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.

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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 👸

[UPDATE: We’ve had a lot of interest in the on-premise vs outsource debate so we’re updating this post with more information to provide some context on the pros and cons of both camps.]

Whether or not a business decides to go with on-premise infrastructure or outsource to email service providers for managing email streams is a critical long-term choice, and one to which there is no singular answer.  That choice depends on a number of factors, including the size of the business, the volume and frequency of sending, the need for data integration, data privacy, and the need for scalability. While you’ll hear voices on both sides advocate for one solution or another, the reality is that different solutions fit different requirements, and the choice comes down to balancing potential upside with cost and risk.

When looking at the upside comparisons, one might take a look at the findings of a survey published by David Daniels, CEO of The Relevancy Group and former VP / Principal Analyst of Forrester in September 2012. The survey explores the impact of technology deployment on marketing effectiveness.

While results of the survey favor the on-premise camp, there are some instances where outsourcing might work for your business.

The Argument For Outsourcing

Volume

Most businesses really begin enjoying significant cost savings with on-prem when they send 10 million messages a month or more. The 10 million mark isn’t a sharp line, but a decent ballpark figure. If you’re a start-up that is still growing a fledgling database of subscribers with a small email list, then chances are you’ll be pretty far off from the ten million messages a month benchmark. With a small team that is focused on the development of a core business product, start-ups or smaller enterprises might not have the technical resources in-house to really focus, fine-tune and reap the benefits of the on-premise marketing juggernaut of an email infrastructure.  When you move into high-value messaging, transactional messaging, or have complex data integration or stringent delivery SLA requirements, this guideline may well come down.

Creative Services

Running a tight ship and your marketing department is small? You might want to outsource to an email service provider that offers creative services: a one-stop shop for all your needs. Consolidating all production rather than relying on disparate contractors to first design, then code email is a time-saver and definitely a value-add that email service providers can deliver. With email service providers, a core value is not only the technological capability, but the array of creative services that comes in the packaged deal such as consultancy and production.

Business Model

Greater control and insight into the email process through on-prem can provide a boost in terms of deliverability, but perhaps that is not a core concern of your business. There could be a number of reasons why this is the case. Messaging your customer might not be business critical to your revenue stream. You might not have complex data integration needs for crafting your campaigns. Your sending volumes are manageable.

It all boils down to the issue of your business model. If you are heavily dependent on significant volumes of email to keep your business in the black, you should take another careful look at the on-prem option. However, if the upside potential from managing your own messaging in terms of the factors identified in the Daniel’s research does not justify the investment in building a center of excellence, then that is the clearest indicator that an outsource provider is right for you.

The Argument for On-Prem

The scalability, greater control and better deliverability that on-prem provides are critical factors for businesses that send huge volumes of emails, such as a daily deals site or e-retailers, where service offerings are presented to customers primarily through online channels such as emails. When email becomes a major source of revenue for a business and increasing deliverability just slightly can result in significant financial gains to the company, then it’s time to look at an on-premise infrastructure.

The argument for on-prem hedges mainly on:

  • The pure cost savings that sending in high volumes can present.
  • The control that it provides over data, which you would not be able to obtain immediately, and with ease through an outsource provider.
  • The factors outlined in David Daniels study. The question each business must ask here is if these factors are important enough to justify that spend on messaging infrastructure.

Cost

While outsourcing may be a quick-fix to resolving your issues with email in a start-up, when an organization grows to a certain size and begins pumping out email campaigns at high volume, costs, when working with an email service provider, can quickly escalate. In many businesses, a critical part of the workflow includes event-based mails and transactional notifications that ramp up the messaging volume, and corresponding prices too. In the process of evaluating whether on-prem is right for your business, there is simple math you can do to evaluate whether moving from a CPM-driven model to an owned-infrastructure model has a lower TCO (total cost of ownership). Making the switch to on-prem could lead to significant cost savings in the long run.

Control, Visibility & Integration

The story of on-prem is closely tied to that of the greater control it affords users. If your marketing department is large enough that you have in-house designers and in-house web developers, you’re probably comfortable with producing your own branded look and feel of an email. In fact, you probably want that flexibility to make your own tweaks to the template to better customize and personalize it for recipients. Access to such creative resources in-house severely diminishes a critical part of the value that many ESPs bring to the table.

When weighing your options from a cost perspective, it’s easy to say that on-prem is the way to go, if you flat out have a lower TCO when sending significant volumes. Visibility and integration aspects however, are more subtle, and may add value that makes sense to switch to on-prem, even if it is not a direct cost saving. If you are sending in high volumes, and deliverability is critical to the success of your organization as a whole, you will want immediate visibility into sending data that can help to optimize your campaigns. Additionally, visibility into recipient data will allow you to better understand the value of your customers, and help you improve the targeting and relevance of campaigns to increase the revenue gained per customer. From a technological perspective, it also facilitates the integration into other disparate systems.

It’s not that ESPs can’t provide visibility into your email stream and data – they can. But with an on-prem solution you’re going to have greater control over your email data, and you’ll have immediate access to it. Moreover, the Relevancy Group study we reference in our infographic shows clearly that on-premise marketers are able to leverage and integrate more disparate data than marketers using out-sourced email infrastructure. In other words, they are better able to use information such as customer purchase/transaction histories, web behavior and mobile marketing data to shape and optimize their email programs.

And the answer is…

Each business has differing needs when it comes to email. A general categorization is for businesses to look for an email service provider when sending in smaller volumes or seeking one-stop creative services, and to look towards on-premise when they need more sophisticated features to address the gaps in terms of deliverability and visibility.

If you are interested in finding more about on-premise and whether it is right for your business, we’re happy to do a thorough evaluation and address any questions you might have.

And for those that may not have the luxury of time to drill down to the nitty gritty details of David Daniels white paper, we’ve distilled the salient points into an infographic that summarizes the study results. Just remember that the benefits outlined are mostly experienced once a sender crosses a certain threshold in volume. Enjoy!

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