AppDirect Business Case (MSP)

SECTION 5:
AppMarket
Business Case
Please Note: The following section includes
illustrative sample business case analysis.
Rogers, Award Winners
at AppDirect Engage 2016

SECTION 5: APPMARKET BUSINESS CASE
65acmebusiness.byappdirect.comYour Cloud Marketplace & Management Service
Thinking about your business case
for selling cloud applications depends
on your customer maturity matrix
Your
Risk
Profile
Time
Cost
Complexity
OCM
High
High
Low
Low Your Cloud Business Maturity
Number of Customers, Revenue and Transactions Impacted
Your business case is placed into one of three categories based on
INTERNAL GOVERNANCE and GO-TO-MARKET STRATEGY,
which can evolve over time with your business.
Success on
the Platform scales
with you and your
customers
SaaS
LAUNCH SCALE OPTIMIZE

Your governance and go-to-market readiness
determines the tech configuration needed
for your given cloud business maturity
EXTERNAL:
GO-TO-MARKET (GTM)
ASSESMENT
EXISTING CLOUD CAPABILITIES:
• Do you sell cloud services?
CUSTOMER BASE:
• How many business customers do you have?
• How many employees does your average
customer have?
• What is your ARPU(C)?
• What is your current churn rate?
GTM CHANNELS:
• Do you plan on selling cloud through your website?
• Do you plan on bundling with core?
• Do you plan on activating your sales teams?
• Do you plan on using a reseller/dealer network?
TIMELINE / LAUNCH DATE:
• When do you plan to launch your offering?
TECHNOLOGY: MINIMUM VIABLE PRODUCT
MVP FOR PHASE 1:
AppDirect platform based on your business goals and needs
INTERNAL:
GOVERNANCE
ALIGNMENT
EXECUTIVE SPONSORS:
• Does the initiative have a senior executive
leading or sponsoring it?
CORE TEAM MEMBERS:
• Is the sales team incentivized to sell cloud services?
• Does the marketing team have budget for
this initiative?
• Does the IT team have bandwidth to complete
the integrations?
• Has the product team engaged with customers to
ensure willingness to buy cloud through your brand?
ADDITIONAL STAKEHOLDERS:
• Any other stakeholders involved in the decision
making process?
CLOUD BUSINESS MATURITY

Your internal governance and
go-to-market strategy also determine
your business case profile
HIGH CASEMID CASELOW CASE
KEEP UP WITH
MARKET PERCEPTION
NEW LINE
OF BUSINESS
REDEFINE
YOUR CORE BUSINESS
Sales teams not trained or
incentivized to sell cloud services.
Product and Marketing have not
assessed cloud product/market fit and
do not have budget.
Support teams are not trained to
handle cloud services.
IT not aligned with technical best
practices.
Sales alignment in place to
drive cloud sales
Product and Marketing
to support sales
Support teams familiar
with offerings and can
provide basic support
IT has budget to implement
some “technical” best practices
from the GTM playbook
Sales compensation in place
to drive cloud sales
Product and Marketing
alignment to innovate
on promotions, bundles,
packages, etc.
Support teams properly
trained and aligned to
support and suggest
complementary solutions
IT has budget and plans to
implement all enabling
“technical” best practices from
the GTM playbook

Combining your cloud business maturity
status with your business case profile
allows us to project your cloud ROI
Your
Risk
Profile
Time
Cost
Complexity
OCM
High
High
Low
Low Your Cloud Business Maturity
Number of Customers, Revenue and Transactions Impacted
Success on
the Platform scales
with you and your
customers
SaaS
LAUNCH SCALE OPTIMIZE
HIGH CASE
MID CASE
LOW CASE

Page title/introduction goes here. We have
room for up to three lines. Lorem ipsum
dolor sit amet.
Next slides showcase an illustrative
business case done by AppDirect
for a MSP with 1,500 SMBs with
an average SMB size ~35 Employees.
NEXT STEPS:
Call AppDirect if you would like
to build your custom business case.

