The fundamental structures of B2C and B2B commerce are changing and converging. Products that never had services attached are now becoming services, subscriptions in effect. Consider the Dollar Shave Club, which has made razors for shaving a subscription product. You don’t buy a razor; you buy a subscription to get razors mailed to your house on a periodic basis. This is just one of many wild and crazy examples of Cloud Commerce.
In the world of software, Pay as You Go (e.g., subscriptions, freemium, etc.) have taken over as the Software as a Service model has become the dominant way to deliver software. But the simplicity of the early days of SaaS has given way to a world in which any combination of free trials (Salesforce.com), usage-based freemium models (Asana), tiered levels of services (wireless carriers), and data volume based pricing (Splunk) may be in play separately or in combination. These models are becoming more granular and complex as the needs of various customer niches are understood. Given the rapid digitization of value atop any goods (e.g., Nike+ atop shoes), this acceleration of both product cycles and the shift to pay as you go models is increasingly affecting all industries.
The need to target and personalize to smaller segments, coupled with the ability to transform pricing from an all you can eat entitlement into many different forms of pay-as-you-go-models has become fundamental to create and sustain longer term relationships. The increase complexity of each offer along with the far larger number of offers that will be active demands ease of use, simplified configuration, and increased automation.
On top of this comes other needs such as how to allow a channel to sell and service customers, how to build or take advantage of affiliate marketing networks, and how to perform A/B testing of offers to see which takes hold. Oh, and by the way, from day one, you will have customers around the world.
At CITO Research, we define Cloud Commerce as the systems and processes that are helping companies make the transition to the world just described. While it is easy to get lost in features and functions, the point of a Cloud Commerce system is to help support the needed experiments with business models that are required to thrive and survive. Cloud Commerce is a superset of the tactical commerce systems used to supporting the well-established simple transactional models that have been proven in the first generation of the Internet.
To be precise, the definition of Cloud Commerce is as follows:
Cloud Commerce consists of the processes and supporting systems used to reach customers across all the touch points (self-service, sales, marketing, support, social, etc.) for:
- Online eCommerce
- Channel Management (resellers, affiliates, marketplaces)
- Order Management
- Subscription Billing
- Global Payments and Tax Management
- Merchant services (risk /fraud management, customer support, global tax and compliance)
This CITO Research Mission is intended to help CITOs answer the following questions:
- How can CITOs define and understand the scope of business impact and opportunities around Cloud Commerce?
- How can CITOs lead their businesses to take advantage of Cloud Commerce?
- What is the scope of the complete business design problem involved in taking advantage of new opportunities for Cloud Commerce?
- What are the technology challenges CITOs will face?
- How will Cloud Commerce be integrated into the application and infrastructure landscape?
- What differentiation can be created by Cloud Commerce?
- What business metrics and processes can be transformed by Cloud Commerce?
At CITO Research, we believe this should be the golden age for CITOs who are seeking to become business leaders. The key to exercising leadership is to add a front office focus to the back office and technology expertise that most CITOs have well in hand. Cloud Commerce, in particular, is a shift of traditionally back-office capabilities that are now fundamentally needed in the front-office to help service customers at the expanding and increasingly customer-driven points of engagement. The simplest example is support, whether self-service or assisted service in your call center where a customer wants more than a trouble ticket, but to get their trial extended by a month, to check on their bill and either pay early, or give a 10% discount for the next 3 months to make up for a service issue. Now, imagine being able to do that consistently across the multiple touch points where your customers interact with you with offers tailored for each customer and context.
In the case of Cloud Commerce, CITOs should work with the executive team to ask the following questions:
- How can we use services to enhance our product offerings?
- How can we use this to change our relationship with our customers?
- How can we make our services more granular and targeted to customer niches?
- How can we think about the offer and delivery of digital value atop any products that we are selling?
- What new sorts of commercial terms can we offer to which segments?
- How can we use freemium offers, free trials, usage based pricing, and other e-commerce tactics to grow our business?
- Should we create a channel to help sell our products?
- How can we expand our existing reseller channels – protect our future revenue, make more money, reach new markets?
