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Does Freemium Work for Enterprise Software?

A couple of weeks ago we made an important decision to offer our Moesion product free of charge for the first 3 servers. This decision represents the final transition to embrace a “Fremium” pricing model as part of the entire Moesion platform. The interesting thing is that we decided to make the switch when our levels of customer acquisition are at their highest level since we launched. We just passed 400 customers, with just a few months since we announced the product.

Looking at that, a lot of our advisors rightfully questioned the decision of moving from a sort-of-traditional enterprise software licensing structure to a freemium model in which customers can start using the product, full-featured, for free and then upgrade to a paying license.

For weeks, we’ve heard all the traditional arguments against the freemium model:

  • Customers should pay for the product…
  • What’s wrong with offering the software in a trial period?
  • Are customers going to take us seriously?
  • Are people going to try to gamble the system and take advantage of the free offer?
  • Are customers likely to upgrade after using the software for free?
  • How does this change our sales model?

The arguments above are not only valid but certainly expected. If you think about it, until now freemium models have, for the most part, been associated with consumer technologies in which user volume is sometimes more important than the revenue model. When it comes to enterprises, the old mindset of long sales cycles, proof-of-concepts[E1]  or trial periods, and armies of nicely dressed sales guys still prevails when it comes to enterprise software.

Despite the previous arguments, we are seeing some very inspiring examples of enterprise software companies relying on freemium models to attract large numbers of customers. ZenDesk, Box, and Atlassian are just some examples of companies that have challenged established vendors in the enterprise software space and reached massive levels of customer adoption by leveraging freemium as the center of their revenue model. These companies are capitalizing on a very unique time.

We are living in really exciting times in enterprise software. The emergence of mainstream computing models such as cloud infrastructures and virtualization, the increasing presence of alternative connected devices as well as the new wave of social communication methods are fomenting unprecedented levels of innovation in the space and are allowing small companies to challenge established vendors such as SAP, Oracle, IBM or Microsoft. In my opinion, these technical revolutions are also opening the door for flexible pricing and commercialization mechanisms to be adopted in the enterprise software world.

A freemium pricing model definitely offers a lot of interesting opportunities in the enterprise software space but there are some serious factors that need to be taken into consideration before adopting it.

Where Fremium Works

Having a large number of customers is always exciting and can definitely help position your company as a leader in a specific market. However, if that customer adoption comes at the price of real revenue you better have a very solid strategy about how to monetize your product. In the consumer world, there are some established mechanisms such as advertising that offer a clear path to monetization once you have an established user base. That equation is not as clear in the enterprise world in which, most of the time, you have to find a way to have some of your customers pay for your product regardless of your user adoption.

In that sense, you must do a very detailed analysis of the characteristics of your product and market to make sure it is a good candidate for a freemium pricing model. Based on my experience, I can list a few factors that need to be present in order to have a chance of success with a freemium pricing strategy:

  1. Great product quality: This one is very simple, if you want customers to pay for your product after using it for free, your product should offer an impeccable experience that justifies the upgrade.
  2. Large market: The only reason for embracing a freemium model is to have a large number of customers using your product. In that sense, the market has to be big enough to give you access to tens of thousands of customers and/or millions of users.
  3. Scalability and monetization unit: Number of users, servers, devices, api calls, storage capacity, etc are some of the metrics you can use to model your pricing structure. In any case, you have to have one or various units to scale your product from a free base.
  4. A broad spectrum to upgrade the product: When going freemium, you have to assume that a significant percentage of your users are just not going to upgrade from the free version in the current version of the product. Even if your target market is large in terms of the number of potential customers, you have to make sure is also broad enough that will allow you expand onto new areas with new products or features that will keep expanding your user base and number of paying customers,
  5. Simple to install and use: In addition to providing a great experience, your product needs to be simple to install and deploy within an enterprise environment.
  6. Simple pricing structure: If you expect customers to give you money after using your product for free you have to provide a pricing structure simple enough that won’t impose major challenging from the budgeting perspective.

