How Can a Cloud Start-up Compete for Enterprise Business?

Whether you are in Silicon Valley, Boulder, Boston or New York – if you are starting a Cloud software company you will need, at some point, to effectively sell your product or service. Many Cloud companies focus on the consumer market. Products like Pinterest, Facebook, Zillow or Yelp – all make their money through advertising primarily driven by access to their base of users.

The Enterprise software market, on the other hand, sell services directly to large organizations. The definition of an Enterprise customer varies greatly – but for the time being we will assume it is an organization over $500 million in annual revenue.

The dynamics of competing within the Enterprise software space are very different from the consumer markets. Cost of sales are higher along with the annual per customer revenue. Customers are often counted in the thousands instead of 100’s of thousands or millions. Sales cycles are typically 3 – 8 (or more) months – and decisions are made by committees.

So how does a start-up company compete for Cloud based business against much larger, established players?

When competing for enterprise business the decisions, especially for deals in the 100’s of thousands of dollars, are almost always made by the C-level executives. However, prior to making a decision executives almost always look for buy-in from multiple key leaders within the organization. The risk of failure is high and so executives almost never makes decisions alone.

“Scale Matters”

What do I mean by this? When executives evaluate your organization as a potential vendor they want to minimize risk. If you are a small organization with a limited number of customers you pose a higher risk than a company that is much larger and has higher revenues and cash flow. If you are selling a product that is comparable to a larger vendors service, unless you can materially change the risk/profit profile for the service, Enterprise customers will most frequently choose the larger vendor. Now, this goes away after a company hits a certain size, about $250 million in annual revenue is a point at which many customers stop worrying about this type of risk.

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Joshua Earle - Unsplash

Negotiating a Cloud Contract – Where Should the CIO Focus?

When negotiating a contract with a Cloud service vendor it is often not obvious what areas of the contract the CIO should focus on. While many CIO’s have the support of full-time Vendor Management and Legal teams, it is still the responsibility of the CIO to understand what risks the corporation is willing to take for what benefit. Legal and Vendor Management can point out areas of concern, highlighting contract terms that may be problematic. But at the end of the day it is up to the CIO to make the call on what is acceptable and what is not. To be effective, a CIO must understand the key areas of a Cloud contract so that they know where to focus their time.

One challenge is that Cloud contracts are structured differently depending on the service and vendor. Many terms like Indemnification and Limitation of Liability are buried in the contract, or even just referenced in another document completely. The goal of this post is to help the CIO understand what the key areas of a Cloud contract are and the relevance is to their business.

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Negotiating a Cloud Contract – How much indemnity does a CIO need?

Indemnification, Warranty and Limitation of Liability clauses – these are all items that become heavily contested when negotiating a Cloud services contract. When you look underneath the terms, you realize that the true business driver of these clauses is risk. How much risk does each side of a transaction take and for what events?

In my career I have negotiated hundreds of contracts as both a customer and vendor. During that time, the Indemnification, Warranty and Limitation of Liability provisions have most often caused the lawyers to get wrapped around the axle. That said, whenever I have asked the lawyers: “How often in your career have you ever seen this term invoked after the contract was signed”, I often get silence – then the statement, “Well, almost never … but that’s not the point”.

For the purposes of clarity, the following terms have the following meanings as used in this article: a Warranty is a guarantee or promise of performance, and a breach of warranty is the basis for vendor liability to the customer. Indemnity is the vendor’s obligation to pay the customer’s loss, typically due to the vendor’s breach of warranty; Limitation of Liability is the cap on the vendor’s liability exposure to the customer.

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Why Every CIO Should Demand Their Cloud Vendors Ask For A Commitment

How often, as a sales leader, have you heard the CIO or procurement professional state “We don’t sign commitments”?  How about the CIO that states “We don’t sign anything over 12 months”.

On the surface the CIO looks like they are doing the right thing for their company.  By not signing commitments they limit the financial risk for their organization.  By never committing to contracts over 12 months they future proof their technology decisions, allowing them to change as markets and circumstances call for.

I would argue, however, that by not insisting their Cloud vendors require a commitment from all their customers the CIO’s are introducing significant risk into their operations.