- Can we leverage affiliate marketing to expand alternative marketing and increase awareness on a performance basis?
- How can we acquire and support customers around the world?
- What are our competitors doing in these dimensions?
- How can we have consistent offerings, order taking and support across channels and touch points?
- How can we automate certain processes and connect currently siloed systems to meet customer’s requirements of real-time access to products, product usage, self-service or assisted support?
- How can we understand deferred revenue from recurring payments and forecast our revenues better?
- How can we understand our customer needs and usage more?
- What tools can we use that can help us increase average order value?
- How can we go to market faster with a limited budget?
- What are the B2B/ B2C converging needs?
The answers to these questions may lead to the identification of new business opportunities.
When a new business opportunity for Cloud Commerce has been identified, then a design process should begin. Of course, as with most new business initiatives, it pays to be suspicious of requirements and use an iterative process to confirm you are on the right track. On the other hand, it is also a mistake to forgo a comprehensive design process that seeks to assemble all information, understand the nature of the business and technology challenges, and then invent a new design that takes everything into account. At CITO Research, we believe that balancing the iterative approach of Agile methods with design practices that fit your organization’s needs produces the best results.
To set the stage for the design of Cloud Commerce business initiatives, consider the following questions:
- What goals are we seeking to achieve with our Cloud Commerce initiative?
- What customer experience changes are you trying to create?
- Who are the customers we are seeking and what are their needs?
- What alternatives do our customers have to our offerings?
- What products or services will meet our customers’ needs?
- Can we offer the needed products or services?
- How must our infrastructure change to offer the needed products and services?
- How must our business processes change to offer the needed products and services?
- How must our applications change to offer the needed products and services?
- What technology will we buy and what will we build?
- What is our marketing and sales strategy?
- What skills do we need to bring in-house to manage the experience?
- Who in the organization will own the end-to-end commerce experience by the customer, even as it crosses traditional channel boundaries?
- What other issues such as customer service, channel support, and others will be addressed?
- What is the minimum investment required to prove our strategy will be successful?
- What compliance, privacy, and data-related regulations apply?
- What is our staged plan for building from first steps to advanced capabilities?
This list of questions is just a start and will have to be expanded but it clearly sets the stage for a comprehensive design process that can then be implemented in a series of iterations. Our inspiration for a fully realized process for business design comes from Harold Hambrose’s ideas as set forth in his book “Wrench in the System.”
Implementing Cloud Commerce involves a wide range of business processes that are supported by many different applications. Increasingly, we find examples of vendors struggling to align various systems to try to deliver on some of the needs listed above. Each product offering requires a slightly different configuration, depending on whether they are configuring these components themselves, or using a Cloud Commerce provider to align these different systems for them. For example, a typical Cloud Commerce implementation would touch on each of the following applications:
- Sales Force Automation
- Customer Service – both assisted and self-service
- Lead Management
- Partner/Channel Management
- Subscription Billing
- Global Payments
- Order Management
- Order Fulfillment
- Tax Calculation and Management
- Master Data Management (customer, subscriptions, orders, etc.)
- ERP (Accounting / Financial, Inventory, Order Entry)
In most implementations, a new application for Cloud Commerce will be provided. That application will have to integrate with other related applications. The following questions will be crucial:
- What are the boundaries between systems that maximize needed flexibility, while minimizing total cost of ownership?
- What data will be provided to the Cloud Commerce system by each application?
- What data will be exclusively maintained in the Cloud Commerce system?
- What data will need to be synched between applications?
- What business processes will be supported by each application?
- What business processes will cross application boundaries?
- How will each business process be supported?
- Where will the applications be provisioned?
- What privacy and customer data regulations apply that will influence technology choices?
Again, this list of questions is just a start.
A wide variety of technologies could be used to support a complete Cloud Commerce solution. Here, in alphabetical order, is a list of the products that either deliver part or the whole of our vision of Cloud Commerce:
- Aria Systems
- Digital River
- Elastic Path
In further research, we will attempt to shed light on all the questions raised in this mission.