acmebusiness.byappdirect.comYour Cloud Marketplace & Management Service
Fail to implement enabling
the GTM playbook.
Implement 4-5 enabling
the GTM playbook.
Implement 4-5 enabling
the GTM playbook.
SECTION 5: APPMARKET BUSINESS CASE ILLUSTRATIVE EXAMPLE
70
Financial model outlines three scenarios based
on implementation of marketplace best practices
and existing customer base of 1500 SMBs
HIGH CASEMID CASELOW CASE
LOW REVENUE
WITH LOW ROI
NEW LINE OF BUSINESS
WITH HIGH ROI
REDEFINE
YOUR CORE BUSINESS
Invest in marketing campaigns
targeting existing customers
• Email and mailer
• Digital retargeting
• Discount promotions
• Telemarketing
Invest in marketing campaigns
targeting existing customers
• Email and mailer
• Digital retargeting
• Discount promotions
• Telemarketing
Marketing campaigns targeting
existing and new customers
• Mid Case campaigns
• SEO/SEM
• TV ads
• Billboards
Exceed “business”
best practices
• Leading brand anchor tenant
• Bundle core with multi-app
discounted long-term deals
• Industry leading support
and sales teams
Implement “business”
practices
• Sell an anchor tenant
• Sell bundles
• Train and launch support
and sales team
Achieve some “business”
best practices
• Establish anchor tenant
• Create bundles
• Launch support team
~$17M2020 ANNUAL GROSS
REVENUE GAIN
REVENUE GAIN
REVENUE GAIN

Assumptions driving the three cases
come from actual market data from a
sample of AppDirect powered marketplaces
71
ILLUSTRATIVE EXAMPLE
‘TECHNICAL’ AND ‘BUSINESS’ BEST PRACTICES CRITERIA FROM GTM PLAYBOOK
EXPECTED MONTHLY REVENUE GROWTH RATE BASED ON
BEST PRACTICES COMPLETION & EXCELLENCE:
BUSINESS
Anchor Service: Cross-sell a leading 3rd party service or add-ons
that integrate to your core offering.
Bundles: Package marketplace apps with core services and contracts.
Assisted Sales: Enable your sales team with the right tools and align
them with incentives.
Human Element: Offer premium tech support to assist with activation,
onboarding and ongoing help.
Targeted Marketing Campaigns: Market your cloud service offerings
to your existing customer base through highly targeted campaigns
with discounted offerings.
TECHNICAL
Platform integrations:
Integrate your marketplace
to unify service delivery
with existing backend
systems by completing at
least 3 of following: Identity,
Billing, CRM, Core Site, Core
Product integrations.
Number of best practices implemented
COMPOUNDED MONTHLY REVENUE GROWTH RATE
OF APPDIRECT-POWERED MARKETPLACES
Based on results from marketplaces
that did not complete best practices
other than marketing campaigns.
LOW CASE
Based on data from marketplaces
that completed the best practices.
MID CASE
Based on data from marketplaces
that not only completed, but
also drove the best demonstrate
results from the practices.
HIGH CASE
Marketing +1 +2
17%
21%
31%
56%
+1767%
12%
3%
+3 >4 BDP
60%
13%
0
20
40

Revenue sources driven by
9 Key Performance Indicators (KPIs)
72
*All-in Seat Price – average amount of monthly recurring revenue / the number of seats
AISP* growth from CROSS-SELLING marketplace
cloud services driven by 7 KPIs
KPI Drivers Outputs Inputs
Existing
Customer Base
Conversion Rate
to Marketplace
Visitor
New Monthly
Customers
Conversion Rate
to Marketplace
Visitor
Unique
Marketplace
Visitors
Marketplace
Sales Conversion
Rate
# of Paid
Subscribers
[SMBs]
Subscriptions
/ Subscriber
[SMBs]
Seats /
Subscription
Price / Seat
New Monthly
Marketplace
Revenue
Monthly Churn
Rate
Last Month
Marketplace
Revenue
Net New
Marketplace
Revenue
x
x
x x
x
x
x
-
2
1
3 4
5
6
7

Key Performance Indicator achievement
levels drive the revenue projection
case differences
73
KEY PERFORMANCE
INDICATORS
LOW CASE MID CASE HIGH CASE
Existing customers
monthly conversion rate
to marketplace visitor
5% 10%
New customers monthly
conversion rate to
marketplace visitor
60% 100%
Unique marketplace
visitors to subscriber
monthly conversion rate
0.0% 25.0%
# of subscriptions /
subscriber [SMB] 3.0 5.0 Subs
# of seats / subscription 0 50 Seats
Price / seat $5 $25
Monthly marketplace
subscription churn rate 2.0% 0.0%
5%
75%
7.3%
3.3
10
$15
0.8%
8%
75%
13.2%
4.0
27
$18
0.8%
8%
95%
21.6%
5.0
35
$21
0.5%
1
2
3
4
5
6
7