In addition to the aforementioned points, there are other elements that could make your enterprise technology an ideal candidate for a freemium pricing structure. Intrinsic virality or the ability to building a strong user community around the product are probably some of the hardest aspects to accomplish but if you get there your product will be in a position to experience high and consistent levels of growth.

The Advantages of Freemium

If the conditions are created, a freemium pricing model can offer very tangible advantages over traditional pricing structures. Here are some of the ones that come to mind:

  1. Large customer base: Having a large number of happy customers can be one of your biggest assets, which will open the door for all sorts of interesting opportunities.
  2. Different sales cycle: Freemium can improve your sales cycle by only dealing with customers which are already using your product vs. having to start with a traditional enterprise sales cycle.
  3. Bring freedom to IT: I know it sounds cheesy, but I can’t avoid feeling satisfaction knowing that offering your product for free empowers IT users to make their own decisions and try to use the best products for the job without having to play IT politics at the very beginning of the technology acquisition process.

Regardless of the clear advantages and undeniable hype around freemium pricing, there are still some serious considerations in order to determine whether it will be successful in the enterprise. We are extremely happy with our decision and already seeing some positive results but I will encourage you to do some serious analysis before adopting a freemium pricing model if you are selling to enterprises. In the end, once you make the commitment to offer your product for free you might not be able to rollback without damaging your brand.

What do you think? Does freemium work in the enterprise?

 
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Posted by on April 17, 2012 in entrepreneurship

 

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It’s Now or Never for Enterprise Software

A few months ago I wrote a small article detailing some of the big challenges of enterprise software. For years, enterprise software has been synonymous with complexity, big spending and hard to maintain. However, we are starting to see clear signs that times are changing for enterprise software. From the massive acquisitions of SaaS vendors RightNow and SucessFactors to the fairly successful IPO of the not-yet profitable Jive Software, we are entering a renaissance of enterprise software which, somewhat shockingly, is not being led by the traditional big boys: Microsoft, IBM, Oracle or SAP.

This wave of change in the enterprise software space is a direct consequence of the fact that we are living in what can arguably be considered the most exciting time in the history of the software industry. These days we are having the privilege to witness the convergence of some the most amazing technology revolutions in the last two decades of computer science.  These technology movements have already disrupted the consumer software space and are starting to make serious inroads in the enterprise.

In addition to the technology momentum, it’s important to realize that IT organizations are ready and even eager to embrace change. The experience of interacting with hundreds customers adopting Moesion convinced me that IT professionals are ready to embrace enterprise software that is innovative, simple to use and manage, and that solves real business problems using the newest technology trends.

If you are in the enterprise software space, whether you are a software vendor or an IT organization, you have a unique opportunity to influence change. Some of the following technology movements should help you to accomplish that.

Cloud

Cloud computing models are actively disrupting traditional enterprise application models. While Software as a Service (SaaS) packages are leading the way as the predominant mechanism for delivering traditional line of business applications such as CRM, HR or ERP systems, Infrastructure as a Service (IaaS) models are becoming increasingly popular models for achieving elastic computing and storage. Finally, Platform as a Service (PaaS) infrastructures are streamlining the cloud application development lifecycle.

Mobility

Mobility is arguably the biggest trend in today’s enterprise software horizon. With the number of connected devices moving from desktops to smartphones and tablets, the ability to consume traditional line of business functionalities from mobile devices sits high on the priority list of IT executives.

Social

Social mechanics a la Facebook or Twitter are slowly becoming an important element of enterprise software packages. Techniques such as tagging, commenting or lightweight messaging are helping to enhance the communication and interactions between people within your business.

Big Data

Slowly but steadily big data technologies are gaining space within the enterprise. The need to effectively leverage and analyze the increasingly growing volume of information processed by an organization is a key element towards achieving competitive advantage in the modern enterprise.

Gamification

Games are not only super cool but a great mechanism to engage audiences. With the explosion of games in the social space, companies are looking to leverage social gaming mechanics to more effectively interact with customers and partners.

