Successful Positioning Of A Managed Backup Service A checklist for VAR s and MSP s from product to pricing. A Business Whitepaper by Stefan Utzinger, NovaStor CEO (November 2012)
Table of Contents Introduction... 1 From Business Model to Positioning... 1 Problems created by Improper Positioning... 2 Ingredients for your business model... 3 Meet tough requirements - a breeze with the right partners... 4 Discount solutions can mean paying more down the road... 5 Price - a Relative Size... 6 Managed service providers require the right partner... 8 About NovaStor... 8 2012 NovaStor, all rights reserved. All trademarks are the property of their respective owners. Features and specifications are subject to change without notice. The information provided herein is provided for informational and planning purposes only.
Introduction Cloud computing is currently one of the fastest growing IT markets. By 2020 the annual data growth rate for cloud technology will be 44%. At the same time half of all digital information will be permanently or temporarily located in the cloud. According to Bitkom / Experton, sales in the cloud computing space will grow to 10.7 billion euros for the German B2B market alone in 2016. Despite the excellent prospects for success, many service providers run into difficulties when attempting to properly position their cloud backup offerings. This is not due to a lack of potential for success in the market, but directly related to properly representing the value behind these service offerings. Many providers set out to launch their cloud service without: Defining their offerings and their target audience Clear positioning with properly aligned information and pricing structure Clear communication of the value of your service Definition of additional services, such as local services Escalation procedures for technical problems If your service does not take off despite the rapidly growing cloud market, we recommend you review this white paper. Learn how value-added resellers, service providers, system integrators and MSPs make the right decisions early on to help them avoid unnecessary setbacks and, reach their potential while offering cloud backup services. From Business Model to Positioning As a first step, the correct positioning requires the identification of one s business model. What do you currently offer and what would you like to offer? How do potentially new services fit into your portfolio? Which offerings correspond best with the needs of your existing customer base? Many providers of IT services can easily select which of the business models below they most closely resemble. Understanding how you serve the market is to your benefit. The challenge begins with the development of a coherent and consistent strategy for product positioning in your customer communications. Copyright NovaStor 2012 1
Cloud Backup for Desktops / Laptops for Private Customers Cloud Backup for Desktops / Laptops / Server for Small Business Customers Local & Online Backup as a Service for Business and Enterprise Managed Backup Services Provider You provide a standardized service for the backup and recovery of data over the Internet. Customers manage their own backups through a an interface provided by the service provider and maintain autonomy and responsibility. You provide Cloud Backup to consumers and small businesses that require a professional level backup and require interaction. Technical support must be provided, and MSP s often run their own datacenter. Servers are located at the customer location. Data is transmitted over the Internet and consolidated at the data center of the service provider. The managed service provider often takes over complete management and monitoring of the customer's data. The client s computers are located in the data center of the managed service provider. The MSP manages, and administers these systems and has controls of the entire backup process. Picture1: Business Models Cloud Backup and Managed Backup Services There are specific issues which may hinder many service providers during the design of their product offering and pricing structure: In particular, commercial customers often request a more sophisticated level of service. Those who provide inexpensive online storage alone will find it difficult to meet the demands of this customer group. Problems created by Improper Positioning Customers that deal with high volume sales and large sets of data expect a great deal more than a simple online storage provider, but require a reliable managed services partner. By providing a wider range of technology services with a higher degree of performance, it is certainly easier to attract these types of customers who are willing to pay higher prices to meet their individual requirements. Competing in a race to the bottom in terms of price improperly positions your product as a low value service, comparable to a budget airline. The experience of successful service providers tells us that business customers rely on obtaining professional services at a reasonable price. This same customer group is turned off by services that Copyright NovaStor 2012 2