However, financial outcomes very
sensitive to your customer base size
and growth rates
YEAR 4 MID CASE REVENUE GAINS BASED ON CURRENT
CUSTOMER BASE AND REVENUE GROWTH RATE INPUTS
CURRENT SMB CUSTOMER BASE
1,000 1,250 1,500 1,750 2,000
CURRENT
MONTHLY
SALES
GROWTH
RATE
(GROSS)
0.2% $8,163,031 $10,203,789 $12,244,547 $14,285,304 $16,326,062
0.7% $9,557,732 $11,947,165 $14,336,598 $16,726,031 $19,115,464
1.2% $11,205,706 $14,007,133 $16,808,559 $19,609,986 $22,411,413
1.7% $13,156,362 $16,445,453 $19,734,543 $23,023,634 $26,312,724
2.2% $15,468,997 $19,336,246 $23,203,495 $27,070744 $30,937,993
Low Organic
Growth
High Organic
Growth
Small Large
74

Revenue mix from initiative split between
new line of business and core business
improvements from initiative
75
2020 NEW REVENUE SOURCES FROM CLOUD
SERVICE MARKETPLACE INITIATIVE:
2020 GROSS REVENUE GAIN:
PERCENTAGEBREAKDOWN
$47,592,019$16,805,187$1,690,466
10x Improvement 3x Improvement
100%
80
60
40
20
LOW CASE MID CASE HIGH CASE
0
$47,592,019$16,805,187$1,690,466
Net Revenue to Channel
from App Sales
Revenue Flowing Through
Marketplace, but Paid Back
to ISV
CROSS-
SELLING
COMMISSION
CROSS-
SELLING
FLOW-
THROUGH

Revenue mix from initiative split between
new line of business and core business
improvements from initiative
Mid case 4 year cumulative revenue of
$39M, with upside of ~$110M for high case
76
TOTAL REVENUE GAIN FROM MARKETPLACE INITIATIVE IN MID CASE
$20M
TOTALREVEUE
TIME
$10M
$15M
$5M
12 Months
$2,626,169
24 Months
$7,393,851
36 Months
$12,100,741
48 Months
$16,805,187
0
CROSS
SELL

High margin recurring revenue stream
with limited fixed costs
77
ONE-TIME COSTS
(Upfront-Fixed)
ONGOING COSTS
(Ongoing-Fixed)
RECURRING REVENUE
(Variable)
• Keep ~20% of top line
revenue, but most of that
share is profit
• Sales and support only
cost to serve – close to zero
over customer lifetime
Net share of top line revenue:
20%
Variable costs (% of sales):
5-10%
• Operating costs decline
(as % of revenues) as
business scales
• Assumes 1 dedicated
headcount for managing
marketplace
• Can be achieved with
existing internal resources
instead of AppDirect
professional services
• Additional value added
services can be added at
no cost going forward to sell
to customer base offsetting
initial integration expense
Note: AppDirect fees are estimates subject to commercial negotiations
AppDirect platform fees
(incl. integrations):
$15/mo
Internal fixed headcount:
$8k/mo
Customization and
technical integrations
(to AppDirect):
$120K

Return on investment: attractive
long term cash flow and return profile
from cross-selling cloud services
78
MID CASE: CROSS-SELLING CLOUD SERVICES ONLY
Month 6 12 18 24 30 36 42 48 Total
Operating Margin -1% 4% 6% 7% 8% 8% 8% 9% -
Incremental Revenue
Not Included Above
$0.0M $0.0M $0.0M $0.0M $0.0M $0.0M $0.0M $0.0M $0.0M
Total Gross Revenue $0.7M $1.9M $3.1M $4.3M $5.5M $6.6M $7.8M $9.0M $38.9M
$900k
$600k $10M
$5M
-$5M
0
$300k
-$300k
-187k
54k
173k
291k
408k
526k
643k
761k
0
Cash breakeven
within 12 months
SUMMARY HIGHLIGHTS:
<12 months to breakeven
12 month fully loaded payback period
IRR of ~10% from only cross-selling cloud services
CASH FLOW ANNUALIZED GROSS
REVENUES
DOLLARS
$15M

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