Monetize Your Digital Services and Build a Cloud Ecosystem (Cloud Next ’18)
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Monetize Your Digital Services and Build a Cloud Ecosystem (Cloud Next ’18)


[MUSIC PLAYING] BRIAN SINGER: We’re going
to get started, everybody. Thank you so much
for joining us today. I hope you enjoyed the keynote– a lot of great speakers there. And we have some excellent
content for you today. My name is Brian Singer. I am the head of Cloud
Commerce product. Cloud Commerce encompasses
our GCP marketplace product, as well as Orbitera,
white-label marketplaces, and multi-Cloud billing. We also have Roger
Pilc with us today. Roger is the EVP
and Chief Innovation Officer at Pitney Bowes. And he’s going to
talk a little bit about Pitney Bowes’ digital
transformation and efforts to build an ecosystem. So I think one of the
exciting things about cloud as I’ve seen it mature is that
the strategies around why we’re using Cloud, and why it’s
important to our companies, have really evolved. In the beginning, we were
moving to cloud to save money. We could pay by the drink. We could use services
only as we needed them. And it was a lot quicker to
provision a VM to get something up and running. As we’ve gotten a little bit
smarter about how we use Cloud, security has actually
become a driver. What Google is able to do with
security in its data centers, and what we’re able
to do with increasing levels of automation,
is secure our workloads in the Cloud to a
level that we’ve never been able to do before. And as we’ve solved
these problems, and as we’ve been able to get
better economies of scale out of Cloud, we’ve actually
started to unlock new products and ecosystems. So Cloud and some of the
characteristics of Cloud have actually
allowed us to create products that could
not have existed before cloud platforms evolved. And that’s really what we’re
going to talk about today, is how do we actually
monetize a product that we’ve built in Cloud? So we’ll look a little bit about
pricing strategies and things like that. And then how do we build an
ecosystem around a platform? Because as we’ve seen, some
of the most valuable companies and products that
are out there today actually are products that
have enabled an ecosystem. So we think about building
a product for Cloud, we have to answer
some key questions. One, how do we monetize it? What’s the right way
to ask our customers to pay for that service? And every company out there,
and you’ll hear from Roger, Pitney Bowes started
as a shipping company. And you’ll see, every
company is actually evolving into more of a
traditional ISV software provider. As our data is moving
to Cloud, and as more of the services that we provide
to our customers are digital, everyone needs to start
thinking about how do we become a software vendor ourselves. And inherent to that is
understanding the billing models that are
available to us in Cloud, and which models are right for
us as we build these services. And this is important to
everybody in a company, from the BD guy who’s
going out and selling it to the developer who’s
actually building the product. Because you actually
have to think about the pricing
and the billing model as you build out the product,
and you’ll see why in a few slides. So in the Cloud, there’s
a couple of billing models that have become very common. And there’s some good
reasons for that. First is a subscription model,
which everyone is probably familiar with. We all have subscriptions
in our day-to-day lives. The key things to think about
when it comes to subscription are that it’s based on
a capped set of usage. So you set the threshold
for what a customer can use, typically within a plan. And that’s basically
the amount you’re going to charge them in any
given month for use of that. Subscription works great
for non-variable workloads, where it’s not
changing that much. If you think about
network usage, for example, that could change a
lot over the course of a month. So it’s not great to have a
subscription to a network, to a certain amount
of bandwidth. But consumption, on the other
hand, usage-based pricing, has become much more
common for cloud services. We use consumption pricing
for GCP, for virtual machines. We use consumption
pricing for storage. And this is based on the
actual usage of a product. And we think about
this as being best for variable workloads,
when you don’t necessarily have a flat amount of
usage over many months or in a given
month, and you want to bill the customer for
exactly what they’re using. So looking a little bit more
closely at subscription, it’s that fixed monthly
price, usually prorated to a given date. And there’s a few
actions that are usually available to a
customer when they have a subscription, such
as upgrading or downgrading between plans. There’s actually a
lot of complexity here that you need to think
about when building out your service because the
upgrade and the downgrade could be manual You could
say to a customer we’re going to cut you off unless
you go upgrade your plan. It could also be automated
based on certain business logic or rules that you
want to put in place. You could say we’re going to let
you use up to a certain amount, and if you go over
that, we’re going to put you into another tier. So when you think about
monetizing your service, you have to make sure
you have a platform that can support whatever model
it is that you choose. The other thing that’s very
