Building Customer Success Organizations

1. www.tsia.com Building Customer Centric Organizations Thomas E. Lah Executive Director TSIA

2. www.tsia.com Why now? Customer Centric Organizations 2 What will they do? How will they be funded? What will they look like?

3. www.tsia.com Our Unbiased Independent Research Model 3 155 Operational Best Practices Audits 1 Million Benchmark Data Points 548,000 Survey Data Points 1,310 Benchmark Analyses 9,600 Analyst Inquiries

4. www.tsia.com Customer Centric Organizations: Why Now?

5. www.tsia.com 5 Hasn’t This Always Been True?

6. www.tsia.com Old Consumption Economics 6Source: Consumption Economics, Wood, Hewlin, Lah

7. www.tsia.com 7 High Switching Costs

8. www.tsia.com New Consumption Economics 8Source: Consumption Economics, Wood, Hewlin, Lah

9. www.tsia.com XaaS Revenue Waterfall Is Not Simple to Master 9 115% $115m 100% $100m End of Year Revenue: Total $’s End of Year Starting ARR: Total $’s Available to Renew at Beginning of Year 90% $90m Retention Dollars Upsell Dollars Cross Sell Dollars Customer Churn Dollars Downsell Dollars Retention Rate = 90% Expansion Rate = 25% Churn = 7% $3m Downsell = 3% $7m Upsell = 10% $10m Xsell = 15% $15m YoY Growth Rate = 15% Source: TSIA SRG Cloud Benchmark Study 10

10. www.tsia.com Customer Centric Organizations: What will they do?

11. www.tsia.com 11 Growing ARR Is a DATA DRIVEN Process, Not a Heroic Act. TSIA Believes…

12. www.tsia.com Supplier Success Adoption Perspectives 12 Customer Outcomes LOW > HIGH > EFFECTIVE>

13. www.tsia.com TSIA LAER: AN INTERNAL OPERATING FRAMEWORK 13 Eﬀec%veness Eﬃciency Data Quality S%ckiness Quan%ty Who Land New Customer LAND ADOPT Descriptive Analytics Predictive Analytics Outcome Analytics Consumption Analytics Platform Cost-Effective Selling Channels Data-driven and CGT-driven Lead Gen X-Sell Sellers Renewal Sellers Upsell Sellers Large Upsell Sellers EXPAND RENEW Outcome Engineering Customer Success Team Customer Service Teams Customer Growth Teams

14. www.tsia.com Use data analytics to predict churn 25% Source: TSIA Customer Success Baseline Survey Use data analytics to predict expansion opportunities 13%

15. www.tsia.com 15 Roadmap: LAER Capabilities Heatmap Lifecycle Construct: LAER Roadmap: PIMO Lifecycle Service Offers Internal and External Growth Constructs Supplier Perspective Customer Perspective Land Adopt RenewExpand Plan Implement OptimizeMonitor Lifecycle Construct: PIMO Outcomes Goal: Maximum ARR Goal: Business Outcomes

16. www.tsia.com PIMO: A CUSTOMER CONSUMABLE ENGAGEMENT MODEL 16 CUSTOMER SUPPLIER PLAN IMPLEMENT MONITOR OPTIMIZE BUSINESS BUYER IT TEAM END USERS BUSINESS MANAGERS IT OPS BUSINESS BUYER SALES TEAM SOLUTION ENGINEERS DEAL CLOSE PS EDUCATION CONSUMPTION ANALYTICS SUPPORT CUSTOMER SUCCESS EXPAND SALES

17. www.tsia.com Customer Success at Scale 1.0 Organizational Strategy and Financial Performance 1.1 Strategy and Goals 1.2 Business Performance Management 2.0 Opportunity Management 2.1 Account Segmentation 2.2 Opportunity Management: Renew 2.3 Opportunity Management: Expand 3.0 Customer Success Delivery 3.1 Success Plans 3.2 Customer Onboarding 3.3 Adoption Monitoring 3.4 Benchmarking 3.5 Renew 3.6 Opportunity Identification and Expansion 4.0 Success Operations 4.1 Talent Management 4.2 Customer and Offer analytics 4.3 Infrastructure 5.0 Success Engineering 5.1 Success Engineering Function 5.5 Value Engineering 5.6 Product Integration 6.0 Success Marketing 6.1 Success Marketing Function 6.2 Strategic Pricing 6.3 Services Rollout 6.4 Customer Experience 17