are interpreted as low-value, and this is precisely the target group with the highest potential for growth. Those working within the B2B segment to provide data backup services should consider offering professional service level agreements, and additional technology services. Both your hardware and software partners should be surrounding their technologies with equally competent and professional services that supplement their own offerings. It is therefore critical to select the right types of partners to rely on. 5 Arguments to illustrate the value added by your service 1. Service Level Agreements 2. Control customer backups, alert actively to errors 3. Personal Support 4. Local services, e.g. Installation/Setup at customer site 5. Provide restore as a service By choosing the proper business partners to broaden your portfolio, you will still be able to offer your services at a reasonable price, operate profitably, and provide your customers with a future-proof and long-term solution. Ingredients for your business model A recent report by the Taneja Group regarding the adoption of cloud backup services by IT managers notes that the interest level in public cloud services is at an all-time high, but at the same time a great deal of uncertainty remains. Provide your customers with information that makes your offerings clear and easy to understand. Take advantage of your opportunities to make a personal connection by meeting with customers and prospects in your proximity to distinguish yourself from the anonymous providers. Emphasize the value of your own offerings, by detailing what is important in a business class service, what sets you apart, and how your services will streamline their operations and improve efficiency. Important items to consider: Service Level Agreements (SLAs): They determine how your customers will measure your service. You define the scope, reaction time and speed of processing, etc. Local services: Training, collection and delivery of services for backup / restoring large amounts of data, installing the software for the customer. Remote Services: Automate and monitor backup, monitoring, reporting, etc. Data Center: Specifying where the customer data is to be stored. Copyright NovaStor 2012 3
Software: Transparency regarding your backup platform. Security: Encryption from the client and back. Only your customer maintains visibility into their data. Privacy: Compliance with US/EU directives and working with partners in the same jurisdiction Complete Data Availability: Introduce best practices Features: FileSharing and copying files to the cloud is not a backup. From a best practices standpoint both file and system backup, local and offsite/cloud backups should be adhered to. Make sure that you and your partners maintain the quality of service that you have promised. Meet tough requirements - a breeze with the right partners Providing Managed Backup Services, creates a multi-faceted challenge. In order to deal with daily operations and all situations in the most professional manner, providers of IT services may draw upon the resources of their hardware and software partners. In the course of operating a managed backup service challenges may arise, but with the cooperation of strong technology partners these difficulties are easily overcome. When the secured systems to be backed up are located at your customer s location, you may be left without the knowledge of changes that are taking place to their configuration in the course of normal operation. This can create the potential for conflicts in the backup process. To fully understand the relationship between the systems and the complex interactions taking place often requires a profound knowledge of the backup platform, as well as a great deal of experience in similar situations. Be sure that you are able to easily reference the knowledge and experiences that your backup software manufacturer has encountered to quickly resolve issues. A reliable, faster and more personal support from the manufacturer of your online backup platform should therefore be a prerequisite to the provision of these services. It s also important to consider the consequences of your selection for a software platform in regards to data security and privacy. From a technical standpoint there should be end-to-end encryption, that is, the data remains encrypted at the service provider, and also during storage. Customer data is therefore protected from unauthorized access. Legally speaking, your backup platform provider should operate in the same jurisdiction following the same set of laws regarding data security, and this should be stated Copyright NovaStor 2012 4
clearly within your contract. Since online backup platforms typically must communicate with the manufacturer, you should be confident that they are subject to the same privacy policies as you - the provider of the service. Should the need arise, the provider can then consult with the manufacturer when questions arise regarding security. Cooperation with qualified partners facilitates the flow of comprehensive information. Providers of cloud backup & Checklist Manufacturer Support Services Team up for dial-in on customer system Native English phone support Native English email and online support Lokale Dienste, z.b. Installation/Einrichtung beim Kunden Personal account manager for questions and escalation processes Tip: Before choosing a manufacturer, check whether the support team is available as promised. service platforms should take a 1-on-1 partnership approach to support, providing valuable assets that contribute to reducing unnecessary support call such as content that may be repurposed in your own marketing and support materials. Discount solutions can mean paying more down the road When service providers are first starting out, they naturally prefer to keep their Saving money in the beginning may lead initial investments low when selecting their to a cost explosion later. hardware and software, but may not always be aware of the long-term consequences. Products and platforms sold at low price points tend to suffer from unreliable support services, do not offer assistance in bringing on new customers, and may have greater requirements for your infrastructure. A sample calculation shows that these problems do not only frustrate daily operations, but may actually result in significantly higher long term costs. Consider the case of a cloud services provider who has chosen a platform that appears to initially save them money versus developing a more strategic partner relationship. With 2,000 GB secure data costing at 0.03 USD per GB/month and very little support, your technical engineers may spend up to 20 additional hours per month unnecessarily with your online backup platform manufacturer and fielding customer questions and issues. Copyright NovaStor 2012 5
