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Thought Leaders in Cloud Computing: Matthew Dornquast, CEO of Code42 (Part 4)

Posted on Saturday, Aug 16th 2014

Matthew Dornquast: That’s not enough. You have a database of consumers and you want to remind them that you have a business offering. You want to encourage them to participate in that. You need the connective tissue between your marketing systems and your enterprise sales force systems so that you will be able to recognize and measure the success rate of those efforts. There are other things that you can do. Enterprise sales force is armed with free consumer cards. When they talk to professionals they say, “Try us at home. It’s the same technology. If you like what you see, we have an enterprise dashboard for you that meet all your Chief Security Officer’s concerns.” It’s a great way to introduce them to a product in a frictionless way.

There are a number of other benefits to this consumer side of our company. One of them is when you’re solving problems at a global scale in a market where your target is free and instant, it shapes your product when you have a direct relationship with your end-users versus a traditional enterprise software company. If there is a bug, you’ll know it in real-time. If it’s hard to use, you’ll know it in real-time. If you’re not in the appropriate languages, you’re going to get that feedback in real-time.

For instance, when iPads were moving into the workforce from home, we knew about this way before people were talking about it, because we had it in the data. It was in our company. We had questions of use cases. It’s a direct relationship between people, their information, and us. There’s the scale. You’re giving something away for free. It has to scale not to a hundred thousand people, but to millions. You’ve got a global population using your product.

Let’s say you go to an enterprise company like Oracle. They start asking you all of the traditional enterprise questions like, “Does it work?” Serendipitously, if you’re taking care of the consumer, not only are they referencing you at work, but you’re proving yourself at scale and usability. You’re proving yourself ahead of time so that when it reaches the enterprise, it’s just a subset of this problem. You’re ready to go. I would contrast that to a traditional enterprise software company that builds a product for the enterprise sells it directly through the management infrastructure and doesn’t have a direct relationship with their employees. It’s a much harder deal to scale.

Sramana Mitra: The issue is how much investment it takes to build and maintain a significant consumer business that is essentially not generating revenues. All the monetization is happening on the business side. How do you justify the benefits of keeping that business whether it’s from a software testing point of view, usability point of view, or lead generation point of view?

Matthew Dornquast: What we chose to do is to make as much as we could for free for personal use that won’t incur significant capital expenditure on our part. Our free offering is limited to private cloud because that’s the least expensive for us to offer to them. Arguably, it’s also the most technically correct implementation of the system. It’s well aligned. Allowing them to manage and control their own information both physically and logically is less expensive for us, more secure for them, and it’s something that we can offer for free.

The other thing you can do, and all companies can do this, is while we chose to go as feature-complete as we could, you could always reserve a subset of features and offer that as an upsell. We do have substantial revenue from the consumer base in the form of upsell. For us, it’s not a feature-set upsell. It’s a storage upsell. For instance, you can protect and manage all of your personal information for free on your own devices and devices you have access to. But if you want to use our cloud to hold a high-availability copy of all of your information, then we’re going to ask for $5 a month. The $5 a month is enough to cover the entire cost of offering the consumer business. We run it as a break-even business. If we start making more money than it’s costing us, then we’ll invest it in marketing to grow.

This segment is part 4 in the series : Thought Leaders in Cloud Computing: Matthew Dornquast, CEO of Code42
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