by Paddy Barrett
This post originally appeared in IBM’s Technical Rockstar blog in 2015 and is derived from my MSc thesis.
“Cloud is going to change the way I.T. operates,” said Ginni Rometty in 2103, referring to the paradigm shift from on-premises software to the cloud. But how does this shift impact the role of the software product manager and traditional product management activities such as cross-functional collaboration, customer relationships, and life cycle management? To find out, I interviewed ten product managers, both within and outside IBM, about their experiences of managing both on-premises and cloud products, and specifically to address the following goals:
- Understanding why cloud products require a different product management approach.
- Identifying the differences in product management activities between cloud and on-prem products.
- Developing recommendations for practice in managing cloud products.
All ten interviewees felt that the biggest impact on the product manager’s role was that created by continuous delivery, where a product could be released on a much more frequent basis than its on-premises equivalent. Continuous delivery adds a new degree of flexibility because the product manager can improve the product much faster than in an on-premises context. Continuous delivery also enables product managers to respond more rapidly to customer requirements.
The other notable areas of change were cross-functional collaboration, innovation, the gathering of requirements, and customer relationships. The relative weight of the each theme is illustrated in Figure 1.
The interviewees stressed the need to understand the differences between the cloud and on-premises models and to be able to explain those differences to their customers. Let’s look at these changes in detail later, but first ask: what does a product manager actually do?
Although product management combines elements of engineering, design, marketing, sales, and business development, the role demands specific skills, including an inclination towards continuous learning, a strategic mindset, networking and problem-solving abilities, and good decision-making instincts.
Many of the activities of the product manager in the cloud are largely identical to those in the longer release cycle in the on-premises paradigm, but with some key differences. There is still the same need to research the market, listen to customers, understand technology, and work cross-functionally.
What’s different in the cloud
The role of the product manager of cloud products differs in several significant ways from the way it is performed in the on-premises paradigm. The two defining characteristics of these changes are speed and flexibility: the increased speed at which cloud products change and cloud-based product management activities take place; and the new degree of flexibility required of the role.
Both of these factors – speed and flexibility – are integral to the continuous delivery characteristics of cloud software. The rapid rate at which cloud products can change is one of the most important differences between the cloud and on-premises paradigms. Instead of waiting several months to update an on-premises product, product managers have an increased flexibility to repeatedly update cloud products. Furthermore, they can update all cloud customers simultaneously instead of having to manage multiple versions of on-premises releases. This flexibility is supported by the agile development process, which is designed to yield an incremented product that can be released at the end of each development iteration.
“Continuous release provides product managers with a lot of flexibility that they didn’t have in the past – from having to collect a group of new features and releasing them all at once, to releasing everything iteratively.”
Product managers have to adapt to the continuous delivery process by re-engineering and automating the processes of building, testing, and deploying the updated software. Additionally, to facilitate customers who do not want continuous updates, the product manager has to devise an appropriate single- or multi-tenancy strategy for the product. One of the biggest challenges posed by continuous delivery is the need for product managers to change the internal culture of their organizations to mirror the speed and flexibility of continuous delivery.
Cross-functional teams have to increase their own internal responsiveness to adapt to the rapid rate of change of cloud products. Doing so, however, can impact the stability of the cross-functional team and the product manager must make new efforts to improve knowledge-sharing and decision-making.
“The challenge is to bring rest of the company up to the same speed – this can result in conflict. You also have to be careful the impression isn’t given that product managers keep changing their minds.”
Figure 2. The product manager’s cross-functional collaborations.
To enhance the effectiveness of collaboration within the context of continuous delivery, cross-functional teams might benefit from further training in conflict management and communication. Some teams are already adapting by changing their collaboration processes and tools to reflect the asynchronous and fast-moving nature of communications within the cloud paradigm. Social networking tools are becoming more popular in product teams because they enhance internal discussion and knowledge-sharing, whereas more linear methods reflect the more static nature of collaboration in the on-premises paradigm.
