex and the 100,000 people who worked in it operated as a complete, vertically-integrated manufacturing facility: raw materials floated in one end, and finished Model A's, Mercury's and T'birds rolled out the other.

Though "the Rouge" continued to operate as an assembly plant until 2004 when one last convertible Mustang GT rolled off the line in May of that year, Ford had decades earlier moved to a more decentralized manufacturing process. Body panels, drive-trains, dashboards, and all the other components arrived pre-assembled from specialized, often third-party, suppliers. While Ford continued to assemble the final automobile, and they were responsible for designing, marketing and selling it, the docks and furnaces at the River Rouge plant were sold off or shut down.

The evolution of application software development

Application software development is on a similar path. Though it lacked the docks, furnaces and railroad tracks of the River Rouge facility, the earlier generation of software applications were also build through a complete vertically-integrated process. The developer was responsible for the entire solution, from the user-interface down through the entire "stack" to the silicon.

Over time, software application developers gained access to compilers, programming languages, operating systems and other foundation elements, freeing them to concentrate on the application layer and "final assembly" of applications.

Cloud computing, and platform-as-a-service (PaaS) in particular, are further destinations on this same path. By providing a pre-built, stable foundation, PaaS solutions allow application developers to focus on the user-interface and other higher-order functions.

These changes in the development environment have profound implications for commercial independent software developers' (ISVs) marketing efforts.

More resources for customer acquisition

A key benefit of PaaS is that ISVs can acquire foundation technologies and hosting & service infrastructure less expensively. As a result, resources that otherwise would be directed to engineering, development and operations should be available for sales and marketing. Most SaaS ISVs already spend nearly 50% of their revenues on customer acquisition. That percentage will likely increase as they take advantage of PaaS offerings and further reduce engineering costs.

Greater flexibility and responsiveness

The availability of PaaS and the ability to concentrate on the user interface and functions that are closer to the customer should allow ISVs to be more responsive to their customers. Without the foundation baggage to lug around, they should have greater flexibility to meet the evolving needs of customers and to respond quickly to competitors.

Higher expectations for innovation

The flip side, of course, is that customers will expect that ISVs will respond more quickly. When they request a new feature or a fix from their SaaS provider, they won't tolerate an answer that explains "we're addressing that in the next release- due in 18 months." Innovation and time-to-market will accelerate and marketers must support a much more frequent release cycle.

More competition

In a market where ISVs can avail themselves of PaaS solutions to quickly establish a foundation for their application at relatively low cost, barriers to entry are lower. As a result, marketers should expect a more competitive market. Expect pressure on prices, revenues or margins. One effect will be further pressure to tightly manage customer acquisition costs.

Beyond that, enhanced competition will likely force marketers to decide whether to compete on price or to build other, more sustainable, competitive advantages. These may include establishing customer relationships built on trust, reliability, security or other qualities.

PaaS, infrastructure-as-a-service, and other elements of cloud computing can offer valuable benefits to software developers: lower development costs, greater innovation, and faster time to market. But ISVs should beware of, and prepare for the impact throughout the entire organization, including marketing.

Marketing collateral: How much and what kind

I attended the IDC Directions 2010 conference a few weeks ago. I listen for two kinds of things at these conclaves: big, industry trends and small, but useful, practices.

On the "big trends," in a presentation entitled, " The Maturing Cloud: What It Will Take to Win," Frank Gens explained that the most significant growth opportunities in the IT market will be in cloud computing and software-as-a-service (SaaS) solutions. He contends that this mode of computing has nearly "crossed the chasm" from early adopters into mainstream adoption, and both users and vendors should now focus on how best to capitalize on these opportunities.

As for the "small, but useful practices," one of the marketing executives on a panel discussing where they're spending their marketing dollars remarked, "When it comes to collateral, there's no need for the Encyclopedia Brittanica." He maintained that in his organization much of the marketing material they've produced - white papers, data sheets, customer stories, etc. - isn't even used.

Too much marketing material... or the wrong kind?

I can't say I've really ever had that experience. I've seen marketing collateral that was inconsistent, inaccurate, or ineffective. But in most cases, the problem wasn't too much material.

