Edge Strategies found in a study[1] commissioned by Microsoft recently that those customers using rich email (messaging services that include group calendaring, file sharing and desktop conferencing) and other communication and collaboration services were significantly less likely to churn than customers using only basic email.

In addition, the study found that rich (Business Class) email customers are less likely to switch providers in order to obtain lower priced broadband services as compared to customers using only basic email.

Key findings include:

• Customers who use business class email and other online communication and collaboration services change providers half as often as those using basic POP/Webmail.
• SMB customers are increasingly comfortable with cable and traditional telecom service providers as a source for online services and applications; particularly those related to email, IP communication and collaboration.
• Wireless service providers are becoming increasingly accepted by SMBs as a source for acquiring online services (relative to a similar study conducted by Microsoft with Edge Strategies in 2008[2]).
• Users of basic POP/Webmail are more likely to change providers on the basis of price than those using higher value-added services.

The study also indicates that churn reduction is an evolutionary process, which requires that the service provider proves its capabilities to meet customer requirements for support and reliability at each stage of their relationship. This is necessary for them to earn the right to provide the next level of critical business service. Customers who elect to upgrade bandwidth with their service provider are themselves less likely to churn than others, and are more likely to consider acquiring additional services from that provider. Once the SMB customer is successfully using rich email, a further significant reduction in churn takes place, and the process of churn reduction continues as additional services and applications are added.

Propensity to Change Providers

In order to quantify the effects of using rich email on the likliehood of changing providers, our sample of SMBs were asked how many times they have changed providers in the past three years. We then clasified companies based on the types of email they have been using during this period and compared their switching rates. Companies not in business or using email for the full three year period were eliminated from the analysis. The findings were clear. The churn rate for those who use basic email services was 37% higher in the previous three years than the average churn rate for all broadband customers, whereas the churn rate for rich emal users was 31% below the average.

It is certainly the case that other factors come into play. For example, those who use rich email on their own servers also have a slightly (10%) lower than averge churn rate. However, many of these customers have already upgraded to premium or business class broadband, which itself demonstrates the relationship between higher service levels and churn reduction. The strongest impact on churn by far, however, is seen when a customer uses rich email provided directly by their broadband service provider. Here, the relationship between the service provider and the customer appears to take on a whole new meaning. At this point, the customer has determined that their service provider is worthy of managing critical business services and 

Reasons for Changing Providers

Another goal of the study was to specifically understand what motivates customers to change broadband providers. Again, significant differences were discovered between companies using basic email services vs. those using rich email. While most customers had several reasons for switching providers, those using rich email were much less likely to switch in order to obtain lower priced broadband services, and much more likely to switch for higher bandwidth or to get services that their previous provider did not offer.

We believe that there are several underlying reasons for the reduced churn associated with rich email use:

• Customers who chose to subscribe to rich email, communication and collaboration services have developed confidence in and are comfortable with their service providers based on past experience or recommendations from others.
• Service providers who offer rich email and collaboration services are considered more business oriented, and are more likely to be at the forefront of providing the services that the customer may need in the future.[3]

Customers who subscribe to advanced services know they are being “locked in“ to some extent, and as a result, are careful who they choose as their provider for advanced services – particularly those services and applications that may require employee education, retraining, data migrations or changes in the way they work.

Conclusion

This research offers further evidence that churn reduction for service providers is a journey that evolves with the availability and successful delivery of new services. Churn rates decline as customers move from basic email to premium broadband to rich email, and further decline as additional critical business online services and applications are added.

Service Providers therefore should strive to move customers to adopt advanced services as quickly as possible using the customers’ desire for and use of premium broadband as an indicator of both the need for these services, and a disposition to consider the service provider as a potential source. At the same time, they must develop the capacity to successfully onboarding these customers while providing a great end – to end- user experience in order to successfully realize the benefits of successful churn reduction and reduced customer acquisition costs that result from in person and online word of mouth.

For more information about the study, contact Bob Kazarian This email address is being protected from spambots. You need JavaScript enabled to view it..

Private cloud transformation equals supplier renewal.

The cloud may be new and disruptive, but its technical and business complexities are driving Fortune 500 CIOs into the arms of familiar vendors.

In recent in-depth interviews with IT executives across key industries, Edge Strategies found significant uncertainty about which vision of the Cloud will deliver the required business value.  Their solution is to rely on large suppliers, who provide enterprise-level professional services, cross-domain management and implementation capabilities.

CIOs cite cost reduction/avoidance and computing investment utilization as key drivers.  The early stages of private cloud solutions deliver these benefits through virtualization and automation, but the business value is less clear when choosing an enterprise cloud model.  Is creating a robust private cloud the best investment, or will a managed service provider offer superior ROI?  Are there commodity services that the organization can safely acquire from public cloud providers?

Most CIOs are addressing these questions in one of two ways:

• Strategically- Which IT model best fits the organization: public, private or hybrid? In other words, is IT a utility, a secure bastion within a commodity environment, or totally sacrosanct within its own private infrastructure.
• Tactically – Which applications benefit from which cloud models?  How should the organization identify and migrate them?  What about data security and information management?

These questions, among others, lead CIOs into renewed dialogue with traditional large suppliers, who are expected to have answers based on direct experience similar problems across the industry.

Although the questions are clear, there is no single, ultimate answer.   Effective use of the Private Cloud remains a joint journey that requires a new level of trust and collaboration between supplier and buyer.