interesting about subscriptions is that you can have what
we call a “one-to-many relationship” between
the entitlement, which is the thing that the
customer is actually buying from you, and the pricing
plan that they’re using. What this means
is you could have, for example, one plan that
is a yearly commitment that’s paid monthly, and you could
have another plan that is a yearly commitment
that’s paid yearly, both for the same entitlement. In either case, the
customer is actually going be paying a different
amount, most likely, but they’re paying
for the same thing. And this one-to-many
relationship is really core to how
subscriptions work. So moving on to
consumption building, there’s a few different
types of consumption billing that you could build into
a service that you have. On-demand is obviously
the most simple. It’s just what I’m using
times the price for each item. In the case of GCP, there’s
a price for a VM for an hour. You take the number
of hours of that VM and multiply it by the
price, and that gives you your total cost. And so the benefit of this
is it’s very simple, easy to understand. The drawback is that it’s also
a little bit inflexible, which is why we have what we
call “tiered pricing” for consumption as well. And what this means is that
as you start to use more, you pay less. And you see this more in
storage, and networking, and things like that,
where you kind of expect to derive some
economies of scale. And you can see
the example here, where as we go from 20 widgets
to 30 widgets to 30 plus, the actual price per
widget is coming down. And the cost, each tier
there gets lower and lower. The nice thing here is that
as the customer is using more, they’re getting the benefit
of that discount, which is actually going to keep them
consuming from you if there are other alternatives. One of the most popular
models that we see out there, though, is what we call a
“base plus consumption model.” This combines elements
of subscription billing with consumption billing. If you think about a
committed use discount in GCP, for example, there
is essentially a subscription, a
commitment, and then there is a per-widget fee or per-hour
fee if you go over that. The benefit of this
is that it allows you to charge the customer for
the basic level of what they’re going to use. You can probably
forecast that they’re going to have some
basic level of usage. And you can lock that in. You can give them a
discount for that, and then anything over that,
they’re still able to consume, but they’re just going
to pay a little bit more. And this tends to be
the most flexible, and actually confers a lot
of benefits to everybody. One of the things that you
need to think about, though, if you are going to
do consumption billing is what are the metrics
you’re going to bill against. Some of the common
metrics that we see are time, so number
of hours, for example, that somebody is using your
service, data, how much data is being transferred, storage,
or just a count of something. It could be the
number of connections that the users made
to the service. The key is that this is
where the business really has to come together
with the engineering team to figure out what
are the right metrics, and then how do we count
them, and how do we monetize on them for our service? So just putting it all
together real quickly, whether you have a subscription
or a consumption plan, you actually have
to figure out what is the route to market,
then, for this product. So we have a few
different options. You could sell it directly
to an end customer. You could also bring it to
market through a public Cloud marketplace like
GCP marketplace. And you can also sell it
through your own channel. No matter what the
billing model is, though, you have to make sure
that billing model fits with the go-to-market
that you’re choosing for your product. So great– you’ve created a
wonderful new product on Cloud. You’ve added monetization. You’ve picked your
route to market. Now comes the fun part,
where you actually get to go build an ecosystem
around this product. I think it’s important to
note that an ecosystem is not an app store. And just because you
have an app store, it doesn’t mean you
have an ecosystem. I actually found this
definition in a paper as I was preparing
for this talk. And I really thought it
did a good job of outlining what an ecosystem actually is. So I’m going to
read it real quick. “A software ecosystem is a set
of actors functioning as a unit and interacting with a
shared market for software and services. These relationships
are frequently underpinned by a common
technological platform or market and operate through
the exchange of information, resources, and artifacts.” So the really
interesting thing to me is that all ecosystems have this
common technological platform in common. And this is really
core to actually being able to build
out an ecosystem. So if you think about what has
to be in place before you can even think about creating an
ecosystem around your product, you have to have this
common tech platform. It also really helps to
have a stable customer base. If you don’t have customers
that are using your product, it’s very hard to
attract other companies to build around the platform
that you’ve created. So it’s a question that
we get a lot of the time is, should I work on building
the ecosystem first or building the customer base first? I would say that building
the customer base is very, very
