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A Three-step Plan for ISV Success in the Cloud: Step 2 of 3

31 Jul 2015 by Insight Editor

With global IT spending on public cloud services outpacing overall IT spending by 600% for the foreseeable future, independent software vendors (ISVs) are looking to take advantage of this exploding global demand for cloud-based software from businesses of all sizes.

This post focuses on the second step of a three-step plan to help ISVs migrate successfully to the cloud. To read the first post focused on differentiation, click HERE.

Step 2: Diversification

If the first step in the path to ISV success in the cloud requires a relentless focus on developing great software, the second step may seem like it supports the exact opposite behavior: diversification.

This diversification doesn’t relate to the development process, however. It refers to how ISVs can drive greater value — and thus profitable growth — from their customer base by expanding beyond their own software and services into other complementary solutions.

Rising above the vendor trap

Many ISVs are considered “vendors” by their customers: pure-play entities that satisfy a specific need. That can be a lucrative position long-term, and many ISVs are quite content to remain laser-focused on serving that need.

On the other side of the coin, these vendors are rarely considered for ancillary or higher-value premium offerings when the opportunity arises. In order to merit such consideration, an ISV must first be considered a true “partner” of the customer: a trusted advisor able to help chart strategic direction and be considered for profitable growth opportunities outside the developer’s core offerings.

Opportunities abound

These opportunities can vary widely, depending on the business processes and customer segments each ISV has targeted. For example, an electronic health records software provider for small medical practices might be able to expand into a hosted Microsoft® Exchange offering for the practice’s secure email needs.

A cloud-based collaboration tool for virtual teams could easily offer additional cloud storage or instant messaging services as a premium offering. A construction firm’s estimating application might be able to deliver cloud-based invoicing capabilities as well, connected by Application Program Interfaces (APIs).

Keys to diversification success

In each of these cases, the criteria for success are the same:

  • The additional offering is a common need for the customers that complements what the core software serves.
  • The offering is an extension of the value the core software already delivers.
  • The capability can be seamlessly marketed and packaged by sales and marketing teams.
  • The upsell opportunity isn’t “all or nothing,” jeopardizing the sale of core software application(s).
  • The marketing, selling and delivery of the additional capability doesn’t distract from the ISV’s core application development operations.

Adding diversification without impacting differentiation

Some cloud providers have developed a SaaS portfolio opportunity for ISVs that meets all of the criteria above. With these SaaS portfolios, any ISV can pick and choose from a catalog of cloud-based applications that might complement its own applications.

These ancillary cloud services can be marketed as branded offerings — Microsoft Exchange and Symantec’s Norton™ Security suite, for example — or as nonbranded, “white label” services like cloud storage and disaster recovery solutions.

A provider’s SaaS portfolio capabilities create a unique and compelling opportunity for cloud-based ISVs: the ability to quickly deliver higher value and more profitable growth to customers and prospects — without disrupting the ISV’s current business model, target markets or internal development capabilities.

The third and final post in this series will explore the third step for ISV success in the cloud: Scale

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