session_2_lync partner economic opportunity forrester study - copy

© 2011 Forrester Research, Inc. Reproduction Prohibited1 © 2009 Forrester Research, Inc. Reproduction Prohibited

The Lync Business Opportunity For Partners

Michael SpeyerSenior ConsultantForrester ConsultingMonth Day, 2011

© 2011 Forrester Research, Inc. Reproduction Prohibited2

Agenda

Study purpose, methodology and summary findings

1000 seat Voice deployment: deal analysis

Revenue, expense and income analysis


What is a Partner Total Economic Impact study?

Business Value• Revenues• Margins

Business risk• More accuracy• Higher success

Total Economic Impact™

(TEI)

RISK

Revenues

Expenses

Flexibility“Options” created

• Base for future• Valued financially

Expenses• Startup• Ongoing


Due diligence: Review existing relevant Forrester research, consult with Forrester analysts. Interviews with Microsoft marketing, sales and partner management leads.

Partner interviews: Fourteen in-depth interviews with Microsoft partners

– 5 Global Sis– 9 National and Regional Sis– All interviewed partners had performed many OCS deployments, ranging from 200

– 10,000 seats

TEI methodology and approach

Construct financial model using TEI

framework

Write case study

Perform due diligence

Conduct partner

interviews

Formulate typical deal


Summary of findings

Economic impact of a 1000 seat full Lync deployment including Voice

One-time assessment, design and deployment revenues: $175,000 – Average gross margins + incentives: $84,253 (48%)

– 3-year ROI: 177%, breakeven period of 16 months

Support revenues: $84,000– Assumes managed services @ $7/seat/month

– Potential for annual recurring revenues

Observations about the more successful practices– Lync is usually part of a larger portfolio of Microsoft practice areas

– Services are packaged and offered as standard offerings

– Lync is used to ‘pull through’ other revenue opportunities e.g. hardware, software, managed services, telecom services.

– Sales and marketing efforts are focused (not random)


Evolution of Lync deals Lync (OCS) deal progression has typically been:

– IM/presence Conferencing Voice integration PBX replacement

The deal mix is evolving:– Yesterday: 90% IM/P, 10% voice

– Today: 75% IM/P, 25% voice

– Tomorrow (next 12 months): 50% IM/P, 50% voice

VoIP (IP phone/softphone, IP/PBX)

IP audio conferencing

0% 25% 50% 75% 100%

6%

13%

10%

22%

22%

25%

13%

12%

48%

24%

1%

4%

Not interested Interested but no plans Implemented, not expandingPlanning to implement Expanding/upgrading implementation Decreasing/removingDon’t know

Base: 353 voice purchasing decision makers in North American enterprises

“What are your firm’s plans to adopt the following landline voice technologies/services? “

Source: Forrester Research, “Networks And Telecommunications Survey, Q1 2010”


Agenda





Lync business opportunity framework

Workflow and Network Assessments

Pilots

Design and deployment

Support

Hardware resell and incentives

Staffing and training

Sales and marketing

Support systemsDemo lab

Custom app dev

Revenues and margins Expenses


Lync business opportunity – Assessment services

Assessment services include business productivity, workflow, business value (ROI).o Difficult to monetize, treat as pre-

sales activities

Network assessment services are critical to successful voice pilots and deployments.o $5,000 - $25,000 revenues

o 30% - 40% gross margins

o This is a ‘must-have’ service offering


Pilots


Support



Lync business opportunity - Pilots

“Pilots drive business !!!”o Successful pilots of the full stack

demonstrate Lync’s capabilities.

o Establish a toe-hold for future Lync voice expansion (the PBX / gateway integration is already done)

o Typical deployment scenarios are branch office, mobile worker or limited (250 seat) in-office.

o Breakeven to 10% gross margins


Pilots (voice)


Support



Lync business opportunity – Design and deploy

Bread and butter serviceo Design, deploy, acceptance testing

o Typically 50% - 70% of project revenue

o Revenues scale with project scope and complexity


o Knowledge transfer can be monetizedo Training

o Documentation


Pilots (voice)


Support



Lync business opportunity – Support services

Support offers significant revenues opportunitieso Voice buyers expect support

o Potential for long term, recurring revenue streams


Many flavors of supporto Short term, post deployment ($ for

hours)

o Maintenance (multiple blocks of hours)

o Remote managed services ($/seat/month)


Pilots (voice)


Support



Lync business opportunity – Hardware and software

Hardwareo Voice deployments need headsets,

desktop / conference phone, gateways etc.


o Establish relationships with hardware vendors / distributors

Software incentiveso Microsoft solution incentive on net

new license sales

o 10% - 20% incentives


Pilots (voice)


