Transcript for Joe Staples Talks About the Cloud
Jim Burton: Welcome to UCStrategies Executive Insights. This is Jim Burton and I’m joined today by Joe Staples, Chief Marketing Officer for Interactive Intelligence, welcome Joe.
Joe Staples: Thank you very much.
Jim Burton: Joe, I’d like to talk to you today about cloud-based communications. I know that Interactive Intelligence has been in this market for quite a number of years, can you give us a background about how long you have been in this space?
Joe Staples: We launched our cloud-based contact center product probably five or six years ago and saw some early interest but it’s really been in the last 18 months that things have really taken off in that space for us.
Jim Burton: What kind of customers are you seeing, because whenever I think of cloud-based services, I always think that it’s going to be the SMB market that’s going to take advantage of this first. What kind of things are you seeing?
Joe Staples: And I think we thought the same thing. As we went into this we said, you know, this makes sense for smaller organizations that don’t have the IT resources to be able to manage a communication system in-house, and so pushing it out to the cloud makes sense for them. We’ve seen much bigger customers. We probably haven’t seen that much business down at the low end but instead, what we’ve seen are multi-national companies, hundreds or even thousands of total users that are looking at a solution and saying, “you know what, we don’t want to mess with all of the IT, infrastructure, and management. Instead, we’re going to hand that off to a third party provider.” We’ve seen a lot of large companies go this direction.
Jim Burton: What do you think the primary drivers are to attract these large companies? They all have the resources to do whatever they want and they usually are more than happy to spend money to get the best of breed. So what’s driving them to go to these types of solutions?
Joe Staples: You know, I think it’s changed a little bit, even in the last 18 months. Initially, the real spark we saw was around the financials. Instead of capital expense, instead of writing a big check to purchase a system, they looked at cloud-based offerings and said, I can use operating expenses and pay per-user per-month. That’s still a driver but it’s clearly not the only one. So things like less IT resources, being able to essentially focus on whatever their business is, if they’re in the mortgage business or the insurance business, focusing on that instead of on IT. Flexibility, being able to add and subtract users as they need to based on the nature of their business, the ability to get access to new features and functionality earlier on, quicker time of deployment to get up and running. I think all of those things are contributing to the growth that we’re seeing in this space.
Jim Burton: You mentioned flexibility and size as being one of those flexible factors. Are you able to help companies that have seasonable business to be able to grow and then cut back and make it economical for them?
Joe Staples: We are, so if you think of the premise based model, you essentially buy a user license and if you have staff for the peak of your business, you’ve got some of those licenses that are just sitting idle. In a cloud-based model, we’re able to structure something that adapts to seasonality of businesses, allows them to add and subtract or contract the numbers of users that they are actually paying for. So it’s pay for what you’re using versus having to make those decisions up-front and then just live with the results afterwards.
Jim Burton: Do you see this as just a continuing growth? Do you see this going on for some time and do you see the market migrating that way?
Joe Staples: I don’t know what the growth figures will be, but we’re certainly not seeing any slowdown in our cloud-based business. We’re actually seeing a lot of deals in play where companies have strategically decided that they’re going to migrate things to the cloud. And so at least for the foreseeable future, it certainly looks like a trend. It doesn’t look like any kind of a short blip on the radar but really a trend of a migration from premise to cloud. One of the big debates that we have, and we kind of picked the brains of a number of analysts, is how much of this will actually shift to the cloud. And those numbers are all over the place. I heard one last week that projected 12% would get moved over to the cloud. We’ve got another one that predicted the number would be 60 to 70%. There’s a lot of disparity between those two.
Jim Burton: Yeah there is, and it’s almost like the people who look back at the old Centrix model and say, you know that was always around 10% of the market. I am actually a believer that the number is going to be fairly significant. And as we know, all the major vendors are investing heavily in cloud. IBM, Microsoft, Cisco, they are all investing in cloud because they think that is the direction that the market wants to go. One of the things that always concerns me about changes to what really ends up being a business model, is distribution. Distribution has been typically used to a large sale, collecting a big amount of money up-front, distributing it accordingly to compensate their employees. With a cloud-based service where it’s on an as-you-go basis, it’s a monthly type of rental and that’s the type of thing that makes it very difficult for the channel to deal with because they have to really change their business model from those big chunks of money to ongoing payments. It’s almost like an insurance agent who builds an annuity and does quite well, but starting off is very difficult for them. Are you seeing that kind of challenge with your channel?
