Opposing Business Models or Solution Variety?

ExchangeDefender, IT Business, OwnWebNow, Pimpin
4 Comments

MSPs and IT Solution Providers have an inherent business model flaw: They can’t compete on both price and performance at the same time. Your solution cannot simultaneously be the best and the cheapest because the cheapest is always getting cheaper and the best is exceedingly difficult to accomplish.

So how do you compete? I don’t know, and I know exactly. Allow me to explain 😉 I recently got an email from a long time ExchangeDefender partner who was asking for further volume discounts of our product:

“Can you also look at my account and see if you can do anything about the pricing – we continue to bring on more ExchangeDefender accounts and I don’t want to have to downgrade the accounts to the lighter versions to help us maintain our margins in the face of more and more competition.  Thanks.”

Sociopath Enterprise Architect

To succeed in this business you need to be able to wake up each day and shift mindsets quickly.

I myself had to face the line above – many times. As a matter of fact, I and other OWN sales folks have been approached about meeting BPOS pricing – which we just cannot do. I think we lost most if not all of those deals because quality of service doesn’t matter to many – only price does.

So my options are cut all the vendor sponsorships we have, kill all the partner programs, stop answering my phone and try to compete with BPOS until Microsoft realizes they are doomed against Google and give it away for free (and run me out of business in the process). That’s one option, but I honestly would not wake up and drag myself to work each day to build a crippled product.

So we launched CloudBlock – You can now buy hosted Exchange with more storage than Own Web Now provides for $2.95 / month.

We’ve also been approached time and time again to compare our ExchangeDefender product with Postini, AppRiver, MX Logic <insert antispam product here> and asked to compete on price for their lowest tier antispam solution. Now, when you look at ExchangeDefender it’s $2 a month. For that you get the base antivirus/antispam but you also get 1 year of LiveArchive on Exchange 2010 with no storage limits, you get web filtering, web file sharing, encryption, integration with your PSA and RMM tools and even a free version to use on your own stuff. But after hearing “I just need antispam” a billion times, I allowed the team to create an ExchangeDefender Essentials offering for $1 a month: spam and virus filtering.

Do we spend a lot of time thinking about the Essentials offering? Not at all. There isn’t even a product ID for it in our billing system – all 5 people that have ordered it just have ExchangeDefender with a 50% discount. The offering has been as successful as a flying brick.

On the other hand…

When we decided to publish Shockey Monkey as a commercial product, we decided to give it away for free. No restrictions, no catches, no limited time trials, no approval process at all. You just fill out a form and 60 seconds later you have a full blown client management portal.

If you want some of the advanced features, you can sign up for the Pro.

This is the exact opposite of the ExchangeDefender and OWN business models: of writing really, really, really great and profitable stuff.

Why is it different? Because there is no “markup” on a solution that you’re going to use to run your own house. But I don’t know a single MSP that doesn’t charge at least $5 for ExchangeDefender. Either all of my partners are total crooks, or they are great at sales.. or there is a valuable addon that comes with deploying these solutions, one that (when managed properly) businesses are willing to pay for and support their business on.

Skitzo enough for you?

It all just comes down to what kind of business you want to run, what kind of solution you want to offer and what motivates you to work to please your clients.

For me, it’s all about ExchangeDefender, Shockey Monkey, OWN. But I’m an entrepreneur and I’m willing to take anyone’s money with CloudBlock, ExchangeDefender Essentials and anything else from folks that are willing to compromise. I would never sell those to a client but if that’s what you need to build your business that is your decision to make.

Do you want it good or cheap?

That is the only question that matters.

When you build your solution stack, do you want a good one or cheap one?

My name is all over ExchangeDefender. I go to trade shows all the time. If my solution was terrible there would be a line of people waiting to beat my ass. I have seen CEO’s that have since stopped going to shows for having their butt chewed out by their clients. I never want to be in that situation or put my people in that kind of a position. That is why all of my VPs go to these events, answer the phone and work with our partners. That is why our partners sell our products and know someone is behind them.

But if you need to cut costs to remain competitive.. That is a race that goes in only one direction. Whether you have your successful business model figured out (like Shockey Monkey) or are just serving a wider market (like CloudBlock).. I hope there is a method to the madness.

And to answer the original question.. No, ExchangeDefender price is not going down. It’s going up. If that’s not for you, I understand and I got options. You can have Essentials for $1 or you can have CloudBlock Antivirus/Antispam for $0.35. Just remember that there is only one solution I stand behind, and while I will feel sorry for you when the 35 cent one doesn’t work out, I’ll only offer 35 cents worth of compassion. Now.. roll the vartruth video.

4 Responses to Opposing Business Models or Solution Variety?

  1. SeanPT says:

    Well, if your sales people would respond to e-mails and tweets and more e-mails and web forms about your products then sales may be better.

    Ya have my e-mail for this post, maybe send it along to them, ok?

  2. Vlad Mazek says:

    Sean,

    We don’t respond to non-partner contacts as a matter of policy. Too many end users try to bypass their service providers and go to us directly so if you aren’t in the partner program (the email you used here isn’t) that would be the place to start:

    http://www.ownwebnow.com/partners

  3. Glen R says:

    Vlad, good post.

    Right now, I don’t know of anyone that isn’t going through a process or project of making everything count, and I mean everything. Every little thing that costs anything has to be producing something measureable and tangible. The problem with security software is that it is preventing the possible, and isn’t producing something that creates money. Security software help the client from the possibility of loss productivity, etc, something that’s possible, but not something they can put in their books as an asset or something like that.

    That’s where I find myself, when the client mulls over the possibility of something happening, and of course I can play up the security breaches that are occurring lately but I also don’t want to give the client the idea I am a Chicken Little crackpot that will spend all of their money needlessly on something that may not happen.

    There are really only two companies I know of that don’t have stripped down versions of their products to be more affordable, and they are Mesa Boogie from California. Everything else has an economy version of some sort.

    We, and our customers all want the best, but what we want, and what we can afford and get by with are totally different. One CIO gave me a very interesting analogy. “We don’t need the Tux and Ferrari, we just need blue jeans and a greyhound”. She was right, and under her guidance she kept all of her staff in the IS dept.

    My advice (take it for what it is worth). Don’t treat your lesser priced offerings as sub-par. Make them something people WANT, make them great, and make them profitable. The more customers you have on your product (even the cheap ones) is customers that wont become part of the Postini army, and very dollar you keep from Postini is a victory to you right?

    Look at it this way to: this isn’t a custom made Paul Reed Smith Guitar, it’s not a one of a kind item that is skillfully crafted by a world leading guitar maker, it’s a commodity service. If you do it cheap, and do it reliably, then I am going to be able to sell it easier, and keep people on it. It’s just like the power company, I never say, man; Ameren keeps my lights on great! I get a bill once a month, and as long as I didn’t have a power outage, I pay it without calling their support line and complaining. I still then look at LED bulbs, sealing my windows, and every other way I can to lower that re-occurring bill.

    Anyhow my $.02

    Thanks for listening.

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