It’s important to notice that these technology revolutions are not only changing software but the economics of it. Technologies such as cloud, mobility or social computing are leveling the playing field for new and innovative technology companies that want to make enterprise software sexy again. With all these technology revolutions happening at the same time, and consumer technology setting up a high bar for innovation, it’s hard to imagine a better time to disrupt enterprise software.

 
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Posted by on January 3, 2012 in Uncategorized

 

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Tellago and Tellago Studios 2011: Lessons, Changes and Crazy Ideas

Last week we hosted our annual company meeting for both Tellago and Tellago Studios. When preparing for the meeting, I have to admit we had a very difficult time reviewing everything we accomplished this year without getting a bit emotional. With 2012 around the corner, I figured I’d write a final blog post this year to share Tellago and Tellago Studios’ journey in 2011, the lessons we learned and our dreams for 2012. I know founders can talk forever about their companies so I will try to keep this post very concise and, hopefully, you will find it helpful.

The Biggest Lessons of the Year

2011 has been the most intense year of my professional career. With still a few days to go, I can’t think of any other time in my life in which I slept so little, stressed so much and had so much fun in terms of work. We started the year with very ambitious but yet incredibly pragmatic goals in terms of growing both companies, establishing a solid culture, doing right by our customers, and having a lot of fun. At some point early in the year (I could tell you the exact day) we started nurturing some crazy dreams about working in big problems that could, in some small sense, have a big impact on specific industries. Fortunately, we let those crazy dreams lead the path for Tellago Studios, and to some extent Tellago, for the rest of 2011. As a result, I think Tellago and Tellago Studios look very different today compared to a year ago and we couldn’t be more proud of our accomplishments or more excited about the future.

When reflecting about this year, I can probably summarize the lessons I learned in a simple thought: “Effort is a constant: Companies are too painful and difficult to build to build something that doesn’t matter”

The idea here is fundamentally simple. I firmly believe that the amount of effort it takes to build a small NGF (nobody gives a f….) business is the same that it takes to build a multi- hundred million dollar company. So if (BIG IF) you have the talent, you MUST focus your efforts on working on problems that can make a difference in this world because, at the end of the day, it is the same amount of effort you will put into working on NGF problems.

Our work on Moesion, represented the transition point between two different philosophies: From one that was focused on working on small software and make a profit to one whose goal is nothing but to disrupt the enterprise IT market (while still making a profit :)

Tellago and Tellago Studios 2011: What we did?

Grew Organically

During 2011 Tellago and Tellago Studios grew over 65% achieving revenue numbers that seemed pretty far away at the beginning of the year. More importantly, we put a lot of emphasis on keeping our growth strategy very organic and making sure we brought in the right talent that could help to make the companies better.

Stevie Awards

This June, Tellago was the recipient of the prestigious American Business Award as the best company under a 100 employees in the computer services industry. My business partner Elizabeth Redding, accepted the award in the name of the company at a ceremony hosted in the Marriott Marquis in Time Square, NYC.

Established a Unique Culture

I’ve always been of the opinion that a company culture is something that has to grow organically so that it truly represents the identity of an organization. Even though Tellago and Tellago Studios have grown under well-established principles, I wasn’t convinced we had yet established a culture as a company.

In 2011, for the first time, I witnessed how both companies nurture goals, processes and principles that naturally became the core DNA of both organizations and helped to establish a very unique culture. To cite an example, for 52 weeks this year, every Friday both companies got together during 1 hour, in something we called Technology Dojos, to discuss a specific technology topic that we considered important. During those meetings we were able to debate all sorts of technologies that are becoming important in today’s software industry. In addition to passionate debates, those meetings were the catalyst to some of the coolest open source projects we release during the year. We also used those meetings for the Tellago Studios teams to present prototypes of ideas for upcoming releases.

3 New MVPs

2011 brought 3 new MVPs to our family. Tellago’s veterans Dwight Goins and Gustavo Machado achieved their MVPs in BizTalk Server and Connected Systems respectively while we added software developer extraordinaire and C# MVP Jose Romaniello to the team at the beginning of the year.

