Build your business case for selling in the cloud. Use our template to win internal buy-in and bring about digital transformation.

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

2. SECTION 5: APPMARKET BUSINESS CASE
64acmemarketplace.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

3. SECTION 5: APPMARKET BUSINESS CASE
65acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
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

4. SECTION 5: APPMARKET BUSINESS CASE
66acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
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.

5. SECTION 5: APPMARKET BUSINESS CASE
67acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
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

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SECTION 5: APPMARKET BUSINESS CASE
68acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
Next slides showcase a business case
done by AppDirect for an ISP with
35,000 SMBs with an average
SMB size <20 Employees.
NEXT STEPS:
Call AppDirect if you would like
to build your custom business case

7. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
Fail to implement enabling
“technical” best practices f
rom the GTM playbook.
Implement 4-5 enabling
“technical” best practices
from the GTM playbook.
Implement 4-5 enabling
“technical” best practices from
the GTM playbook.
SECTION 5: APPMARKET BUSINESS CASE ILLUSTRATIVE EXAMPLE
69
FINANCIAL MODEL
Three scenarios based on implementation
of marketplace best practices and existing
customer base of 35k 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
~$38M2020 ANNUAL GROSS
REVENUE GAIN
~$129M2020 ANNUAL GROSS
REVENUE GAIN
~$5M2020 ANNUAL GROSS
REVENUE GAIN

8. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
Assumptions driving the three cases
come from actual market data from a
sample of AppDirect powered marketplaces
SECTION 5: APPMARKET BUSINESS CASE
70
ILLUSTRATIVE EXAMPLE
‘TECHNICAL’ AND ‘BUSINESS’ BEST PRACTICES CRITERIA FROM GTM PLAYBOOK
MARKETPLACES ASSIGNED TO THE THREE CASES BASED ON BEST
PRACTICE 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
1 2 3
17%
21%
31%
56%
+1767%
12%
3%
4 5 BDP
60%
13%
0
20
40

9. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
New revenue sources come from
cross-selling, up-selling, core service
conversion increases and churn reduction
SECTION 5: APPMARKET BUSINESS CASE
71
Note: Incremental monthly Average Revenue per User (ARPU)
is the delta between revenue made from marketplace versus
non-marketplace customers not gain in overall ARPU.
Make more from every customer by cross-selling
marketplace cloud services
Convert more customers with better solution
package differentiation
Up-sell higher bandwidth plans to marketplace
customers that use demanding web-based services
Increase your customer life time value by reducing
churn with sticky software
“Our marketplace customers are paying $330 per month on average
more than our non-marketplace ones. We have earned this ARPU
increase by becoming their primary trusted IT vendor.”
—SVP REGIONAL TELCO
Incremental monthly ARPU from cross-selling
Percent improvement in core service yearly revenue growth
Percent increase in monthly ARPU from up-selling
Percent improvement in core service churn rate for marketplace users
“We achieved better solution differentiation with a Tier-1 VAS portfolio
and better offering packages making us much more competitive.”
—PRESIDENT, REGIONAL ISP
“We found that customers that used more than two web-apps hit the
sweet spot for up-selling to our higher plans.”
—DIRECTOR TIER-1 TELCO
“Software is very sticky. When we cross-sell productivity tools we saw
churn go down to almost zero.”
—VP TIER-1 TELCO
High CaseMid CaseLow Case
$2,000
1,500
1,000
500
0
$1,710
$500
$130
25%
0
10
20
50%
0
10
20
30
40
25%
16%
6%
100%
0
50
25
75
15
5
14%
74%
12%
58%
5%
58%
ILLUSTRATIVE EXAMPLE

10. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
Revenue sources driven by 9 Key
Performance Indicators (KPIs)
SECTION 5: APPMARKET BUSINESS CASE
72
KPI Drivers Outputs Inputs
ARPU growth from
CROSS-SELLING marketplace
cloud services driven by 7 KPIs
ARPU growth from UP-SELLING
core services to marketplace
customers driven by 1 KPI
Revenue growth from achieving
HIGHER CONVERSION rate
on core service sales driven
by 1 KPI
Revenue growth from
core service CHURN RATE
IMPROVEMENT driven by 1 KPI
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
xxx
x
xx
# of Paid
Subscribers
See drivers from
cross-selling.
% Increase
in Core Service
ARPU
Average Core
Service ARPU
Net New
Up-Sell Core
Revenue
x
x
Existing
Customer Base
Existing Monthly
Growth Rate
% Increase in
Monthly Growth
Rate
Average Monthly
Core Service
ARPU
Net New
Monthly
Customers Net New
Core Service
Revenue
x
xx
Core Services
Monthly Churn
Rate
Marketplace
Monthly Churn
Rate
# of Paid
Subscribers
Average Monthly
Core Service
ARPU
Churn Rate
Improvement
Net New
Churn Reduction
Revenue
x
x
–
ILLUSTRATIVE EXAMPLE
*
See build up in
cross-selling drivers.
1
2 3 4
5
6
7
7
8
9

11. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
Key Performance Indicator achievement
levels drives the revenue projections
case differences
SECTION 5: APPMARKET BUSINESS CASE
73
KEY PERFORMANCE
INDICATORS
LOW CASE MID CASE HIGH CASE
Existing customers
monthly conversion rate
to marketplace visitor
2.00% 2.50%
New customers monthly
conversion rate to
marketplace visitor
0.0% 40.0%
Unique marketplace
visitors to subscriber
monthly conversion rate
0.0% 25.0%
# of subscriptions /
subscriber [SMB] 2.0
5.0
Subs
# of seats / subscription 0.0
20
Seats
Price / seat $5 $20
Monthly marketplace
subscription churn rate 2.0% 0.0%
% increase in core
service average revenue
per user (ARPU)
0.0% 30.0%
% increase of customer
growth rate
0.0% 20.0%
2.00%
10.0%
7.3%
6.3%
3.3
4.1
$10
0.8%
5.0%
2.25%
20.0%
13.2%
3.3
11.6
$13
0.8%
15.8%
11.5%
2.40%
30.0%
21.6%
4.0
15.5
$16
0.5%
25.3%
14.0%
ILLUSTRATIVE EXAMPLE
1
2
3
4
5
6
7
8
9

12. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
However, financial outcomes very
sensitive to your customer base size
and growth rates
SECTION 5: APPMARKET BUSINESS CASE
YEAR 4 MID CASE REVENUE GAINS BASED ON CURRENT
CUSTOMER BASE AND REVENUE GROWTH RATE INPUT
CURRENT SMB CUSTOMER BASE
33,000 34,000 35,000 36,000 37,000
CURRENT
MONTHLY
SALES
GROWTH
RATE
(GROSS)
1.4% $22,980,844 $23,677,233 $24,373,623 $25,070,012 $25,766,401
1.9% $28,496,228 $29,359,750 $30,223,272 $31,086,794 $31,950,316
2.4% $35,479,319 $36,554,450 $37,629,581 $38,707,712 $39,779,843
2.9% $44,333,779 $45,677,227 $47,020,675 $48,364,123 $49,707,571
3.4% $55,572,501 $57,256,516 $58,940,531 $60,624,547 $62,308,562
Low Organic
Growth
High Organic
Growth
Small High
ILLUSTRATIVE EXAMPLE
74

13. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
Revenue mix from initiative split between
new line of business and core business
improvements from initiative
SECTION 5: APPMARKET BUSINESS CASE
75
YEAR 4 NEW REVENUE SOURCES FROM
CLOUD SERVICE MARKETPLACE INITIATIVE
YEAR 4 GROSS REVENUE GAIN:
PERCENTAGEBREAKDOWN
$129,383,681$37,629,581$5,407,801
7.0x Improvement 3.4x Improvement
100%
80
60
40
20
LOW CASE MID CASE HIGH CASE
0
$129,383,681$37,629,581$5,407,801
Net revenue to Channel Driven
by Core Product Benefits
Net revenue to Channel
from App Sales
Revenue flowing through
marketplace, but paid back
to ISV
CORE
CONVERSION
UPTICK
UP-SELLING
CORE SERVICES
CROSS-
SELLING
COMMISSION
CROSS-
SELLING
FLOW-
THROUGH
ILLUSTRATIVE EXAMPLE

14. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
Revenue mix from initiative split between
new line of business and core business
improvements from initiative
Mid case 4 year cumulative revenue of
$85M, with upside of ~$300M for high case
SECTION 5: APPMARKET BUSINESS CASE
76
TOTAL REVENUE GAIN FROM MARKETPLACE INITIATIVE IN MID CASE
Cross Sell Higher ConversionUp Sell
$40M
TOTALREVEUE
TIME
$30M
$20M
$10M
12 Months
$5,342,141
24 Months
$15,626,916
36 Months
$26,375,553
48 Months
$37,629,581
0
ILLUSTRATIVE EXAMPLE

15. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
High margin recurring revenue stream
with limited fixed costs
SECTION 5: APPMARKET BUSINESS CASE
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
ILLUSTRATIVE EXAMPLE

16. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
Return on investment: attractive
long term cash flow and return profile
from cross-selling cloud services
SECTION 5: APPMARKET BUSINESS CASE
78
MID CASE: CROSS-SELLING CLOUD SERVICES ONLY
Month 6 12 18 24 30 36 42 48 Total
Operating Margin 4% 7% 8% 8% 9% 9% 9% 9% -
Incremental Revenue
Not Included Above
$0.1M $0.3M $0.6M $0.9M $1.2M $1.6M $2.0M $2.4M $9.1M
Total Gross Revenue $1.4M $3.9M $6.5M $9.1M $11.8M $14.6M $17.4M $20.3M $85.0M
$1,800k $30M
25
20
15
10
5
-$5M
0
1,500
1,200
900
600
300
-$300k
-126k
220k
450k
683k
920k
1,159k
1,403k
1,650k
0
Cash breakeven
within 12 months
SUMMARY HIGHLIGHTS:
<12 months to breakeven
12 month fully loaded payback period
IRR of ~20% from only cross-selling cloud services
Additional upside from upselling core services, reduction in churn, core conversion uptick
Cash Flow Annualized Gross Revenues
ILLUSTRATIVE EXAMPLE
[BAR]CASHFLOW

17. acmemarketplace.byappdirect.comYour Cloud Marketplace & Management Service
Revenue exceeds expenses, with equal
mix of benefit from SaaS revenue and
churn reduction in core services
SECTION 5: APPMARKET BUSINESS CASE
79
MID CASE:
$30M
4 year economics (cumulative)
Operating Costs Net Revenue
$20M
$10M
$1,224,000
$24,306,627
0
UP-SELLING
CORE
SERVICES
CORE
CONVERSION
UPTICK
CROSS-
SELLING
CLOUD
SERVICES
VARIABLE
Upside potential not
included in ROI analysis
on previous slide
Share of $75M
in top-line revenue
ILLUSTRATIVE EXAMPLE