The ROI of Cloud Migration Is Real, and It’s Spectacular
In some circles, there’s still a tendency to talk about the cloud as an “emerging” design pattern and market for technology adoption. Well, don’t look now, but that “emerging” label expired some time ago. The cloud is already here in a major way. It’s time we collectively stop talking about cloud migration as an novel idea. Along with social, mobile, and analytics, the cloud is now a dominant presence in businesses’ technology adoption.
Just a couple numbers: In 2014, 69% of enterprises had either infrastructure or applications running in the cloud. In 2015, a quarter of all IT budget allocation went to sustaining and expanding cloud solutions. And today, the adoption of cloud-based infrastructure has approached or surpassed the 50% mark. Stats like those show that cloud migration has moved well beyond the early adopters and has hit the mainstream of business technology use.
Do figures like these apply to email delivery? (Spoiler: yes!) The cloud migration pattern is just as true for email delivery as it is for martech, CRM, and other markets known for early moves to the cloud.
Wondering why? When we spoke with customers who decided to move off of an internal messaging stack for the cloud, we repeatedly heard what anyone who deals with marketing and transactional email already knows. Sending email at scale isn’t easy, and shifting it to the cloud improves flexibility while also relieving businesses of significant overhead and opportunity costs. Here are three themes we heard:
Cloud migration means “We can focus on building our business applications and services—not becoming messaging experts.”
When a company has achieved scale, the difficulty of maintaining a complex messaging stack goes up dramatically. Failure in that stack, especially for companies whose revenue is highly seasonal, could be catastrophic. (For example, see the crisis faced by formerly soaring e-retailer Zulily when their email delivery infrastructure collapsed in the midst of the peak-shopping season.) When maintaining in-house infrastructure, any disruption—from minor changes to major outages—is likely to cause friction in the IT system by pulling engineers, sysadmins, and other technical personnel to address the problem. Most companies would rather focus their technical efforts on developing their own technology and supporting applications and infrastructure that deliver unique competitive advantage, not on operational issues like managing email in transit.
“Scaling and growing email is extremely expensive and disruptive to ongoing normal operations.”
A company experiencing tremendous growth will realize far greater benefits by focusing and managing their continuing business growth rather than investing enough money to scale their email provide redundancy for email-at-scale, deal with increased bandwidth costs, assigning more technical resources to the project, procuring servers, and ensuring stability. These functions can all be outsourced far more cost-effectively to a provider who knows serious email inside and out. The cloud’s elasticity allows companies not only to scale and keep pace with growth, but also to have on-demand burst capacity available whenever it’s needed and guaranteed through SLAs. The only way to achieve this in the past was to overbuy hardware, bandwidth, software licenses, and development time—and then to have it sit idle just in case it was needed. That underutilization is a very inefficient use of resources.
“Email deliverability is a highly specialized and expensive skill set in short supply on the open market.”
Ensuring the ongoing success of marketing email programs and critical transactional message streams alike requires the constant attention and operational expertise of email deliverability personnel. Deliverability staff monitor, configure, consult on best practices, triage in times of crisis, and remediate deliverability failures that are bound to arise during the normal course of messaging operations. These highly skilled professionals help companies navigate a complex landscape of varied privacy laws, bounce codes, blacklists, and other highly email-centric nuances that can prevent revenue loss and improve customer engagement by ensuring the timely delivery of email to the inbox.
Ultimately, the cloud has created new financial incentives that are improving its adoption, and pay-as-you-go models have encouraged rapid evolution, adoption, experimentation, creativity and testing. Freemium pricing (like SparkPost’s 100,000 free emails per month plan) encourage businesses to innovate and to take platforms in ways we’ve never dreamed.
Cost savings and innovation? Yes please. ROI like this makes it clear why cloud migration has become such a key part of the plan for all sorts of businesses.
P.S. Want to learn more about the bottom-line benefit of cloud migration? Check out “Why the Cloud Wins,” our real-world analysis of why a business that sends 750 million emails a year can save up to 40% by migrating their email infrastructure the cloud.
As our CTO Alec Peterson wrote on the blog last week, this is an interesting time in the transactional ESP market. Mandrill (operated by MailChimp) recently announced that they were eliminating their stand-alone offering and instead will be incorporated as an add-on feature of MailChimp’s paid, flagship email marketing service.
