Add-on or Opt-out what works best?

Recently I have had a common question come up with lots of discussions that I have with Service Providers (this will help anyone building or delivering a service not just Service Providers). The question is aimed at how to productize a service, what get’s included and what gets excluded.

Unfortunately no simple answer to this question exists, as it really does depend. What does it depend on you may ask? Well it depends on what the service is that your offering or want to offer.

Service offerings that focus on providing a premium service or features to end users, may leverage an opt-out strategy, which reduces the cost. Service offerings that are in a competitive market will use the add-on approach to have the smaller more appetizing cost but with reduced service or features.

In a pure cloud market, your main service offering will be Infrastructure-as-a-Service. Various options for the add-on or opt-on features within a cloud market as additional “as-a-Service” offerings;

  • Backup as a Service
    • Add-On – Customers would opt to have VM’s backed up – may not be applicable if the VM is disposable and can be re-provisioned rapidly.
    • Opt-Out – The opt-out strategy would be aimed at production, business critical applications, Directory Services, Exchange etc. these services need backups and the customer has to decide what doesn’t get backed up.
  • Protection as a Service
    • Add-On – Customers would opt into having anti-malware services on their infrastructure, may not be applicable for VM’s that are in a trusted network or do not require agentless protection (if agentless is an option).
    • Opt-Out – Service Providers would deploy agentless technology across the platform by default for protection, customers would have to opt-out, generally if the customer has another preferred vendor.

In a Managed Service Provider market, where cloud isn’t the focus, services become the add-on & opt-out variants, some of these can also be applied to cloud offerings;

  • Customer Support (24×7, 8-5 & NBD)
    • Add-On – As with most hardware purchases, customers choose which level of support they require, some people may see this as a critical need, others are self sufficient and do not require support services.
    • Opt-Out – Opt’ing-out of particular levels of customer support is common within Managed Service Providers and determines what the customer wants/needs. This requirement is driven more by business requirements than the above add-on option.
  • Reporting
    • Add-On – Customers would opt to receive a monthly report showing them what infrastructure or services have been leveraged in the previous monthly.
    • Opt-Out – Customers would opt out of receiving reports if the data is not of value to them.

Looking over the above, the same or a similar response can be argued for both add-on and opt-out discussions. When helping customers package services, I recommend a premium or percentage cost is added if you are using an Add-On approach, where-as minimal cost reduction happens with Opt-Out options.

On average it costs more in time to process the add-on, than to remove a feature upfront. As service providers become more mature and start adopting automation and orchestration we will see the cost go the other way.

As the terms of cloud services are generally month-to-month, the numbers are much smaller, and service providers are becoming more competitive, I see in a trend in how differentiation is being demonstrated. Service Providers that share common service offerings (IaaS, BaaS etc) are leveraging services and skills/knowledge to differentiate.

When mixing a service offering with service’s you can start to build out a hybrid approach of add-on and opt-out which may help you stand out from the crowd. Spend considerable time on this piece as I have seen quite a few failures here, with large opportunities that service providers thought they had in the bag.

When deciding what sort of service or level of service offering to deliver, consider how you interact with the end user. If you do not interact with the customer then an Add-On approach is good, as it starts as a low entry level cost, helping you to attract more customers. If you are heavily engaged with the end user, an opt-out approach works far better as it simplifies the service offering, and most end users trust the provider to provide what they need.

 

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