important, because it’s hard to attract that
ecosystem if you don’t have it in the first place. Your customers also need to
be engaged with your platform. An ecosystem will
only really form if they believe that
they can make money by working with you and
with your customers. And if the customers aren’t
engaged with the platform, it’s hard to actually get
that flywheel spinning. And then finally, you have to
be able to create a trusted relationship with
your customers. What you’re doing effectively
by creating an ecosystem, and maybe wrapping an
app store around it, is saying that you
actually believe these solutions are good. Your customers are going
to be able to use them. They’re going to work,
et cetera, et cetera. And if you don’t have
that trusted relationship with your customers,
it’s very difficult to get them to start using
third-party software. In terms of the actual
product requirements, a couple of things
have to be in place. First of all, you have
to be able to support the exchange of information. In today’s world,
that usually means that your platform has open
APIs that third parties can use. So if you have data that’s
part of your platform, that you’re making
available to your customers, you want other third parties
to be able to provide services on top of that. You have to have some way
for them to get at that data. So open APIs, extensibility
are very important in creating an ecosystem. A couple of great examples– everyone’s probably
familiar with Google Play. I think, actually Sundar talked
about the Android ecosystem a little bit. It’s more than just,
obviously, the app store. It’s all the telcos, all the
customers, all the app makers. And all of these entities
are working together to deliver value
to the end user. The common tech
platform in this case is, obviously, the
Android operating system. And you can kind of see
how some of the elements in that definition
apply to Android. GCP is another example
of an ecosystem. We’re all here. We’re all part of
that ecosystem. And some of the
things we’re trying to do to help that
ecosystem organize and form are things like GCP marketplace,
which we’ve made available. So just a quick bit– why are ecosystems important? I think some of this
goes without saying, but for one, it increases
loyalty and stickiness from the customers. If they’re getting
products, not just from you but from other entities, and
you’re facilitating that, they’re going to stick with
you over the long term. Second, it helps fill gaps
in the platform offering. It’s very difficult to
have a solution that solves all the problems
that your customers want you to solve. You will not be able to
hire enough engineers to make that happen. But if you have a
robust ecosystem, they can fill in these gaps. And then finally,
it gives you avenues for additional monetization
and value creation. So it goes without saying,
if you build a marketplace, people are going to be buying
things from that marketplace. And whoever is facilitating
that transaction is able to take a
little bit of that value that they’re creating. So the ecosystems
can actually form without you doing anything. You’ll see, if you have a great
product and customers come into that product,
other third parties are going to want
to get engaged. But to really organize
and monetize effectively, it helps to actually have
a place for customers to go to discover solutions,
and procure them, and so on. So in terms of actually
operationalizing, we look at it from two sides– the partner side, so
these are the entities that are creating value-added
solutions around your product. And in the case of them,
there’s really three things to think about– onboarding, and this
means bringing them into your ecosystem,
getting the contract signed, doing sort of the actual
product integration work, certification, so that
means looking at the solutions that you’re bringing
into the marketplace, and actually running
them through some sort of certification process so that
when your customers are using them, they can be relatively
assured that they’re going to work, and they can
trust the solutions that are available from your partners. And then finally, go to market. It’s not enough to just usually
put solutions out there. Your partners, whoever
is participating in your ecosystem, is
going to need help selling. On the customer side,
there are some basic things that customers need in order to
make the ecosystem effective. They have to be able to find the
solutions that are out there. This is where the app store
becomes very important, app store marketplace,
whatever you want to call it. They have to be able
to purchase solutions. And it really helps
for them to be able to purchase from
a central entity. You don’t want your
customers to have to go to many
different entities, many different organizations
to use products along with your platform. You want them to be able to
centralize that procurement. And then finally, provisioning–
that is basically, how are they going to use
these third-party products? Provisioning can mean a
lot of different things. It could mean deploying
a VM to a cloud platform. It could just mean
turning on an API. All three of these things
need to work really, really easily for your customers
to have a robust ecosystem. So at Orbitera, we’ve
actually built a solution to help you jumpstart
your efforts with this. We can’t solve every
problem that you have for building an
ecosystem, but some of the things we just