Support



, Revenues Gross Margins GM %

Assessment and pilots

Workflow / business value assessment services $3,000 $300 10%

Network assessment and readiness $16,000 $5,600 35%

Voice Proof of Concept $20,000 $2,000 10%

DeploymentDesign and deployment services $100,000 $38,000 38%

Training, knowledge transfer $36,000 $14,400 40%

Hardware and incentives

Hardware resell ~($256,950) $10,473 4%

Software incentive ~($264,900) $13,480 5%

Total one-time services, resell and incentives $175,000 $84,253 48%

Support (1 year’s revenue)

Option 1: Blocks of hours $30,000 $9,000 30%

OR

Option 2: Managed services @ $7/seat/month $84,000 $31,500 37.5%

Other Application development (Communications Enabled Business Process) $50,000 $20,000 40%

Lync revenue analysis – 1000 seats, all workloads (IM/P, conferencing, PBX replacement)


Risk factors and revenue variance

The market for Lync Voice is relatively new but buyer interest is increasing– Momentum is in your favor

Voice deals can take 3 – 6 months to close– IM/P and conferencing deals close faster (4 – 6 weeks)

– Must be able to sell to multiple decision makers (Voice, data/network, business)

– Potential for lower utilization rates for services professionals during ramp up

Overall project revenues may vary considerably – Project scope, complexity, type of Lync workloads

Revenues from network assessment s are highly variable– Driven by the state and complexity of the underlying network

– Network readiness offers additional revenue opportunities but requires highly specialized skill sets.

Must have a Voice support strategy– Voice has to be bullet-proof


Lync business opportunity – Staffing and training

Deployment professionalso Voice-specific expertise is essential

Sales, solutions architects

Support professionals

Training expense of $30,000+ at startup, excluding lost billable hours

Additional ongoing hiring and training expense commensurate with business growth


Sales and marketing


Custom app dev


Lync business opportunity – Sales and marketing

Marketingo Collateral, events etc.

o $20,000+ expense annually

o Packaged deliverable developmento Helps formalize services offerings

o Informs customers about what’s needed for different deployments


Sales and marketing


Custom app dev


Lync business opportunity – Optional investments

NOC and support staff are necessary for remote managed services offering– Capital investment+ recurring

expense

Build a demo lab to showcase your capabilities and Lync– Capital investment+ recurring

expense

Use custom app dev to differentiate– Service verticals

– Staffing expense

– Development risk


Sales and marketing


Custom app dev


Comment

Assumptions

Number of new hires 2 1x delivery professionals, 1x sales

Recruiting expense 25% of salary

Per person training cost $5000

Startup expenses

Recruiting expense and non-billable hours during ramp up $135,500 25% of salary recruiting expense

Training expense $15,000 2x new hires, 1x existing hire

Marketing $40,000

Total startup expense $192,500

Lync startup costs


Agenda





Lync can generate 177% ROI over 3 years and breakeven in 16 months

Startup Year 1 Year 2 Year 3

Number of deals 3 5 9

Total incremental revenues 525,000 1,177,000 2,095,000

Total gross margin 252,758 535,763 955,773

Total costs (192,500) (157,500) (165,000) (40,000)

Contribution to business (192,500) 95,258 370,763 915,773

3 Year ROI 177%

Breakeven 16 months


Interview insights: Best practices for developing a successful Lync practice

Network assessments and readiness are critical for successful Voice deployments

Voice pilots drive business– Limit their duration to push the customer forward

Training is critical– Must know Windows Server, Exchange, Lync

You must have support offers for Voice customers– Need an experienced Voice resource to solve the tricky challenges

– Consider establishing a managed services (MSP) practice. It offers recurring revenue streams

Be a one-stop-shop, to whatever extent possible– Create partnerships with hardware vendors


Michael Speyer+1 617.613.6349

[email protected]

www.forrester.com

Thank you

mailto:[email protected]


Appendix 1: 3 Year Lync P&L, all numbers Assumptions Startup Year 1 Year 2 Year 3

Number of deals 3 5 9

Revenues Professional services 175,000 525,000 875,000 1,575,000

Support (Managed services ) 84,000 252,000 420,000

Application development 50,000 50,000 100,000

Total incremental revenues 525,000 1,177,000 2,095,000

Gross Margins Professional services 60,300 180,900 301,500 542,700

Support (Managed services ) 30,000 - 94,500 157,500

Application development 20,000 - 20,000 40,000

Software incentive 40,440 67,400 121,320

Hardware resell 31,418 52,363 94,253

Total gross margin 252,758 535,763 955,773

Costs New hires 2 1 4 -

Recruiting, 6 month ramp up (137,500) (112,500) (110,000) -

Training 5,000 (15,000) (5,000) (15,000) -

Sales and Marketing (40,000) (40,000) (40,000) (40,000)

Total costs (192,500) (157,500) (165,000) (40,000)

Contribution to business (192,500) 95,258 370,763 915,773

3 Year ROI 177%

Breakeven 16 months

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