A few years ago, I remember talking to a sales rep from a company that promoted white papers and customer case studies to qualified IT buyers. As these folks were reading about the latest developments in servers, storage, web conferencing, or whatever, they'd be presented with offers to access relevant material provided by various vendors.

I understood the idea, but explained to the rep that my problem was lack of content. When it came to providing marketing material, our small marketing department could not simply reach into a deep "bucket-o-content," or a stack of literature just waiting to be fed to their audience.

For most companies, the problem is not too much material, but it's the wrong material. For SaaS companies, I've seen this problem in at least two flavors:

The material doesn't reach all the decision makers.

Often the marketing material presents a compelling case for the particular departmental users (e.g. the sales team or the HR organization), but it ignores key decision-makers like the IT folks. It highlights certain of the solution's vital features, advantages and benefits, but little is available that addresses legitimate IT concerns about security, performance and integration.

Similarly, marketing material may not address the needs of the prospect's legal and procurement professionals. These people may not be familiar with SaaS or cloud computing and marketing can help educate them on the basics, as well as the specific implications for contract terms and conditions.

The material doesn't tell the whole story.

In some cases, the marketing material focuses exclusively on the product features and functions and omits the other elements of the value proposition. SaaS solutions deliver a complete user experience and success depends as much on rapid deployment, flexible configuration, ease-of-use, and other factors as it does on specific product functions.

The focus on product functionality also sometimes gets in the way of winning the prospect's trust. Remember, SaaS customers are buying into a long-term relationship and they want to see evidence - references, roadmap commitments, corporate history, management team bios, etc. - that the SaaS provider can be trusted.

In the relentless effort to grind down customer acquisition costs, SaaS providers should certainly scrutinize their marketing collateral budget. But for most companies, the effort won't be directed so much on cutting down on the volume of material. Instead, it should ensure that the available material reaches all the influencers involved in the decision-making process and that it presents the solution's entire value proposition.

Winning customer trust

In subscribing to software-as-a-service (SaaS) solutions, customers aren't really buying a product; they're buying a promise. They are not purchasing a finite set of capabilities to be delivered once the contract is signed, as they would with an on-premise license. Instead, the customer is expecting the SaaS vendor to deliver a service over the life of the subscription.

This requires trust. The customer must trust the SaaS vendor. They must trust the vendor to deliver the service reliably, to protect the customer's data, and to provide support. They must trust the vendor to enhance the service regularly.

A Unique SaaS Marketing Challenge

Winning the customer's trust presents a unique SaaS marketing challenge. It means selling more than the feature set. Of course, the service must provide capabilities to solve the customer's problem, but that's just the starting point.

The SaaS solution must also demonstrate that it's easy-to-use, easy-to-deploy, easy-to-configure, and easy-to-renew. Along with the product capabilities, marketing should promote all these additional elements as part of the entire customer experience.

But to earn a prospective customer's trust requires even more than that. Customers need to have confidence that the SaaS provider will meet their needs over the entire life of the subscription. Customers are making a bet on the future.

How to Win Trust

How do SaaS marketers gain that confidence? How can they help the customer make that bet?

A few suggestions:

• Show customers your future intentions. Reveal a roadmap of how you intend to enhance the service over time. (See "Advice on Exposing the Roadmap: Relax.")
• Let customers see your track record of meeting past commitments. Show your record on service availability, feature enhancements, and data security.
  
• Demonstrate a commitment to communicating with existing customers. Show how you are engaged with them as part of a vital community.
• Help educate customers on SaaS. To many, it may be a new concept. Help them understand it.

I just read an excerpt on trust from Marc Benioff's book, "Behind the Cloud." He tells the story of how salesforce.com dealt with a series of serious service outages in 2005 that was eroding the confidence of customers and prospects. After swallowing hard, the executives decided to openly share the company's previously "internal-only" data on system status. They trusted that customers and prospects would use that information to make more informed decisions. They established a site - appropriately labeled "trust.salesforce.com" - that allows anyone at any time to see the status of all systems and the service performance history. Benioff describes it as "a bold move and a big leap of faith."

A good lesson for other SaaS providers here: show trust to earn trust.