talked about in terms of onboarding partners, and
actually making your solutions discoverable, and making it
easy to integrate and provision, are things that the Orbitera
White-label marketplace is able to help with. And we’ll hear from Roger
Pilc in just a few minutes about how Pitney Bowes is using
Orbitera to build an ecosystem marketplace for their customers. Actually, perfect timing. So I’m going to welcome
Roger up on stage. Roger is the Executive
Vice President and CEO at Pitney Bowes. Take it away, Roger. ROGER PILC: You said
a couple minutes. I thought I had a couple– all right, great. Good to be here. I’m going to share
Pitney Bowes’ journey. I’m sure part of it is
unique to our company, but hopefully, some
of it is helpful and sounds familiar
to what some of you are going through in
your own companies. Pitney Bowes is a
100-year-old company. We have had a long history in
office equipment, and services around mailing and shipping,
as Brian went through. And our general
set of solutions, ultimately, power commerce. 100 years into it,
we had a new CEO come on board six years ago. We’ve undertaken
a pretty dramatic digital transformation. Part of the
transformation relates to a couple of billion
dollars of acquisitions in the software space
that started 10 years ago. So in addition to the mailing
and shipping heritage, we’re in three
categories of software. One is customer
information management. We do data quality for
customers like Salesforce.com. We’re in location intelligence–
we sell data to customers like Twitter and Facebook– and customer engagement. So as we went through our
digital transformation, it was a huge help that we
had 800 software developers and a software business. We partner closely with GE, who
didn’t necessarily have that. And it’s been a key part
of our transformation of mailing and shipping. And then the last
piece of the equation has been really important, and
that’s e-commerce services. We do all of eBay’s
global shipping platform, and have grown our
global shipping business and our domestic
e-commerce business to a billion dollars now. So between that and software,
it’s half of our company. And we got our first taste of
creating an ecosystem based on a platform in that
e-commerce business. And that, ultimately, led
to partnering with Google for our SMB business. But in our e-commerce
business, we’re actually both supporting
eBay and also 250 retailers. We’re connecting millions of
sellers, millions of buyers, hundreds of retailers,
tens of payments companies, tens of shippers via the
Pitney Bowes Commerce Cloud. So that ended up
facilitating from zero to almost $2 billion dollars
of gross merchandise value by creating that platform
and that ecosystem in our newer business. So based on that,
we said everything we learned, let’s take that
to a very traditional business of ours, which was
what we were known for, which is postage meters and
a million small businesses using postage meters. So it’s a little
bit of our history. The journey has involved
a tremendous amount of technology change. And that actually was
very, very critical to the building of an ecosystem. Brian referred a couple
of times to a platform, and I think a key part of
the journey of building this ecosystem has been a
very persistent building of a platform over
multiple years. Our CEO was very forward
looking, kind of not what I’ve been used to, to be honest. But he really encouraged
us to follow a journey. We basically laid out a
set of technology drivers like you’ll see at events like
this, built the Commerce Cloud. And there were three pillars
of our transformation. One was design. So many of you at
your companies, I’m sure you have
design initiatives. But design and client experience
was very, very critical. For those million
small businesses, we actually built
a client portal. So we have 4 million
logins now a quarter. And that was very
critical as we started to build this ecosystem
and this marketplace. So design and client experience
and creating a web experience was the first piece of it. The second piece of it was
data and a data platform. So as we were progressing
on this journey, we built one very large data
platform, big-data platform, that served all the
company’s data needs. It became our IoT platform. It became our BI platform. It became our tracking platform. So we’ve got 30 products
across the company leveraging our big-data platform. And it’s also the
place where we create data about our customers. And that, also, will
feed into the app store and the marketplace. So as we build IoT capabilities,
we built web capabilities, we started to build
increasing amounts of data about our
million SMB customers. And that’s actually going to be
very critical to our app store ecosystem creation. So that was a very critical
piece of the puzzle. And then lastly, in terms of
foundations of our platform, we’ve basically transitioned
our entire 100-year-old company to the Cloud, just went all in. So we’ve got 35 SaaS products. Those SMBs, those million
SMBs, almost 200,000 now have a SaaS or IoT
product of some sort. So we used to be an
office equipment company. We sort of shifted to
a cloud-centric client experience, and then started
offering our own IoT or SaaS products to those customers. And we sort of
changed the center of gravity of the
company from sort of office equipment
and a phone experience to a Cloud and
SaaS-based experience based on the Commerce Cloud. So SaaS was critical to it. API was critical to it. Brian mentioned open