Joe Staples: Absolutely. I think you’ve really hit on a key point and sorting out and putting together a program for a channel is going to be a key factor to overall success. But the same way the channel has to adapt, we have had to as well. You know, we were always a premise-based solution provider. We were used to being able to report revenue as the deal was sold. Now we get to report that revenue on a monthly basis. So the nice thing is it’s not an overnight shift. We, nor the channel, have to look at a business model that says today everything is premise and tomorrow everything is in the cloud. It’s going to take time and as it shifts. I think those successful channel partners will be the ones that say, “wow—this may be something that causes me to change my near-term thinking.” But long-term, if they can build a recurring revenue stream where they’re not having to actually go out and look for that new business every single month to bring cash in the door, but instead have generated this recurring revenue stream, almost an annuity with their cloud-based customers that continues to pay, the long-term value of the channel partner’s business, in the same way as the long-term value of our business, is actually going to be greater.
Jim Burton: I agree, and I’m very bullish on cloud for multiple types of applications, everywhere in our communications market. And I’ve got to say that this just shows again how innovative Interactive Intelligence has been. We all know that through the years you’ve come up with things well in advance. Some of your CEBP capabilities are well in advance of any of your competition. In fact, some of them are just getting started and you’ve had a product out there as I recall, for about 18 months. And having cloud services out there for five years, again it just shows the innovation that Interactive Intelligence has, so what’s next?
Joe Staples: Oh, there are a lot of cool things in the hopper. We’ve got version 4.0 of our flagship CIC product coming out. It will include some great real-time speech analytics; it’ll include some enhancements that really push up the scalability of the product, some enhancements that improve reliability. We are also doing some creative work in the area of content management where it doesn’t really matter if it’s a document or a voice recording, anything that’s content related, and being able to provide access at a blinding speed to agents so they can better satisfy their customers. So we’ve really got some neat things coming. You know, our CEO, Don Brown, is constantly looking at how we can improve the experience of our customers’ customers, and how we can use technology to their advantage. And he just continues to drive that vision and does a great job.
Jim Burton: Yes he does, and you are all being rewarded with your stock price. Your stock continues to grow pretty rapidly here over the last couple of years so congratulations on that.
Joe Staples: Thanks, and you know, revisiting back to the cloud point, I think one other thing that we’ve seen as we’ve gone out and talked to customers…well two key points. First, thank you Salesforce.com for paving the way on cloud-based computing. We’ve found that as Salesforc.com (RightNow is another one) has forged the way with a cloud-based model, we have been able to come in and say, “Wow, if that works so well for you for computing, let’s consider it for communications.” Those customers are so much more open to looking at this as an alternative. So that’s really been something that we’ve been able to benefit from.
The second key point is the fact that having a premise-based offering and a cloud-based offering allows us to compete a little bit differently than those that are pure cloud because essentially what we provide is a nice safety net for the decision maker. If at any time the business model changes, for whatever reason, they say, “we want to switch, we want to take what we’ve been doing in the clouds and we want to bring it in house.” That’s a very easy transition for us to make. We do everything with virtual machines. We can actually take an image of that virtual machine and drop it on-site and make the shift that way. So it provides a nice safety net and a nice balance between the way they’re going to make decisions.
Jim Burton: Wow, that’s extremely powerful. Do you have a unique relationship with Salesforce.com, a special type?
Joe Staples: I probably wouldn’t call it unique but we have a close relationship with them. We’ve done a very nice integration with their product, we were a gold sponsor at Dreamforce this past December, we worked with them closely at a field level in developing and cultivating sales opportunities, joint sales opportunities. So, they are a really nice partner as is RightNow Technologies – again, a cloud-based offering that is very elegant in what it’s able to accomplish and then add in the communication piece that we deliver, and it makes a real nice complete solution.
Jim Burton: Well that’s great. Joe it’s always a pleasure to catch up with you and again, best of luck at Interactive Intelligence. Continue that innovation, I know the market’s looking for it.
Joe Staples: Thanks Jim, a pleasure.