18. www.tsia.com Foundational Reactive Support SLAs, Hours of Coverage, Case Routing, Support for Old Releases, Client-side Diagnostics, Kbase 10 Layers of Value Proactive Support Alerts, Remote Monitoring, Health Check, Technical Account Management/Designated Resources LEVEL 2 Product Services Bundling Training into Support eLearning, Instructor-led Online, Curriculums, Templates, Certifications 1 2 3 20 Adoption ServicesOperational Services LEVEL 3 4 5 7 6 Risk Management / Compliance Compliance Audit, Security Assessment, Technical Readiness Assessment Performance Optimization Performance Optimization/Tuning, Operational Status Dashboard IT Staff Augmentation Services Admin Services, Upgrade Asst, Event Mgmt, Business Continuity PIng, Operational Change Mgmt Support for Adjacent Technologies Network Troubleshooting, Multi-vendor Support, Customization Support, Data Integration Mgmt Adoption Planning Vision & Strategy Alignment, Governance, Onboarding Consumption Optimization Success Management, Prescriptive Best Practices, Gap Closure Consumption Monitoring Adoption Monitoring, Scoring & Benchmarking 8 9 10

19. www.tsia.com New Offer Landscape As Is (Red Ocean) Could Be (Blue Ocean) Availability Adoption and Outcomes More Features Impact Features Customer Type: Enterprise/SMB Direct/Indirect Adoption Class Package an “Offering” Package “Business Impact” Product + Services A Service 19

20. www.tsia.com Customer Centric Organizations: How will they be funded?

21. www.tsia.com Comparing Dashboards 21 TSIA TS50 TSIA Cloud 40 18 % Revenue Growth -5% Operating Income 91 % Subscription % 69 % Services Margin 4% Revenue Growth 66 % Services % 13 % Operating Income 52 % Services Margin

22. www.tsia.com Cloud 40 Business Model: Q4 2015-Q4 2016 22 67.9% 38.0% 17.2% 18.8% -7.6% 69.1% 35.4% 14.6% 19.1% -4.8% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% Gross Margin S&M G&A R&D OI Q4 2015 Q4 2016

23. www.tsia.com Customer Success initially funded from Support as Cost of Goods Sold (COGS) or out of Sales as Sales & Marketing Costs (S&M) Initial Customer Success Funding Model 23 Support Sales

24. www.tsia.com SG&A 54% R&D 19% OI -9% % of Revenue Gross Margin Margin $ XaaS 1.0 Product 90% X 68% = 61% Service 10% X 25% = 3% GM 64% UNprofitable XaaS 1.0 26

25. www.tsia.com Major motions of Adopt, Renew and Expand are Sales and Marketing costs (S&M) Key metrics include Customer Retention Costs (CRC) and Customer Expansion Costs (CEC) Mature Customer Success Funding Model 25 Adopt Renew Support Monetize

26. www.tsia.com Monetize Customer Success49% Source: TSIA Customer Success Baseline Survey

27. www.tsia.com SG&A 30% R&D 19% OI 15% % of Revenue Gross Margin Margin $ XaaS 2.0 Product 60% X 70% = 42% Service 40% X 55% = 22% GM 64% Profitable XaaS 2.0 29

28. www.tsia.com Economic Engines of Technology Providers 28 Annuity Services Project Services Technology Subscription Product Revenue Stream Paid to deliver a project Paid for a service capability that is renewed on annual or multi-year basis Paid for access to technology (XaaS) Paid for a technology asset Each of these revenue streams has unique margin and profit profiles

29. www.tsia.com LowAverageHigh Financial Keys: Mix Matters 29 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% SOFTWARE PRODUCT GROSS MARGIN SUBSCRIPTION GROSS MARGIN ANNUITY SERVICES GROSS MARGIN PROJECT SERVICES GROSS MARGIN

30. www.tsia.com Where is Revenue Coming From? 90 10 70 20 10 Future Value Aggregators Current Profit Maximizers 30 60 3010 Mid-Term Wedge -10% Operating Income 15% Operating Income 0% Operating Income Annuity Services Project Services Subscription

31. www.tsia.com Customer Centric Organizations: What will they look like?