“Since features are being released weekly or daily, you’re having to hurry more to educate the rest of the business when new features are ready.”
Over the longer term, cross-functional teams in the organisation will probably have to apply the agile approach to their own processes so that rapid, iterative change can be managed collaboratively. This approach is likely to work best when teams are willing to collaborate on a social platform like IBM Connections.
The product manager in the cloud paradigm needs not only to thoroughly understand the product being managed but also the capabilities of cloud computing, including its benefits and drawbacks for customers. The many facets of the cloud are captured in this model by the European Commission in Figure 2.
Figure 3. A cloud computing model.
The cloud product manager can point out to hesitant customers that switching from an on-premises application to the cloud will benefit them in the form of reduced capital expenditure and IT staff, along with the opportunity to gain competitive advantage. Conversely, the product manager must assure customers of the continued availability of the product and, consequently, business continuity.
“A product manager needs to understand the way to compare and contrast on-premises versus cloud versions.”
Although customers are increasingly attracted to the cloud because of its business benefits, the issue of data security is still one of their paramount concerns. This concern imposes additional responsibilities on the product manager, who must be conversant with national and international regulations around the issues of data accessibility and liability.
“There are new questions that prospects ask around security and the safety of their data.”
For customers in the EU, for example, the requirements for “safe harbor” agreements can be decisive factors in considering the move to a cloud product.
Pricing and revenue models
The cloud paradigm does not necessarily change the role of the product manager with regard to pricing. Nevertheless, product managers have to address new factors in the cloud paradigm, specifically the cost and revenue factors, which are markedly different than in the on-premises paradigm.
“When you move to a cloud model, my perception is that customers expect to know what they’re going to pay because they’re going to start using it immediately – they aren’t going to necessarily go through a procurement process.”
The cloud model typically has more pricing options than its on-premises equivalent, including several types of transaction (pay-per-use) and subscription (rental and licensing) models.
“It’s a minefield when you get into subscription pricing, because of all of the things that you have to consider.”
However, revenue models that are based on transaction pricing can be riskier than subscription models for several reasons: customers can switch more easily to another vendor; metering of transactions adds a new layer of administration, and revenue is collected in stages, making it more difficult to finance development work.
The shift to the cloud affects the product manager’s approach to product lifecycle management because the cloud can extend the lifetime of a product beyond that of its on-premises equivalent. Rather than accept that a product has reached its sunset phase and must be discontinued, product managers have new opportunities to reinvigorate their cloud products.
“We classified our on-premise products into invest, harvest, and sunset products but we haven’t done that exercise for the cloud because you can always update the product and make sure that it’s current with customer and market requirements.”
This flexibility is more difficult to achieve in the on-premises paradigm because the technology is installed on the customers’ hardware, rather than on the vendor’s.
The shift to the cloud is having a positive impact on innovation and new product development because of the ease of testing new ideas and garnering feedback. The cloud is thus a major new addition to the innovation process because it allows product managers to perform experiments to help develop products faster.
“Cloud gives us a lot more options about trying different solutions before focusing on one. It allows us to measure our tests. This type of research is absolutely new for us; we weren’t doing this before.”
The cloud model is supportive of design thinking approaches to innovation, particularly the process of prototyping potential product solutions, many of which can be expected to fail. Design thinking has an affinity with the cloud because the two phenomena focus on user experience, feedback, speed, and flexibility.
“Fail early and fail often” is something you want to do with SaaS. We use design thinking as a way to prototype and envision new features or functions outside of the released software, where the expectation that the feature will make it to market disappears.”
Product managers in IBM can now apply the IBM Design Thinking framework, which combines traditional design thinking approaches with three unique practices – design hills, sponsor users, and playbacks – as shown in Figure 4.
Figure 4. IBM Design Thinking.