platforms and APIs. So a big reason why we’re
here working with Orbitera is several years ago we
jumped in with Apigee, which is the API management
platform that Google bought. And we built our
whole API platform based on Apigee,
now Google Apigee. We’ve got 400 APIs on that. A business that was
nothing grew to 120 million annualized based on
that API platform. And so as we’ve built this
platform and ecosystem, we’re able to launch hackathons
and developer programs. And they’re all leveraging
all of our solutions via that Google
Apigee API platform. And then lastly, we
jumped in with mobile. And that’s another reason
why we partnered with Google. The Apigee experience
was really, really good. And we ultimately changed
that office equipment to be Android based, thinking
we want to build ecosystems, but we’re also riding other’s
ecosystems and platforms. So we went all in. And our latest generation
of office equipment, we launched at Google’s New York
headquarters last September. It’s Android based. It is the best selling new
product launch we ever had. We’ve already sold
over 60,000 of them. And we’ve actually become
a relatively mature, mobile-centric
IoT-based company. We partnered with the
gentleman that created the Nest thermostat, now part of Google. And so those devices, we
kind of transformed them like Nest transformed
thermostats. So now they’re digital, IoT
connected to our Commerce Cloud based on Google. So that’s sort of our journey. It’s a little bit of context
for the conversation. Ultimately, it’s about
business outcomes. I was e-mailing with my
boss, our CEO, on the flight. And he just pretty much
doesn’t care about anything I said except for
the business outcome. So from a business
perspective, we’ve been able to create
$600 million of revenue from the Pitney
Bowes Commerce Cloud. All of our $150 million
of revenue growth last year was based
on new products. And we’ve got, as I mentioned,
about 200,000 SaaS customers, saved about $15 million of
costs a year and growing, reduced cycle time a lot, and
really transformed the client experience to one
that was really old school to something
that’s very digitally centric at that point. And that kind of brings
us to where we are today. So this is, I think, my
second-to-last slide. It’s very, very complicated,
so I’ll just walk through it. So the reason why I’m
speaking here with Brian is the next step of
that journey in building the Cloud was to build an
ecosystem for our million SMB customers, just like we did in
our e-commerce business unit. So Brian mentioned trust. When we surveyed our customers
related to our brand, that was, fortunately, one of the things
about our brand that stood out was trust. And we’re a honest
company, and we try to do the right
thing by our clients. And I think those
stable relationships, the million customers
very engaged like Brian said
in that trust, was sort of the foundation
for what we’re doing here. So I’ll try to walk you through
this hyper-complicated chart. So in the center is
the Commerce Cloud, which is all those platform
elements that I talked about on the prior page. On the bottom left is our
latest generation of postage meters, our latest generation
of office equipment. So roll back five years, all
we had was office equipment. Then we built the
Commerce Cloud. And then in the top
right, basically, our 100-year history,
for which most of us haven’t been around
for 95 of the years, we are intermediating
$10 billion of postage between the
USPS and a million SMBs. So we were basically
a one-product company intermediating one partner. So we wanted to get
increased stickiness, like Brian described. We wanted to bring more
value to our clients, like Brian described. And we wanted to fill
gaps in our portfolio, like Brian described. So what we ultimately did,
based on the Commerce Cloud and leveraging the data we
had about our customers, is adopted the
Orbitera platform. We actually made the decision
at Google Cloud Next last year. And what we’re doing now is
we’re essentially pivoting. So those million
SMB customers that used to only have
one product, we’re now bringing
additional mobile apps on the Android-based solutions,
delivered via the Orbitera app store, additional
Pitney Bowes SaaS apps and third-party SaaS apps
delivered from the app store. And then ultimately,
it’s tied together with that web experience
that I described, which we call Your Account. And then on this
side, which is sort of the other end, the other side
of the two-sided marketplace, we’ve gradually, over
the last two years, pivoted with
additional services. Started with USPS. Two years ago we started
intermediating services from FedEx and UPS as well, all
via those same SaaS solutions. We wrap it all with
our payment solutions. And now, based on
Orbitera and Apigee, we’re bringing more
and more third parties into the mix through
our app store, delivered on the Android-based
devices or via SaaS, via Your Account. So multiple delivery
methods, multiple partners, and the Orbitera and the
Apigee and the Google Cloud is making it possible. So ultimately, I already
went through sort of why we’re doing it– additional value,
stickiness, filling in gaps, improving our small
business’ productivity. And I think that’s about it. So I think we’re going
to have a little Q&A now. So hopefully, that is
somewhat helpful to some of your journeys. [MUSIC PLAYING]

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