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In this Executive Insights podcast, Jason Alley, Solutions Marketing, Interactive Intelligence, joins Jim Burton for a conversation about the Cloud market and the company's 2011 results.
Jim Burton: Welcome to UCStrategies Executive Insights. This is Jim Burton. I am joined today by Jason Alley. I need to stop here for a second. I know Jason’s father, Bob Alley. He is somebody I worked with years ago in the early days of CTI. I was telling Jason, who is with Interactive Intelligence by, the way, that as I was ready to make this introduction I was thinking of his father’s name rather than his. So Jason, welcome.
Jason Alley: Well, thank you. If my father could be here today, he would say thank you as well for the introduction.
Jim: Well, we’re at Meadowood Resort, which is about a half of a mile from where I live and he would be here and enjoying a glass of wine with us later, I am sure.
Jason: He would like that.
Jim: So, we are here today actually to talk about Interactive’s Cloud initiative. I have done several podcasts with Joe Staples on this and it’s an area that I really want to get an update from you because I know from other conversations I’ve had with the marketplace and with Interactive Intelligence that a lot of progress has been made. So, can you give us an update?
Jason: Absolutely, and actually, the timing is perfect. On Wednesday – that was February 1st – we announced our 2011 results. So, we have some figures that I think will help tell the story that we’re all excited about and certainly, with my focus being on the Cloud, I am excited about as well. We grew our Cloud revenues by 96% year over year. Cloud orders grew 179%, year over year, and we signed 42 new Cloud customers in 2011 as compared with 22 in 2010.
I think probably though what is most telling is the fact that 23% of our total orders were Cloud-based orders. So, what that’s showing is that the Cloud has become a very significant portion of our business overall. I think one other thing worth noting that has come from this information is that we’re making a lot of headway moving up-market, and specifically addressing very large accounts in the Cloud, specifically.
As an example, in our Q3 announcement we shared that we actually landed our largest deal ever, and it was a Cloud-based customer. It was a $10M deal across a five-year contract that was addressing 4,200 agents and with room to grow as well. As you can tell, we’re having tremendous success. We’re seeing the results, and we’re seeing the results in some very large accounts as we move up market. We feel we’ve established ourselves as a very significant player in the market, in this Cloud market.
Now our executive team is heavily focused on applying resources and focused this area of the business so that we can emerge as the clear leader in this particular space.
Jim: That’s great. I know in talking with Joe Staples in the past, he has indicated that you’ve done a great job as far as the large accounts. That was a little bit of a surprise. You thought the Cloud would be smaller customers and right out of the gate they were larger customers. But there obviously are a lot of things that are driving this growth. What are your thoughts on that?
Jason: That’s a great question. I think in general the Cloud market and the contact center and beyond is experiencing exceptional growth. So the market as a whole is growing significantly. We’ve shown some results that indicate that we’re growing faster than the market that we’re addressing. So we’re doing something right, so I’ve kind of sat back and listened to customers talk about why that is and done some analysis in this regard.
There are several factors, but one that I want to call out specifically is how we’ve been able to uniquely address concerns that many customers have had with moving their contact center to the Cloud, around the areas of security, reliability, and control. We’ve been able to address those concerns uniquely with a hybrid deployment model that’s had a tremendous amount of success, and we call it our local control model. And just to give a brief explanation about what that is, is essentially imagine a customer that operates in the premise world, everything lives on site. Well, with this hybrid model and the local control model, all of the voice infrastructure components continue to remain onsite, but the powerful applications server, the CIC or Customer Interactions Center server, resides up in the Cloud and is delivering services, leveraging those local voice infrastructure components. So the voice stream, all of the recordings, and all of the really sensitive customer information remains on the customer’s premise within their network. That’s allowed companies who were again hesitant to move to the Cloud for some time, the level of comfort and freedom to be able to do so, addressing their concerns in those areas adequately.
So, we think that is a key contributing factor, and if you look at the success we have had up market in the Cloud, that has been a key contributing factor.
Jim: Can you give me some examples of those types of customers? What a profile of a customer like that might be that’s looking for that type of a hybrid solution?
Jason: Yeah, absolutely. We talked about this earlier. Certainly, when I started to look at this market back in the early to mid-2000’s we really thought it was the small to mid-sized business that was best suited for the Cloud. And, as indicated, we’re seeing that actually companies that are very large in nature have significant brand and have large mission critical contact center operations are now leveraging this model to move to the Cloud.
So, that’s definitely one profile that fits the mold. As well, there are a lot of companies out there that have really stringent requirements around security, around compliance and with some regulatory concerns that by leveraging this hybrid model, are able to actually move to the Cloud and not jeopardize their business.
Just some examples of customers that are currently leveraging this model to do so: I think a great example is Philip’s Healthcare and their implementation across seven locations and five different countries, leveraging the local control model to run a global operation. I think that’s one example that’s effective. Another is Bright Point. You see these well known, large, global operations in addition to those that have these really unique and stringent requirements around security and compliance and regulatory concerns that are really gravitating towards this hybrid model.