Even without formally applying design thinking, product managers can take advantage of the low-cost of trialing new software in the cloud, whether through prototyping, A/B testing, or releasing a minimum viable product (MVP). They must, however, be careful to protect the customer relationship by informing users when a prototype or MVP is being tested.
The requirements-gathering process for on-premises products is identical in most ways to cloud products (including the use of interviews, focus groups, surveys, and site visits) but the cloud offers additional channels of requirements. Metrics, for example, can highlight patterns of usage of the product, feed directly into requirements, and prompt new innovation.
“You have this opportunity now to get information about the usage of your product that you never had before.”
Additionally, in contrast to gathering requirements at set intervals during the on-premises release cycle, the cloud product manager is constantly in contact with internal and external stakeholders to gather their requirements for future releases.
Product manager role
Many of the activities of the product manager in the cloud are largely identical to those in the longer release cycle of the on-premises paradigm, but there are some key differences. There is still the same need to research the market, listen to customers, understand technology, and work cross-functionally, whilst constantly honing the personal skills required for success.
“It’s not extra activity, it’s the same activity but in smaller pieces and in a much more dynamic way.”
A significant advantage of the cloud paradigm, however, is that a product can be developed and incremented iteratively, as opposed to the on-premises paradigm, where all aspects of the product must be in place before its initial release. But because of the faster pace of the cloud, more urgency is placed on the product manager.
“A lot of assumptions that you can make about on-premise software don’t work for cloud and vice-versa. And in addition, you need to get used to the speed of turnaround with all these processes.”
Moreover, the cloud product manager has to deal with increased uncertainty because the ability to react quickly to customer feedback and market trends requires a constant updating of the product roadmap. That said, product managers must keep the long-term product strategy in focus so that tactical issues do not predominate.
The importance of the customer relationship is increased for the cloud-based product manager. As a consequence of the additional communication channels provided by the cloud, customer engagement is more immediate and fluid than in the on-premises paradigm. Product managers can more easily engage with customers both to understand and respond to their needs, and to provide online resources such as user communities, self-service tools, and documentation libraries.
“ The communication is continuous now. Every time you talk to the customer, you’re building the relationship.”
Moreover, the cost of switching to rival products is much lower for customers than in the on-premises paradigm, so product managers must constantly manage their customers’ expectations. This means continuously monitoring feedback, analysing usage, inviting participation in testing, and communicating news of updates and other important information.
Recommendations for practice
The product manager role as it is practiced in the on-premises paradigm differs in important ways from its execution in the cloud. The management of cloud products differs markedly from on-premises products in terms of the urgency and flexibility required of the product manager.
Product managers who are moving to the cloud should study the following recommendations for practice:
- Attain a thorough understanding of how the cloud model works, including its benefits and drawbacks, with special regard to legal requirements for data protection.
- Lead cross-functional teams in adopting new collaboration tools and processes to adapt to the extra demands of the cloud on communication and decision-making.
- Introduce IBM Design Thinking practices to improve innovation, engage with users, and test prototypes.
- To foster customer loyalty and interaction, maintain a consistent focus on managing customer relationships and customer expectations.
- Master the use of metrics to analyze how customers use the product and to develop product requirements.
- To prevent the customer disruption that can be caused by continuous delivery, devise and incorporate product capabilities that give customers some control over receiving upgrades to the product.
- Formulate guiding principles that guard against the tendency to focus on short-term customer requirements at the expense of long-term product strategy.
Figure 5. Benefits of cloud adoption.
In short, traditional product management activities must become more dynamic in the cloud context and the product manager must adapt by becoming more flexible and responsive. To put this in context, IBM’s cloud revenue grew by 60% in 2014 to US$7bn, and one reason for that growth, said Ginni Rometty, was understanding the requirements of our clients. To continue to capture this market, managing customer expectations becomes a more critical concern than ever. Understanding and acting on these recommendations can help product managers shift to the cloud with a greater chance of success.
© Paddy Barrett 2015