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Google Reduces the Price of Cloud Services

If you read my post on How to Succeed in Selling Transactional Cloud Services, you would have learned about how Transactional based Cloud businesses are subject to downward pricing pressure.   In that post I talked about how Amazon was a Constant Disruptor – driving prices down on all the other vendors.

Just this week we learned that Google is playing at the same game, lowering the cost of storage by 68%.  You can read about it at Bloomberg here.  Some of this is probably in response to Amazon’s recent price cuts.  However, it re-enforces the direction of this business.  It also leaves vendors like RackSpace and Microsoft holding the bag – working to prove their value to customers at higher price points.

That said I believe Microsoft will continue to do well within this space – but primarily because of their Software as a Service (SAAS) applications like Office 365, not because of their Platform as a Service (PAAS) capabilities.

Eric Westerkamp

How to Succeed in Selling Transactional Cloud Services

Just imagine, there you are a well established Platform as a Service (PAAS) vendor.  You’re thousands of customers all paying you fees for every CPU cycle consumed and storage unit used.   Then out of the blue your largest customer calls you up and says “We would like you to cut our CPU usage fees in half”.  Normally you would push back, demonstrating to your customer how much value exists in the  service.  However, they point to the new AWS pricing from Amazon – letting you know that if you don’t cut your rates then they are going to take their business there.  After months of back and forth, negotiations and demonstrating the value of your PAAS solution over the competitions you keep the customer – at a 25% discount.

So at the end of this cycle you have tied up some of your best sales people, operations team and legal counsel for months.  At the end of which you have a revenue decrease on the books.

This example goes to show the perils of selling transactional based solutions in a technology world that is quickly commoditizing.  After a service or technology matures then prices will decrease until companies run the same service on lowered margins.  This process accelerates as a service moves toward the long tail of the technology spectrum.

So how do companies keep their existing revenue and growth in this environment?

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Visualizing Data using 3D Technologies

You can’t browse the web these days without reading about Big Data, the Internet of Things  and how they are going to transform the world.  One of the problems with big data, or any type of information, is turning it into something people can use and understand.  That is where visualization of  into play.

Traditionally people have used charts, graphs and other ways of visualizing information. Many of these visualization mechanisms work fantastically well – for their given purpose.  For instance if you want to visualize a data series then a bar chart is great.  To see the relative sizes between different data sets a pie-chart works well.  However what happens when you want to visualize very different types or large amounts of information?

As people start to integrate more and more devices and data points into their lives it will become harder and harder to review and understand all that information.  People can only absorb so many graphs and charts at a time.  With data coming from personal monitors and devices linked into the environment (the Internet of Things)  people will become flooded with data.  It will become critical for companies to find new ways of displaying that information in ways that humans can understand and absorb quickly.

I believe that we will see the use of 3D technologies leveraged more and more to create simpler methods of visualizing information in ways that map to our own native understanding of the world. There is a convergence coming between the technologies used in gaming environments – 3D Models, real world physics engines, dynamic data integration – and the data streams coming from all the different devices being integrated into our environment.

As an example of how easy it is to start to integrate this information I developed a simple example here.  In this example I took a simple real-time data source and integrated it into a 3D image that would instantly represent to the viewer what is going on with the data – without the need to display the data itself.

For the example I decided to take a weather data feed from the site wunderground.com and display the resulting information in a 3D model of a tree on a hill.  The data from the weather feed causes the model to dynamically change depending on all the data points.  The goal is to instantly relay to the viewer the weather conditions at the specified place – without them having to read or see the data itself.

Try the visualization below by selecting play.  It requires that you have the Unity Plug-in.  For best effect click the small icon on the lower right to maximize the screen.  You can close by selecting the set of four arrows pointing toward the center right underneath the main screen.

There are five primary visualization themes integrated into this model.