Jim: Yeah, I can see some of these government regulations are going to be absolutely necessary for people to keep some of that information on site, so the hybrid approach makes a heck of a lot of sense. You know, you are not the only people in the Cloud business. I mean, there are a number of competitors. What are the several unique things you think give you that competitive edge?
Jason: That’s a great question. The hybrid model we just talked about is certainly one. But, there are three additional factors that I’ll talk about and share. The first is being an experienced and proven supplier, that’s delivering a Cloud offering based on the same application server – the CIC or Customer Interaction Server – platform that we’ve been delivering to customers in the premise world for years and been doing so successfully, and really are the only player that’s considered a leader in the global contacts center space that is fulfilling a Cloud-based offering and doing so real effectively. So, our experience and the proven nature of both our company and our platform is one unique advantage in addition to the hybrid model.
Another is our approach relative to how we deploy our application server. We leverage, take a multi-instance approach verses a multitenant approach. A lot of the economies of scale that were the promise of the Cloud, initially, and I know this certainly going back to the early to mid-2000’s, the thought was the multitenant architecture was going to allow for the economies to scale to make the Cloud attractive. There have been some technology enhancements specifically around the areas of virtual servers from companies like Microsoft and VMware and the like that have allowed companies that are providing Cloud solutions to take a different approach and to deploy each unique customer application server on its own separate virtual instance, keeping it separate from other customers and isolated which addresses some of the concerns that we talked about earlier. And, that’s the approach that we’ve taken. We’ve seen that customers are telling us that is a deployment mechanism that they feel is really strong in terms of their comfort level and moving to the Cloud. So, multi-instance verses multitenant.
The last I wanted to mention is the ability for customers to migrate from the Cloud to premised environment. And, it’s really a combination of our hybrid deployment and the multi instance approach that we take that makes it a very easy proposition to do so in a simple and cost-effective fashion.
As a little side note, what we’re seeing is customers actually leveraging that flexibility in new ways. Whenever you deploy an innovative technology or architecture, customers are going to test that out and look for new ways to leverage that, creative ways to implement. And, we’ve seen that in that customers are deploying in the Cloud as part of a phased deployment strategy for the premise-based deployments. So, while they fully intend to move to premise based environment, they are actually leveraging the Cloud as part of a phased deployment, which is an interesting side note that I thought was worth mentioning.
So – just to sum it up – the hybrid model, the experience and proven nature of the company and the platform, our multi-instance approach, and the freedom to be able to migrate from Cloud to premise and vice versa.
Jim: Well, now that you’ve been in the market for a while with this hosted service, it’s clear that there are probably some trends that you’ve observed that will help us understand where this market is headed. Do you have any thoughts there that you would share with us?
Jason: Absolutely. You know, some of the obvious trends are rapid growth and a move towards mainstream adoption. When I say mainstream, I don’t mean the majority of the market has moved to the Cloud, but mainstream-type customers. Customers with significant brand names, some of the larger, more mission critical deployments that we talked about earlier are now moving to the Cloud.
We also are hearing and seeing that customers are looking for suite-based solutions in the Cloud. This is something that we saw in the premise world for some time where customers were looking to move away from deploying point solutions and integrating them and having separate systems with separate administration environments and separate resources training on these different systems towards a suite-based approach.
That is certainly something we’ve been effective in addressing with the all-in-one approach in the premise world. But now, we’re seeing that the Cloud customers are finding it just as important where they may have dabbled with email or chat in the Cloud for their contact center operations, now they are looking for a full suite of solutions when they start to look at a Cloud-based offering.
The other trend that’s really playing into our favor is that we’re hearing and seeing as well that customers are preferring that the software provider themselves fulfill the Cloud-based offering. That doesn’t mean they still won’t, and we expect them to do business with the channel partners that they have for years, they continue to be important and even play a more important role. In some instances and in some respects it’s actually a more strategic relationship now. But the ultimate fulfillment coming from the supplier of the software is something that customers are preferring. We see that as a trend moving forward. And again, we’ve seen a mention of that in various analyst reports.
Then another trend is globalization. What we’re seeing is our customers as they start to implement within a certain region of the world, our experience and success with the Cloud model and then looking to extend that to global operations.
Actually, one area that we’ve invested significantly in over the last year has been expanding our data center operations throughout the world. We’ve opened up a data center in the UK and Australia, Japan, as well as Germany. We continue to look to expand because we’re seeing the opportunity is significant, not only in North America, but from a global perspective. So globalization is key.
Jim: That’s great. This has been very interesting. It was great to get this update. I found it fascinating that customers are looking for a suite solution from their vender. I think many of us who follow this market saw that those were available earlier. It’s interesting that now the customers are finally getting around to it. You know, I guess it’s because contact centers are such of strategic importance to these customers that they are not leaders in this area. They’re going to kind of wait and make sure things iron out and make sure it’s rock solid before they get around to implementing it. Let the rest of the enterprise try it first and slowing take it on as it’s becoming available.
Well, this has been fascinating. I think it’s time for us to go have lunch. If people listened in the background they may have heard a bunch of giggling and laughing. There is a lady sitting at a table near us that have already started enjoying their afternoon. Jason and I are going to go join them. So, Jason thanks a lot for your time today.
Jason: Thank you, Jim. It’s been an honor. Thank you.
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