Blog Entry

May 30
2013 

Executives to Product Managers: “Show me the Money!”

I can tell you with first-hand experience that being a product manager is a tricky and thankless role!  On paper, your task is to understand customer needs and translate them into product requirements. You must then work closely with your R&D team to realize those requirements into a product that hits the market at the right time and at the right price.

Sounds simple, right? The reality is that its way more complex than that, with a myriad of decisions and trade-offs to make along the way.  Product managers have to  react to the realities of what is possible in the time and budget available, and constantly adapt to changing market conditions and competitive moves.

If I put a more hard-nosed definition of what it is to be a product manager, then I would argue that we ultimately have only one duty – to maximize the profit for the business I serve. Translation: To provide the best possible answer to management when they say “Show me the Money!” In order to do this, I must define a compelling product that is delivered to market on time, but it’s also absolutely imperative to devise and implement the optimal pricing strategy.

Pricing strategy has become increasingly more complex in recent years. Packaged on-premise software has been gradually replaced with electronic software download delivery model – a more efficient method of distribution for sure, but the change from physical delivery to electronic delivery didn’t impact pricing strategies. The transition we are experiencing now, where software is increasingly delivered as a service in the cloud, has much more profound implications and uncovers new opportunities. As we saw recently with Adobe’s decision to move completely to a cloud-based services model, more and more companies are looking to the cloud to fully monetize their software, and by leveraging the cloud, a wide variety of pricing strategies are potentially available, including monthly subscription, pay by use, pay by feature, by seat and/or any combination of these models.

As an industry, we’re still early on in the adoption of new ways to price cloud delivered services. The reality is that the model you might choose to employ today for cloud delivered services may not be the one that best resonates with customers and your bottom line. As competitors jostle for position in the cloud, quick adjustments need to be made to respond to new and innovative pricing strategies that had previously not been considered, pricing is in fact an art perfected over time.

This leads me to yet another product manager challenge: how do I convey all the requirements to my engineering team on how I want to do business today and in 12 months from now? Engineers desire requirements with little uncertainty. They like tight definition of the functionality they are being asked to deliver and the ways in which that functionality should be packaged for sale. To be fair, many have enough on their plates already just making sure the base code within their software can cope with a hosted, multi-tenant, scalable, secure, cloud based delivery model.  Engineers see potential uncertainty in the licensing requirements as a moving target, which can translate into delays as a revamp of the functionality and testing needs to happen prior to release.

With such uncertainty and an ever-changing landscape, the right answer must surely be then to do what you know best, and integrate existing platforms to give you the flexibility you require “under the hood”. Licensing is clearly one place where many software companies don’t have the expertise in house, especially in the cloud.  Here’s where a buy vs. build strategy makes a whole heap of sense. Every commercial software vendor will have to deal with the same types of licensing issues, and every vendor will want to experiment with differing go-to-market models. The underlying capability to be able to do that effectively and securely is essentially the same. What simpler decision can there be than to bring in specialist expertise and thousands of hours of R&D effort specifically focused in this particular field?

My fellow product managers, the next time you are asked by management to “show me the money”, here’s one slam dunk of a way to make sure you still can in the cloud.