A new inflection point was reached in the service desk technology market space this week.
A free service desk.
Whilst free and open source ITSM technology has been available for quite a while – this is the first supplier I’ve seen to offer a free service desk without limitation on number of analysts (please let me know if otherwise).
What is perhaps most significant is that the vendor, ManageEngine, already has a huge number of customers, is recognized on the Gartner ITSSM quadrant and has the resources to make a dent.
Techcrunch report today that Zoho/ManageEngine revenue is ‘9 figures USD’, growing at 30% per annum.
The entry level Service Desk offering from ManageEngine is now free. The previous ‘standard’ edition offered a Service Desk for up to five analysts for free – now it’s completely free for any size organization. Customers just pay for premium optional upgrades.
The new normal?
This sort of ‘Freemium’ business model is becoming increasingly popular in a world of very low cost or free apps and cloud-based delivery. Freemium is whereby the vast majority of users of a service can take advantage for free and the business can turn a profit from a small proportion that adopt premium upgrades.
For example Spotify the music streaming service has 6 million paying customers versus 20 million active monthly users and it is estimated that only around 10% of LinkedIn’s 200M users pay to use the service.
Will this kill the market?
No, I don’t think so.
Whilst it is disruptive and gutsy move at market share I don’t think it is necessarily going to kill the market. It will certainly mean existing competitors will have to seriously re-evaluate their value-add but it’s not the end of the world. Spiceworks (ad supported) is free and versions of OTRS (Open source) are free. Vendors have been competing against these for years and should know how to articulate their value. Great software supported by, rather aptly, great support.
If you compete on price alone, you can be beat on price alone. – RA
— Roy Atkinson (@RoyAtkinson) February 18, 2014
However I would say that more fragile competitors should be worried. We’re yet to dig into the finer details of the detailed differences between the free standard edition and professional but at first glance there seems to be a lot under the hood considering the price.
Barclay Rae, commenting on the news said:
“It is certainly a brave and audacious move. I think there is no doubt that some core aspects of ITSM tool functionality is pretty much a commodity, so I guess ME are using this as a level to expand their client base and brand awareness, particularly into new markets and market areas.
ITSM still requires some levels of implementation and integration intelligence, along with organisational change etc., so there will need to be some recognition of the need to develop support mechanisms around the free product that safeguard the brand via successful implementation.
I’d expect ME will need to look at developing their support and professional service capability to support this, particularly for the enterprise market.
However this is still a brave and market shifting move – I wouldn’t be surprised to see more of this in due course.”
ManageEngine can presumably offer this for free because:
- a) The marginal costs of additional customers on a cloud based infrastructure is negligible – assuming the product works ok without hitch
- b) ManageEngine are betting that a sufficient number of free customers explore paid upgrades and other products in the ManageEngine range.
- c) The cost of acquiring new customers into the marketing pipeline just got a lot cheaper – albeit at the cost of forgone revenue. Customers can now be convinced with delivery, rather than a short trial or promises, before parting with their cash. Theoretically they might be free customers for years before parting with any paid upgrades. Meanwhile ManageEngine has the all-important resource in the Internet economy – the customer’s attention.
As ManageEngine state in their press release – if it wasn’t already, the basic service desk has just become commoditized.
More info here: