Exclusive Q&A with Avangate’s CMO/SVP Mike Ni

We got to chat with Avangate’s Mike Ni, who discussed why cloud technology is so disruptive in payments, building out a B2B and B2C platform on a global scale, and a Bitcoin tease.

Kevin Xu: Hi Mike, let’s get a breakdown on Avangate.

Mike Ni: At Avangate, we are a commerce platform. A lot of people blend or blur the line between payment processing provider, service provider and commerce.

But just to provide a little more definition, we look at commerce as really five key blocks. Not only global payment, which we do in terms of helping customers go globally, but for the other key modules that are part of our whole platform. One is how do you sell and even optimize that online selling, right, and sell service? How do you reach out to management? How do you sell through a reseller?

The new, rich media we are forming, there’s a lot going on online. How do you actually manage to bridge the online and offline world? How do you actually manage not only your own affiliate, but we have a whole network of over 40,000 affiliates in the software and services world. Then finally, subscription billing.

Very fundamental to not only the new economy, but frankly, services in particular like subscription, freemium, fractional ownership. These are all things that become fundamental to this business model surrounding services. So that’s sort of in a nutshell all on our cloud-based platform. We have over 3,400 customers on our platform leveraging us for payments and commerce.

Can you speak to your rate of growth?

We’ve been around I think since 2006, when we first launched. When we were going for a round of funding by Francisco Partners – they see this world moving very rapidly around services, digital commerce, and digital goods – and as such, helped not only fund us for growth, but actually bought out our previous investors as well.

Of course, part of this movement as a company, we’ve been signing not only partners, but also winning a bunch of awards for growth, for leadership in building an e-commerce platform, as well as made partners or vendors for commerce last year. Of course, we’ve been closing customers, both B2C and B2B, folks for online financial services via subscription, as well as HP, as they make their shifts towards selling their own product as a cloud service.

And part of this gets into the trend behind what we see as this huge shift towards services as a whole, which is products are dead, right?

What we see more and more is that with customers being able to have a lot of choice, products increase and commoditize, frankly. People are increasingly looking to add on service contracts, turning their products into a service, being able to add and innovate around the visual aspects of their business to drive up the margins of their business.

We see this across multiple customers who are making this shift and us helping them do so. And it’s a massive growth, right, across multiple industries.

We started in software, which is like a Kaspersky World, and have quickly moved from there as those turn into cloud services, which like iYogi and TechLive Connect, are consumer tech support, right? Purely service contract. How do I actually get someone to help me pay for that service? So a very rapid change for us in an industry that we see changing very rapidly.

I see a general trend in cloud computing; cloud technology being the next movement, driver of business. How are you leveraging this technology to help B2B, B2C companies?

Sure. Two things going on. Or let’s start with three things.

Number one, the cloud has changed how people are buying. Because what’s happening is, the cloud made it easier to consume in smaller bits.

Let’s take HP for an example, right? What’s happened was they were making consumer sales or inside sales and they had mid-market sales guys and above. In one year, they saw the small end of the business starting to trend downwards.

And they said, “It’s okay. We’re more of an enterprise play.” But what was really happening was the cloud had changed what people were buying. People were buying one or two, five. They were buying in smaller chunks.

And those customers, when you get in, has a foot in the door, who get the RFPs for the bigger deals. So you see, big companies needed to make a shift because the cloud fundamentally changed what B2B customers are buying. In the same way, sort of like MyFICO, for instance.

If you look at the cloud here, when you look at how people engage online, how did they discover a service. And how do you now offer it to them so that you can give them guidance on how to manage their credit scores.Help them with a monitoring service that helps alert them, right?

These are all services that were not possible without the cloud. When we talk about not only being able to package that, but then to be able to sell it, right, you talk about being able to sell it online, being able to create multiple packages very quickly, and then turn on and off on different times. Now let me tell you why this is difficult and why companies need to turn to a commerce solution.