We have a lot of respect for MailChimp. They’re a great company, and we admire the work they do making full-service email marketing accessible to all kinds of customers. We also understand what their CEO said in his announcement letter about a “fit” issue with the Mandrill product. Transactional email isn’t the business they’re in.
This sort of change always is a hard decision for a company to make. Understanding that not all of Mandrill’s customers have a need for the full-service offering, MailChimp is recommending SparkPost as a Mandrill alternative for developers looking for a transactional email provider.
In fact, SparkPost announced last week a previously-planned change to our pricing structure, notably increasing our free tier to 100,000 free emails per month (as well as incredibly cost-effective rates for higher message volumes). I’m really excited about this pricing model. It’s a win for our customers, and it’s a win for our business model.
These pricing plans mean that SparkPost is matching (and even beating) the rates Mandrill customers have been paying. That’s really good news. But I want to make a further commitment to you today: should the terms of our free tier of pricing ever change in the future, I promise we will nevertheless honor it for any customer currently enrolled at that tier, for the life of that account.
And for anyone who wonders if it’s really possible for SparkPost to keep this promise, the answer, unequivocally, is yes. In his post last week, Alec explained why. I agree with his analysis one-hundred percent.
Giving developers the tools to do great things with transactional email is hard-wired in our DNA. It’s who we are, and our love for developers runs deep—most of us here are developers (or in my case, former developers) ourselves! I’m proud of how our team at SparkPost has risen to the occasion to support the Mandrill developer community, and I’m thrilled we’ve also gotten the pricing part of that right.
Whether you take us up on our 100K free emails per month plan, or a paid level of service, we’d really like to have you as a customer. I look forward to working together to build something awesome.
Hi. I’m Alec Peterson, the CTO at SparkPost. I’ve been building large-scale email infrastructure for a long time—in fact, I’ve been a member of the leadership team here for 10 years. I love this business, and I know how important getting it right is to our customers, including the developers who do such amazing work with our service.
The last few days have been interesting ones in the transactional ESP market. Mandrill (operated by MailChimp) announced that they were making major changes to their offering, including ending their free tier. Shortly afterwards, SparkPost announced a previously-planned change to our pricing structure, notably increasing our free tier to 100k free emails per month.
While we’ve been absolutely thrilled with the response, we did hear from a couple folks who questioned whether it’s really possible for SparkPost to sustainably offer such a significant free tier. The answer, unequivocally, is yes. I’d like to provide a few details on why we can do it, and why SparkPost is uniquely suited to offer this level of free service.
There are a few things that are important to understand about how we do things at SparkPost. Our history is not only in email infrastructure, but also in delivering the highest performance (meaning most efficient) email infrastructure on the planet. That’s not hyperbole. Before we were SparkPost, we were (and, in fact, still are) Message Systems, the leader in on-premises email infrastructure.
Our customers are the most demanding high-volume senders on the planet. We have several on-premises customers who individually send more email than the entire transactional ESP market combined, and they do so using the Momentum platform on just a couple dozen of servers. To service those customers, we’ve had to push the envelope in terms of performance for the entire existence of our company. In other words, building and optimizing email infrastructure that outperforms anything else on the planet is something that we always have done as an organization. And we’re really good at it.
The fact that our cloud infrastructure is built around the de-facto standard for high-performance email is an undeniably powerful position to be in, making all sorts of things possible. Like, for example, offering 100k emails per month for free.
Our deep experience, however, is only part of the story. We’ve also built a remarkable cloud architecture for our service. When we architected SparkPost, we made a strategic decision to build it upon cloud-based, fully virtualized infrastructure, notably Amazon Web Services (AWS). By leveraging AWS, we’re able to forego worrying about managing our own physical plant with buildings, cages, man-traps, security guards, power, generators, UPSs, racks, servers, spare parts, networks, switches and various transit providers. You get the picture. But just as importantly, we have virtually instantaneous access to as much burst capacity as we could ever need—whenever we need it. And what’s more, when we aren’t sending bursting traffic, that elastic capacity goes away and we stop paying for it. That’s the best of both worlds: virtually unlimited capacity, combined with a highly efficient cost model.
Of course, even the most efficient business can’t run without revenue. And while the free plan we just introduced is a great fit for some senders, we also know that for businesses who need a dedicated IP address, or who need to burst beyond 100k/month, one of our paid service tiers is a better solution. In fact, when we crunch the numbers, our conversion percentages and analysis of customer volume overall tell us that we’re making a really sound business decision. Far from being a threat to our business, the 100k/month free plan is, in fact, a business driver that combines a great long-term option for some senders with a fantastic upgrade path for customers looking to grow their email presence even further.
By the way, I want to also point out that we are not in the business of selling data, and do not ever plan to be. We take privacy really seriously. Respecting it is one of our core principles. We understand that a natural reaction to a generous freemium offer is to assume the provider is selling data to outside parties. However, that’s not the case here, and you have our commitment we will not do this. Not now, not ever.
Our business at SparkPost is email infrastructure. We think MailChimp is a great company, and we have a ton of respect for them and the work they do. We also understand and believe what their CEO said in their announcement letter about a “fit” issue with the Mandrill product. Transactional email isn’t the business they’re in. But it’s the fundamental core of our business, and we’re here for the long haul.
Check us out! Whether you take us up on the 100k free emails per month plan, or a paid plan, we’d really like to have you. Our love for developers runs deep. I think you’ll be impressed.
Every day when I pick up my kids from school, I ask them what they’ve learned that day. They proceed to tell me what they did—in class, after school, what they had for lunch, who they played with at recess. But getting them to articulate what they learned is a lot harder. So in the spirit of setting an example, I thought I’d report on what I learned this year as a product manager for SparkPost.
First, let me back up: it’s been a year of remarkable change and growth for our company. We made the leap from our origins as an established, packaged software vendor to a software-as-a-service operation. We architected an entirely virtualized, cloud-based infrastructure. We built and launched our core SparkPost offering. We expanded upon that foundation to introduce the SparkPost Elite service with dedicated instances and service level agreements to suit the world’s most demanding senders. We built out a world-class operations, deliverability, and customer success team. And, we changed our brand from Message Systems to SparkPost to better reflect all of these changes.
But those are things that we did. What did we learn? Here are four lessons about doing business in the cloud that really hit home for me this year.
- Offering a cloud service means more than engineering a technology stack. It requires a deep understanding of how customers actually integrate technology into their business processes. It also means publicly staking a claim with the right product/market fit and countering a new group of competitors. All in the open.
- Another key lesson for us at SparkPost has been just how critically important it is to reduce friction throughout the customer lifecycle, from selling to onboarding to daily ease-of-use and support. In plain language: the cloud means we need, more than ever, to make it easy for customers do business with us. In our market of high-volume, high-value email, we want to make it drop-dead easy for legitimate senders, while freezing out spammers and phishers. Ultimately, dealing with the bad guys in the email world is where our rock-star compliance and deliverability teams give us a real competitive advantage. But as a product manager, I can assure you that it takes a lot attention to detail to get that balance just right.
- The cloud changes everything, including the business model. If you’ve spent any time in the traditional software industry, you know how big, perpetual license deals are the name of the game. But there’s a reason why the business model for cloud businesses is called “software-as-a-service.” Services aren’t a one-and-done deal; instead, our accountants report recurring revenue as the primary metric for our shareholders. For customers, that’s good news: less up-front capital expenditures, more bite-sized spending, and a real incentive for the company—that’s us—to keep customers happy and earn that recurring revenue.
- And this brings me to the thing I think about every day of the year. Of course I want to develop a product that has the most compelling features in the industry. Of course I want to see my product beat out competitors on the biggest deals. But the discipline that the recurring revenue model enforces on us means that customer retention (and that really means customer satisfaction) is simply crucial. To be frank, the same simplicity that makes the cloud so compelling also makes it pretty easy for a customer to switch to a new service provider. So, that means that I am always working to make SparkPost better-performing, easier to use, cost-effective, and a step ahead of my competitors in all the ways that matter to our customers, including email deliverability.
That last lesson is the most important thing any company needs to remember, and doing business in the cloud simply makes it all the more obvious. So, what I learned in 2015 (and will keep focused on for 2016) really is a reminder of what I and my colleagues have always believed: keeping our customers happy is the key to our success. It’s not the technology, and it’s not the marketing, or anything else except you. So a heart-felt thank you from all of us at SparkPost and from me personally. I’m looking forward to an awesome 2016.
—Irina, Cloud Queen 👸