  • Tree – The Tree changes based upon the time of year.  During the spring and summer it shows green foliage.  During fall the leaves turn brown and during winter the tree is bare.
  • Cloud – The cloud cover will change depending on the weather conditions.  If it is sunny just light clouds are shown.  As the weather worsens the clouds will move through partly cloudy, cloudy to stormy.
  • Precipitation – The precipitation changes depending on the weather conditions.  Precipitation can come as rain or snow.  Within each there are three levels – light, medium and stormy.  As the weather get’s worse the precipitation will show how bad the conditions are.
  •  Lighting – Lighting may be one of the most subtle, but powerful, effects in the model.  The lighting changes based on two factors.  Time of day and weather conditions.  The intensity of the lighting will increase/decrease through the day with high noon being the most intense.  In addition to the lighting intensity the color of the light will move from a yellow/orange to a grey light depending on the weather conditions.  That way we have a nice warm light on a clear sunny day at noon.  However in the late afternoon on a stormy day the light moves to a less intense grey.
  • Wind – Wind is also modeled into the image.  Depending on the intensity and gusts of wind the tree and leaves will sway more or less vigorously.

As a comparison to the image above you can see the model on a very snowy, stormy and windy day in the late afternoon.

Another example of the same model showing a rainy day in the fall.

What this shows us is how easy it is to visualize live data using 3D Modeling and gaming tools combined with web-based API’s.  There are many benefits to using these types of tools for visualization.  For instance these tools enable the direct integration of 3D models from tools like Blender and Maya.  They have a built-in physics engine.  This in and of itself means that real-world physics (gravity, mass, vectors and force) can easily be leveraged within the visualization.  It’s also very easy to integrate in real world data through XML files, spreadsheets or real-time through the use of Web-Service calls.

My assumption is that we are going to see more and more instances of the technologies built for 3D gaming being used in real-world visualization for business and consumers.   As an example you could imagine a 3D model of your house, shown in real-time that indicates to you the status of everything in your house.  Lighting reflects lights that are actually on, indicators show the status of key devices like the stove, water heater, etc…  Through the model you can easily turn on/off the devices.  It could also show you, in real-time, where any members of the family or pets are located.

With the right inputs, coming from devices linked to the Internet of Things, the creation of this type of 3D model would be trivial.

In my next post I will take you through at more depth how this visualization was created.  I will cover the tools and assets that were leveraged and share more about the underlying design.

Eric Westerkamp

3D Printing and Art

December 17th, 2013
Eric Westerkamp

Sometimes you just run across something very cool.  Most of the time we hear about 3D printing in the context of manufacturing and design.  However I’m seeing a huge trend in the use of 3D printing for the purpose of art.   As a matter of fact I’m seeing much more Artistic uses for the current wave of 3D printing technology than I am general manufacturing uses. Check out some of the work by deskriptiv over on Behance.net to get an idea of what I mean.

As you can see there is a convergence coming between programming and physical art.   In the past physical art has been the realm of sculptors.  However with 3D printing it will also incorporate programmers and designers.

Very cool stuff.

Why Projection Mapping means you can no longer trust your eyes

December 14th, 2013
Eric Westerkamp

If you are not already familiar with Projection Mapping, then before reading any further you should acquaint yourself with some of the better examples of the craft.  In a nutshell, Projection Mapping is using a combination of video projector and computer to project images into the real world.  These images are projected in a way that make the object they are projected on take on different characteristics.  The projections themselves are mapped on to the surface of the object inside the computer, so that when the projection hits the object it appears to be perfectly mapped to the object’s surface.

A great example of this can be found on this video.  Here, a group of mappers created an installation against a church in Prague.  While the technique and artistry is amazing, the underlying principle is very simple.  The artists create a 3D image, inside their favorite tool, of the real-world object.  Then they create the animations against the 3D image inside the computer.  Once it is ready, they use high powered projectors to project the image out against the real world object.

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Welcome to FutureSurge

FutureSurge is a site dedicated to discussions about technologies emerging into the mainstream.   Lots of technologies make a bang and get a tremendous amount of hype as they enter the market (think 3D Printing).  However as a technologist and sales executive one needs to think about what are the real-world applications for these technologies.  For instance what size are the markets?  Who will the early adopters be – and which companies will best take advantage of those dynamics?

As an entrepreneur it is even more important to have a feel for which technologies have real market potential – and which won’t generate real revenue for years to come.  When creating a business plan, working to raise capital or just running a revenue projection – realistic assumptions on true revenue potential are paramount.

Within this site we will not only discuss new technologies but also aggregate links and resources to help technologists, entrepreneurs and sales leaders find relevant information, data and commentary.

I hope you find this site useful, helpful and most importantly valuable.

Eric Westerkamp