SAN FRANCISCO — These days, startups pushing software for collaboration fight for attention and customers. But some later-stage companies have found success in the sector, and representatives on hand at CloudBeat 2013 today shared a few strategies that have worked for them.
The freemium business model for software collaboration that many startups offer earned praise from panelists Kenny Van Zant, the chief operating officer of Asana, and Joan Vandermate, vice president of product marketing at Vidyo. “We power the video behind Google Hangouts,” Vandermate said. Exposing the video product to millions of people free of charge increases visibility, but it’s one of Vidyo’s many go-to-market methods, she said.
Freemium has shortcomings, though. It might not pencil out mathematically, at least at first. “If you subsidize the cost of 100 million free users … in line under marketing expenses, you may have your gross margin look very healthy, but it’s just accounting,” said Vineet Jain, the chief executive of Egnyte. He has managed to get his company’s file-sharing product into companies such as Ikea, Puma, and Yamaha and positioned the company for an exit.
Cisco, too, believes in giving away some products — take WebEx video conferencing software. “I actually do believe in freemium when you have 20,000 enterprise sellers and $50 billion in the bank,” said Rowan Trollope, the senior vice president and general manager of Cisco’s collaboration technology group. “I give WebEx away for free all day long, because I know that that drives usage and adoption.”
Use is critical, and it provides feedback data companies can use to improve their products, as Van Zant pointed out.
But it might not be enough to take on millions of customers who don’t pay a dime. Revenue needs to flow toward software companies. That’s where the channel comes in handy for Egnyte, Jain said. At Cisco, those 20,000 sellers can communicate directly to a company’s chief executive, chief marketing officer, or sales executive to communicate how the software will deliver outcomes they want, Trollope said.
In the end, a happy medium seemed to emerge: Collaboration-software providers that want to thrive might elect to deploy sales teams to talk with potential customers while also continuously iterating on a free version of its product. Or maybe there are other ways to succeed. In any case, it sounds like a tough market.