Open Source Releases

During 2011 we continued our commitment to open source. Hermes and RESTBucks.NET are some of the most notable examples of our open source work this year.

Buenos Aires Office

Is it not a secret that Tellago Argentina has become a key element of Tellago’s identity? This year, thanks to the drive of Gustavo Machado, we opened our first office in Buenos Aires. I have to admit I was particularly cautious about the idea of establishing a physical office for the Tellago Argentina team. Sometimes, I see offices as an unnecessary element that rewards presence instead of productivity.  Well, my concerns were totally unfounded, I have been having a blast watching the team work together from the same location and I think the office that turned out to be particularly helpful for the Tellago Studios team as we were approaching the release of Moesion.

Conferences

During 2011, we presented sessions on a record number of conferences including Microsoft’s TechReady, Teched, SOA Symposium, MadExpo, VSLive,  etc. I believe our proudest moment in this aspect was when 11 Tellagans were selected as speakers for the Buenos Aires Code Camp which represents around 4 times more than any other company presenting at the event. The credit goes entirely to our super talented Tellago Argentina team.

Moesion

The release of Moesion this September can be considered the most important milestone of Tellago Studios as a company. Without getting into a commercial about the product, I can easily say that the implementation of Moesion has been the biggest engineering and product management challenge of my entire career and its release is one of the proudest moments of my life. However, that pride has little to do with me individually and a lot to do with the unparalleled amount of talent, passion and effort displayed by the Moesion  team every day during the six long months that took to bring Moesion to life.

The Moesion team is the best example I’ve witnessed of how talent, passion and team work can overcome any challenges in this world. Starting with the magnitude of the problem we were trying to solve, to the natural resource constraints of being a bootstrapped company, we knew the road to Moesion was going to be a painful one. In order to maximize our chance of succeeding we did the only thing we could control: assemble the best team we could possibly have. We brought together engineers from both Tellago and Tellago Studios that covered the areas of expertise we knew we need it but, more importantly, that we knew would make shipping Moesion their mission in life and would fight to make the product successful every step of the way.

After six months of working long nights, weekends and dealing with my time constraints from the responsibilities of running both companies, we unveiled Moesion to the world on September 19th. The reception by customers, the press, and the community has been nothing but remarkable. To this point, Moesion has been highlighted in publications around the globe including InformationWeek, Wall Street Journal, and CNBC. We have received a lot of positive feedback and words of encouragement from legends within the software industry and have signed a fairly large number of customers in only a few weeks.  More importantly, Moesion has proven to us and our customers that enterprise software can be fun, sexy and innovative again.

Tellago and Tellago Studios 2012: Where are we going ?

At this point, I can’t give a lot of details about our plans for 2012. I will write a more detailed post at the beginning of the year. I can tell you, however, that 2012 promises to be the most exciting year in the history of Tellago and Tellago Studios.

The experience of working on Moesion drastically changed our perspective about building a business. As I mentioned earlier in this post, companies are too challenging to build to focus on problems that don’t matter. While Tellago Studios has already found its identity with Moesion and products around the Moesion platform, it is time to shift Tellago’s course to focus on more important problems.

In that sense, during the last few months, we’ve re-structured Tellago to focus on 4 fundamental areas that we think are going to change the IT industry:

  • Enterprise Mobility
  • Cloud Computing
  • Modern Business Intelligence and Big Data
  • Enterprise Collaboration

In each one of those areas, our teams have been working on specific solutions to some of the most important challenges in that space. Hopefully, you will see more details about that work in the first few weeks of the year.

Tellago Studios is going to have an incredibly intense first quarter with the announcement of some really groundbreaking new features, exciting partnerships with top software companies, and the implementation of some new crazy capabilities that we have been researching on for a while.

More importantly, we are truly focused on enabling the necessary infrastructure so that both companies can continue growing through innovation, working on big problems and having a blast changing the enterprise software industry in some small way.