32. www.tsia.com Service Organizations Most Likely to be in Place 32

33. www.tsia.com Tech Org Structure: Emerging Challenges •  Ineffective sales investments •  Portfolio proliferation –  Basic Support, Premium Support, Education, Professional Services, Technical Account Management, Managed Services, Customer Success, XaaS subscriptions. •  Customer confusion –  The service offers from product and service lines are beginning to overlap •  Cost of sales –  Current models not optimized to cost effectively land XaaS customers •  The adoption gap –  Current org structure does not effectively drive adoption and expansion of XaaS offers 35

34. www.tsia.com 35 These trends are stressing the P&L and organizational structure of existing models.

35. www.tsia.com How to accelerate profitable growth in today’s technology marketplace? 35 Question

36. www.tsia.com Deploy “as a service” offers. 36 Answer

37. www.tsia.com Built around helping customers achieve specific business outcomes. 37 Answer

38. www.tsia.com Supported by a go to market model that cost effectively drives customer adoption, account expansion, and contract renewal. 38 Answer

39. www.tsia.com What Changes? •  Blurring of Sales and Service roles •  Breakdown of traditional P&L structures •  New focus on adoption, cost effective expansion •  Leveraging technology not labor to: –  Educate the customer –  Unfold offers –  Monitor adoption 39

40. www.tsia.com End Game Coverage 40 UNLIKELY TO EXPAND LIKELY TO EXPAND LAND SALES ACCOUNT MANAGER LAND ADOPT EXPANDRENEW Marketing

41. www.tsia.com End Game Coverage 41 UNLIKELY TO EXPAND LIKELY TO EXPAND LAND SALES ACCOUNT MANAGER CUSTOMER SUCCESS MANAGER LAND ADOPT EXPANDRENEW Marketing

42. www.tsia.com End Game Coverage 42 UNLIKELY TO EXPAND LIKELY TO EXPAND LAND SALES ACCOUNT MANAGER CUSTOMER SUCCESS MANAGER LAND ADOPT EXPANDRENEW Marketing

43. www.tsia.com End Game Coverage 43 UNLIKELY TO EXPAND LIKELY TO EXPAND LAND SALES ACCOUNT MANAGER CUSTOMER SUCCESS MANAGER LAND ADOPT EXPANDRENEW RENEWAL SPECIALIST Marketing

44. www.tsia.com End Game Coverage 44 UNLIKELY TO EXPAND LIKELY TO EXPAND LAND SALES ACCOUNT MANAGER CUSTOMER SUCCESS MANAGER LAND ADOPT EXPANDRENEW RENEWAL SPECIALIST SMALL EXPAND SPECIALIST Marketing

45. www.tsia.com End Game Coverage 45 UNLIKELY TO EXPAND LIKELY TO EXPAND LAND SALES ACCOUNT MANAGER CUSTOMER SUCCESS MANAGER LAND ADOPT EXPANDRENEW RENEWAL SPECIALIST SMALL EXPAND SPECIALIST LARGE EXPAND SALES ACCOUNT MANAGER Marketing

46. www.tsia.com Target Organization Structure Well Funded Demand Generation Engine CEO LEAD GEN MARKETING 47

47. www.tsia.com Target Organization Structure A Sales Organization Focused on LAND CEO MARKETING LAND SALES VERTICAL 2 VERTICAL 1 SALES RESOURCES SALES RESOURCES LEAD GEN 48

48. www.tsia.com Target Organization Structure A Customer Growth Engine CEO LEAD GEN MARKETING CUSTOMER GROWTH LAND SALES VERTICAL 2 VERTICAL 1 SALES RESOURCES SALES RESOURCES 49

