Editor’s note: Avangate’s customers are software, SaaS and cloud services companies that want to provide better customer experiences for their customers at any customer touch point, in the customer’s specific context. Carl Theobald, Avangate’s CEO, says the complexities of today’s market with increasingly new sales and pricing models now more than ever require software and SaaS marketers to segment the value of their products. But it’s not as easy as it seems. We talked with him about his company’s commerce-as-a-service solution, which helps companies achieve faster time to market with flexible new offerings that focus on customer-oriented value.
SandHill.com: Please describe the complexities for selling software, SaaS and cloud products in today’s marketplace.
Carl Theobald: Businesses are buying more like consumers, and their expectations have changed. They expect more from the buying experience and the payment process. They want to try before they buy (with rental, trial or freemium models), and they want to move to pay-as-you-go methods versus paying all up front. They also expect less interaction with sales folks and more self-service. When they’re convinced of the value, then they will go ahead and buy.
Especially with the growth of pay-as-you-go models, customers now expect an ongoing relationship. They expect to be remembered and treated appropriately on an ongoing basis versus a hit-and-run approach with a perpetual license.
We launched Avangate in Europe in 2006 and moved to the United States two years ago. Our founders are serial entrepreneurs. One of the companies they built (which was later acquired by Microsoft) sold products online. This led to their decision to launch Avangate and build a solution that makes it easier for small companies to sell online worldwide.
SandHill.com: Why is it difficult for vendors to market their products in this new global online marketplace?
Carl Theobald: Customer expectations affect vendors tremendously. Cloud, SaaS and different payment models are causing a massive disruption in the vendors’ back-end systems as well as how they go to market, how they talk about their solutions, how they segment their solutions, how they break up products for more flexible offers and how they deliver them. They need to be able to provide what customers want, when they want it, and in a frictionless way that meets the needs of smaller and smaller segments with more and more product offerings.
SandHill.com: So you help vendors do this easier by using your commerce-as-a-service offering.
Carl Theobald: Yes. We provide a complete customer-centric commerce solution that handles not only the purchase transaction but also the way they go to market. It includes everything, soup to nuts, to provide a consistent user experience across any touch point, whether it’s online or through a mobile device or through a reseller.
Avangate ensures a localized experience (in more than 100 countries) regardless of which country, language, payment method and currency the end customer uses. It also handles whatever business model the vendor wants to employ, whether it’s freemium, trial downloads, upgrades, cross-sell/up-sell or self-service automated subscription renewals; and it does so in a meaningful way that provides value to the customer.
In addition, we have regulatory and tax expertise included in our platform, so our customers don’t have to figure out what taxes are relevant in the jurisdictions in which they sell. Eight out of 10 startups today are SaaS companies, and several U.S. states are starting to charge a tax on payments for SaaS-delivered products; so compliance needs to be a consideration.
Fifty percent of the world’s software actually is sold through channel resellers. So our platform also includes a channel manager/partner portal solution as well as a network of 38,000 software and SaaS-specific affiliates that become a new channel helping to increase our customers’ revenue. Plus the platform offers a configurable portal, shopping cart and buying experience that can be branded by our customers to ensure that their transactions that go through resellers are branded. And the portal gives direct and indirect visibility to revenue.
On top of that stack of capabilities our commerce platform provides end-customer insights that enable our customers to put together promotions and bundled packages, get them out to market quickly and do A/B testing to see what works and what doesn’t work and then fine-tune their offers. Our tools enable our customers’ sales and marketing folks to go to market with optimized price points and value messages that align with what the buyers are looking for. This is important in segmenting value for customers.
SandHill.com: How does this help with customers’ value perceptions?
Carl Theobald: With customers expecting to try products before they buy them and pay as they go, vendors need to know value perceptions — who will pay what for a product. They need to be able to segment products in terms of high-end, low-end and mid-priced offerings. They can figure it out by going to market with multiple offerings at different price points. But that’s not easy to do in a homegrown way because they have to make changes to their management system, website, CRM system and write custom code for testing.
Our platform makes it easy for them to test different offerings and price points and tailor their offerings to what different market segments demand. This segmentation enables them to better sell their value rather than just throwing a product over the wall and hoping people buy it.
SandHill.com: Even with all the functions in this soup-to-nuts commerce-as-a-service solution, your website claims faster time to market for your customers. Do you have a customer success story that demonstrates the shorter sales/marketing implementation cycle?
Carl Theobald: One of our large global customers is a Fortune 100 software business. They had two strategic initiatives: to move more of their software to SaaS delivery and to move as much of their business online as possible in order to meet market demands.
They started down a path of building a custom solution on top of a billing tool and a tax tool. They also hired a lot of developers to build a user interface for their customers (the shopping cart and all the stuff the customer sees in the buying experience). It took them nine months just to get a new SaaS product live online — and that was just for selling to the U.S. market. (English language and dollars currency were the only way they could transact a sale.)
By the end of the nine months, they were way over budget and still had 20 product lines waiting in the queue, and they didn’t know when they would be able to get to them. Moreover, they were supposed to sell internationally since it’s a global company, but they didn’t even have a timeframe of when they might have the capability to do that because they were already so far over budget and time.
Thirty days after we met with them and signed an agreement, we took their next product online with the capability to sell it with a localized experience in more than 100 countries. They were so ecstatic that they signed a master services agreement and we now have gotten their next two products live, including the one that they spent nine months on. We actually replaced their homegrown solution for that product and we’re now enabling more and more of their products to be able to sell online.
Time to market is crucial in today’s competitive marketplaces. One of our strengths is our self-service screens similar to Salesforce.com. They are easy for sales folks to use and they don’t have to wait on IT to make changes.
Even though our Fortune 100 customer certainly had the money to build what they wanted, they selected us because of our agility and ability to get to the market quickly. And going to market is not just a one-time event. They also needed to be able to make changes later to the price points, business model, licensing structure, adding more features, bundling with other products, etc. These changes all require more customization and would delay time to market again.
SandHill.com: What do you think might be the changes in the market in the next two to three years that your company and potential competitors need to address?
Carl Theobald: I think that even more power is going to shift to the individual buyer and therefore we’ll see even more businesses buying software more like consumers. So the B2B and B2C models are merging into a B2I (business to individual) model. It almost doesn’t matter now if the customer model aims at consumers or businesses because it’s the people inside businesses who buy the software.
I think pay-as-you-go models will continue, but I also think that we’ll see a growing trend for payment models based on capacity base. More and more businesses will want to pay for how many CPU cycles or gigabytes of disk space they use.
Also I think the software world will experience more international competition; some markets are already growing super fast. The IT spend in countries like Turkey, Brazil and others is far outpacing the United States. I think U.S. software, SaaS and cloud providers will see a lot more need and demand to reach those markets more effectively to stay competitive.
Carl Theobald is CEO of Avangate. A seasoned technology executive with a proven track record of building high-performance organizations and bringing world-class products and services to market, he served as senior vice president at Serena Software prior to joining Avangate. He also held multiple executive roles at Oracle.
Kathleen Goolsby is managing editor of SandHill.com.