Even though I almost need medical attention these days to deal with my exhaustion, I couldn’t be happier with what 2011 brought for both Tellago and Tellago Studios. I feel truly honored to get to work every day with such an amazing team that truly refuses to settle for mediocrity, I feel honored to have their respect and loyalty.

At this point, I find myself obsessing about details for 2012. I couldn’t be more excited about the immediate future to the point I really need to force myself to take a couple of days off because I really want to keep working.

I hope to have the opportunity to share some more exciting news here in the first few weeks of 2012. In the meantime, I wish you a very Happy Holidays and a Blessed New Year.

 
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Posted by on December 28, 2011 in Uncategorized

 

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Manage your IT Systems from your Mobile Device: Tellago Studios Announces Moesion

Today is a very important day for Tellago Studios. After months of research and incredibly hard work we are ready to announce Moesion: a cloud platform to manage your IT systems or cloud services directly from your smartphone or tablet.

Moesion is the result of our constant obsession to bring innovation and modern technologies to the world of enterprise software. In this case, we want to use the power of mobile and cloud computing to make IT Professionals more productive by accessing their IT systems and cloud services directly from their smartphone or tablet. Even better, we enable all those capabilities without the need of installing any on-premise server side infrastructure.

What Problem does Moesion Solve?

As an IT professional you spend a good portion of your day interacting with different systems that could be hosted on-premise or on the cloud. Traditionally, the management of those systems requires you to have some sort of VPN connection into your corporate network which, most likely, requires you to be in front of your computer.

Wouldn’t it be cool if you could quickly perform different management tasks on your IT systems directly from your smartphone or tablet?

Well….we have an APP for that J

Moesion?

Moesion is a cloud-based platform that enables the management of your IT systems, whether hosted on-premise or on the cloud, from your smartphone or tablet. We accomplish this by using a sophisticated, highly secured, real time middleware infrastructure that brokers the communication between your phone and a very small agent that sits on your specific servers.  The following picture illustrates that concept.

What Can You Do With Moesion?

Detect and fix problems with your IT systems from your smartphone or tablet

Moesion includes a series of HTML5 applications that enable the management of some of the most popular IT systems in a visual manner directly from your mobile device. The current version focuses on the management of Windows Server infrastructure and includes the following IT systems:

  • Event Log
  • Windows Services
  • Windows Processes
  • File system
  • Users, Groups
  • Devices
  • Disks
  • Operating System Info
  • Hotfixes
  • Internet Information Services 6.0, 7.0,7.5
  • SQL Server 2005, 2008, 2008 R2
  • SharePoint Server 2007, 2010
  • BizTalk Server 2004, 2006, 2006 R2, 2009, 2010
  • Windows Azure
  • Hundreds of scripts

Publish And Use Your Own Scripts

Moesion allows you to publish your own PowerShell and VBScripts and use them directly from your smartphone or tablet.

Get New Apps: An Application Store For New IT Systems Management Apps And Scripts

Moesion includes an application store on which you can find new applications and scripts to manage your IT infrastructure. In addition to the initial apps listed above, we are currently working on new apps to manage different products and technologies directly from your smartphone. Even better, you can tell us which applications you would like us to focus on.

Check out our immediate roadmap.

Who Did What? Noninvasive Tracking

Moesion provides a tracking infrastructure that traces the different actions executed in your IT infrastructure as well as the devices those actions were triggered from. This capability will allow you have an accurate visibility of the actions taken in your IT infrastructure. It is important to notice that Moesion DOES NOT KEEP TRACK OF ANY SENSITIVE INFORMATION about your network, servers or infrastructure in general.

Relax: Your Stuff Is Secure

Moesion uses both sophisticated transport and message security mechanisms to protect the communication between our cloud infrastructures and your servers. Additionally, we include an authorization layer on which you can control the access permissions to a specific server. Finally, Moesion includes a device provisioning layer on which you can control which specific devices can interact with your servers.

How To Get Your Moesion Running?

Moesion will be available is private beta mode. You can sign up for the private beta at our website.  While you are at it, check out this cool video that shows you what you can do with Moesion.

 
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Posted by on September 19, 2011 in Uncategorized

 

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