Consider for instance the hours your technical team may spend if they do not receive support response in a timely manner. Just 20 additional hours per month fielding customer questions, and 0.03 USD/GB/month saved, 0.80 USD/GB/month paid on top later. unnecessary problems could well exceed the cost savings and increase your cost to 0.50 USD / GB / month. This amount alone raises the factual cost of 2,000 GB of stored data by 0.50 USD / GB /month. Even with 500 GB of data and 8-technician hours per month, the additional costs are already at 0.80 USD per month. In addition, the acquisition of attractive customers with large amounts of business-critical data can require sophisticated and tailored counseling. Saved 0.03 Euro per GB per year missed 6,000 USD yearly income. If lack of support from your platform manufacturer causes you to lose one out of five customers with 100 GB of data, you will be missing out on 1 USD / GB / month annual income of 6,000 USD. Determining whether or not an IT services partner is going to provide you with the necessary support for the development of backup services (Managed Services) should be quite evident within the evaluation phase of the platform. Reliable software partners offer superior levels of service that should include: Installation Software testing Assistance implementing the business model The total cost / ROI calculation Price - a Relative Size Finally, we would like to dispel one of the most popular misconceptions by small to medium providers: That the lowest price is the most convincing. Quite the contrary, cheap prices contradict and undermine an otherwise cohesive and logical concept for the provision of data protection services. Keep in mind the value that corporations put on the protection of their most critical data. Copyright NovaStor 2012 6
Also the price of a service is not always clear from an oversimplified marketing message. For example, from a provider such as Carbonite, file backup for 100 GB of data will be cheaper than any other service. But are Windows servers supported? Is a disaster recovery feature available? Is SQL Backup included? To all three questions, the answer from Carbonite is "no." The reasoning is simple: SQL Backup and disaster recovery are some of the more complex features that require technical and personalized attention. For the provision of such features and the security of this data customers are willing to incur somewhat higher pricing. Choose a provider of an online backup platform that can backup Windows Server, Microsoft Exchange, SQL and Virtual Machines easily to support the growing needs of businesses today. Address customers, who When it comes to corporate customers, replace tape having local customer support is an backup large data loads important benefit. International providers outsource business-critical data lose out in comparison with local service providers: At just under 16 euro / month per computer and 50GB data, providers such as Mozy seem like a great deal at first glance. After a second look you realize you can probably compete. Ultimately you realize that you offer a greater range of services and provide additional value with the kind of local support that large international companies can only dream of. Keeping your pricing competitive is certainly important, but your supposed competitors should not dictate the pricing terms of your offerings. Move quickly to show new customers how your services differ from the anonymous cloud backup services in the marketplace. Service Feature 1 USD 0,50 USD 0,30 USD Managed Services X - - Local Support X - - Local Data Center X - - Exchange Backup X X - SQL Backup X X - System Restore X - - Encryption X X X File Backup X X X Sample price creation matrix: Feature set in relation to service turnover / GB / month Copyright NovaStor 2012 7
Managed service providers require the right partner The cloud computing market is highly competitive. To compete against low-cost carriers and international corporations, providers should put emphasis on their unique data security services, personal advantages and focus on managed services. Be clear that you work with enterprise class customers and not only rent scalable storage, but that the responsibility for mission-critical data is being transferred to you. It is a question of confidence, which can only be conveyed correctly with the correct positioning. Bear in mind how important your technology partners are to the success of your value added services. Providing cloud storage for consumers may be a simple business. But securing the availability of several 100 GB of business-critical data requires a greater set of skills and extensive knowledge that you must represent along with your partners. With proper positioning and reliable hardware and software partners, cloud backup can operate as a successful business model with excellent prospects for the future. About NovaStor NovaStor (www.novastor.com) is a leading international provider of software solutions for data protection and availability. NovaStor provides software, SaaS solutions and services for local and online backup, restore and retention of business-critical data. Clients include home, mobile, and SMB users, service providers as well as international corporations. NovaStor s cost-effective solutions are platform- and hardware-independent and ensure that optimal technological and economical use is gained from the customer s existing and future IT environment. NovaStor is headquartered in Switzerland (Zug), has offices in Germany (Hamburg) and the USA (CA, Agoura Hills), and is represented in numerous other countries through partnerships. Copyright NovaStor 2012 8