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Cloud Monetization: A Step-by-Step Guide

to Optimizing Your SaaS Business Model

Shlomo Weiss

VP of Business Development

May 9, 2012

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Typical SaaS Company

Approach…

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It starts with a land grab …

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…and turns into “How do we optimize?”

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A Balanced Business Model

Monetization

(LTV)

Cost to

Acquire a

Customer

(CAC)

Source: David Skok, Matrix Partners

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Questions we often hear…

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What business model should we use?

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How do we optimize our offering?

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What metric should we use to charge

our customers?

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Maximizing Revenues

Lower

Price

Higher

Price

Segmented

Price

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Match Offering to Value

Received by the Customer

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Segmented Offering

+ Value A, B and C

Light Version

+ Value A, B or C

Standard Package

Packages with different

values, where values can

be:

• Features

• Resources

• Service Levels

• Frequency/duration

• Etc.

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Optimized Offering

+ Value A, B and C

Light Version

+ Value A, B or C

Standard Package

Packages with different

values, where values can

be:

• Features

• Resources

• Service Levels

• Frequency/duration

• Etc.

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But, how do we get there?

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It’s complicated…

Elements of a SaaS business modelPrice ($X or free)

Metric (user, transaction, instance, bandwidth, click, print, save, etc.)

License Model (subscription, pre-pay, post paid, metered, concurrent users)

Package (Standard, Basic, Pro, Enterprise, etc)

Option 1 Option 2 Option 3 Option 4 Option 5 Etc….

Price A ,

Metric B,

License A,

Package C

Price B,

Metric B,

License D,

Package A

Price A,

Metric C,

License B,

Package B

Price C,

Metric B,

License A,

Package A

Price D,

Metric D,

License C,

Package C

…….

…….

…….

…….

But which combination is right for you?

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Challenge: How to take the guesswork out

of finding the right model?

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5 Steps to Optimize Your SaaS

Business Model

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1. Track Usage

Implement usage tracking to understand how

customers are using our service today

Users

Features

Modules

Content

Resources

Bandwidth

Storage

Instances

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2. Identify Patterns

2A - Analyze usage data to identify patterns

Frequency of use

By % of users

Peak usage times

Grouping of types of usage/users

Usage over time

2B - Survey/Speak with users to validate findings

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3. Segment Accordingly

Product

Packaging

Customer

Segmentation

Optimized

Market

Applicability

(The right offering for

every customer)

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4. Test Models

Run A/B tests to try out new models

Existing users

New customers

Have systems in place to easily implement and adjust

Pricing

Metrics

License models

Packages

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5. Measure Results

Select packages based on the results of A/B testing

Discontinue packages that are not performing well

Continue to iterate and refine offerings that perform well

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Track Usage

Identify Patterns

SegmentTest

Models

Measure Results

5 Steps to Optimize Your SaaS Business

Model

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SaaS application for Beta management

Bringing it all together

2002:

Perpetual

License

2005:

Annual Subscription

– Unlimited Usage

2007:

Seat Based –

Usage Limits

2009:

Seat Based

Editions

2011:

Optimized Offering

– Segmented

Packages

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Additional Tips

Link model to value provided to customer

Need to find the right balance: segmentation vs.

keeping things simple

Enable common features to be used by

customers of different sizes

Consider combining different models

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To Sum it Up

One size does not fit all

Segment your offering to maximize revenue based on

real usage data & customer feedback

Continuously iterate to improve your offering

Make sure you have the processes and systems in place

to enable you to optimize your business model

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Software Monetization in the Cloud

• Flexible Service Catalogs

• Automated Provisioning

• Service Usage Control

• Service Usage Measurement

Booth

#13

Visit us today at www.SentinelCloud.com

BOOTH

13FREE

TRIAL

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Thank You

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