49. www.tsia.com Target Organization Structure With Account Coverage that Drives Adoption CUSTOMER SUCCESS CEO LEAD GEN MARKETING CUSTOMER GROWTH MEDIUM RENEWAL SPECIALISTS LAND SALES VERTICAL 2 VERTICAL 1 SALES RESOURCES SALES RESOURCES LARGE SUCCESS MANAGERS SMALL SMALL EXPAND SPECIALISTS INDIRECT 50

50. www.tsia.com CUSTOMER SUCCESS CEO LEAD GEN CONSULTING SERVICES EDUCATION SERVICES OFFER DELIVERY MARKETING CUSTOMER GROWTH MEDIUM RENEWAL SPECIALISTS LAND SALES VERTICAL 2 VERTICAL 1 SALES RESOURCES SALES RESOURCES LARGE SUCCESS MANAGERS SMALL SMALL EXPAND SPECIALISTS INDIRECT SUPPORT SERVICES Target Organization Structure With a Converged Resource Pool to Deliver Offers 51

51. www.tsia.com Target Organization Structure Sophisticated Customer Analytics SUCCESS SCIENCE CUSTOMER SUCCESS CEO LEAD GEN CUSTOMER ANALYTICS CONSULTING SERVICES EDUCATION SERVICES OFFER DELIVERY MARKETING CUSTOMER GROWTH MEDIUM RENEWAL SPECIALISTS LAND SALES VERTICAL 2 VERTICAL 1 SALES RESOURCES SALES RESOURCES LARGE SUCCESS MANAGERS SMALL SMALL EXPAND SPECIALISTS INDIRECT SUPPORT SERVICES 52

52. www.tsia.com Target Organization Structure Customer Enablement Platform SUCCESS SCIENCE CUSTOMER SUCCESS CEO LEAD GEN CUSTOMER ANALYTICS CONSULTING SERVICES EDUCATION SERVICES OFFER DELIVERY MARKETING CUSTOMER GROWTH INFRASTRUCTURE MEDIUM RENEWAL SPECIALISTS LAND SALES VERTICAL 2 VERTICAL 1 SALES RESOURCES SALES RESOURCES LARGE SUCCESS MANAGERS SMALL SMALL EXPAND SPECIALISTS INDIRECT SUPPORT SERVICES 53

53. www.tsia.com XaaS Self-Service Business Model 53 REMOTE MONITORING AND OPERATING CAPABILITIES SERVICE INTERVENTON CAPABILITIES TAILOR-ABILITY AND APIs LICENSE PROVISIONING AND MANAGEMENT MARKETING ENGINE CONSUMPTION ANALYTICS SECURITY TRUE MULTI-TENANT HOSTING PLATFORM QUOTE-TO-CASH / SUBSCRIPTION MANAGEMENT / E-COMMERCE SALESMARKETING SERVICES SUCCESS SERVICES EXPAND & RENEW TEAM MARKETING FINANCE R & D Offer 1 Offer 2 Offer 3 Offer 4+ The Customer Self-Service Engagement Platform Objects Organizations CUSTOMERCustomer Handoffs Land Adopt Expand Renew

54. www.tsia.com Target Organization Structure Chapter 4, The Technology-as-a-Service Playbook SUCCESS SCIENCE CUSTOMER SUCCESS FINANCE/ ADMIN CEO LEAD GEN CUSTOMER ANALYTICS CONSULTING SERVICES EDUCATION SERVICES OFFER DELIVERY MARKETING CUSTOMER GROWTH OFFER DESIGN INFRASTRUCTURE MEDIUM RENEWAL SPECIALISTS LAND SALES VERTICAL 2 VERTICAL 1 SALES RESOURCES SALES RESOURCES LARGE SUCCESS MANAGERS SMALL SMALL EXPAND SPECIALISTS INDIRECT SUPPORT SERVICES PRODUCT DEV Eﬃciency EﬀecBveness Tight Alignment Tight Alignment 55

55. www.tsia.com Why now? Customer Centric Organizations 55 What will they do? How will they be funded? What will they look like? Lack of adoption kills growth and profitability Execute data driven processes to maximize ARR Combination of COGs, S&M, and monetized offers Two Teams: LAND and GROW

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