For instance, almost any of these companies, they had an ERP system in the backend that they’re building on. So when I was a product manager in one of these companies, it would take me two months to add a new product to the ERP system’s bill of materials, and then have finance build the track report on it. Two months, right?

What is fundamentally needed was a way for the line of business folks to be able to quickly create 25 in a week, do A/B testing, put them out there to different segments, put them out in different channels, and see how these things sell through which channels at what price point. The world, especially on cloud services, has moved away from traditional sales approaches and moved much more towards self-discovered consumption, purchasing on the side.

Therefore, the online aspects of this are incredibly important, right. Especially when it comes to services. Let’s take Bloomberg for instance.

The fact is, unlike going to a store where I’ll look and compare a price, and maybe I’ll go home and buy it on Amazon. Then sometimes, sometimes I’ll even buy it on a device. When you see the data, it doesn’t quite happen that way. In reality, services are consumed on the spot. “I want a ride now, right? I’m reading content now. I’m accessing a database and I need access, and therefore I will pay now wherever I am.”

So they need to combine at every point of engagement with the customer into a point where I can service them by actually either exchanging some value with them. Sometimes that’s money. Sometimes that’s just signing up for a free trial or for a freemium, where upon usage, I’ll bill them later.

The whole engagement approach requires that every point of engagement with my customers or prospects actually changes.This is where payments have actually gotten a huge boost. In the same way that we’ve been growing in this world, payments have actually been dragged into this world as well, because of the dynamics of how people need to pay are actually very much in the moment, where every device can be a point-of-sale device.

But in reality, if you look at what people are really needing, because now, folks like HP, were building all this infrastructure around it. In reality, what they needed was more than just payment.

That’s why when you look at even what’s going on in the industry today, whether it’s Square and the articles around being low margin, or whether you see folks like Stripe.

The first thing they did after raising a fairly substantial round is say, “I’m going to build a whole bunch of items above payments to try to get a little more sticky and to ask more margins.”

So what you’re seeing is demand for the solution, so an ecosystem around payments - which is a total solution, which is commerce.

This is where we think there’s a huge wave of innovations in around services that is touching the payments industry. But clearly, payments is part of a solution where payments will be working with a commerce solution like us to be able to help grow this industry.

What are some of the services that you provide in making global payments easier, relating to cloud technology?

When you look at what’s needed, let’s talk about from the payments up.

When we look at payments, we say it’s around smarter payment. I know some people have been starting to use that word. It’s something that we’ve been talking about for a while. Why do you need smarter payments? Actually, let’s start with the top line.

There’s three things that we typically help our customers with. One is really servicing the customer at every touch point. Number two, it’s around being able to simplify and scale their operations, their business as they grow. And people are really focusing on how fast markets are moving, how to focus on their business without having to build all this building infrastructure, without paying for the backend infrastructure.

So we’ll get back to that as well. I think the first thing to start with is smarter payment. What do we provide there to help them? Well, first and foremost, it’s around just, how do you actually get signed up and leverage all the payments, as many of the payments methods you need around the world?

We have to provide the platform and relationships that allow them to start selling.

That’s the first thing. We help them to go global. Number two, especially given the world of services, retention, the subscription, which is incredibly important.

So for us, it’s around how do we actually provide an intelligent payment routing? How do we actually understand not only the simple retry but how to increase optimization rate?

A combination of cunning, logic, a combination of account updaters, retry mechanisms, as well as failovers to multiple processors where we can actually get the best of all the different relationships we have underneath.

Again, by extracting out payments for the customers, we allow them to increase their retention and conversion. This is about getting a little smarter. Of course, we’re talking about alternative payments. Why should a customer have to follow a particular currency or whatever the new currency of the week is. We are constantly adding alternative payment methods, whether it’s PayNearMe, or Boleto, down in Latin America.

We’re constantly reaching through to alternative methods that become a single API, so that vendors don’t have to worry about it. They can select and turn on just from the control panel. That provides a huge amount of IA market. Now that’s around smarter payments.

The second thing we do is go kind of backwards, is going back through to how do we help customers service at every touch point?

How do I extend my trial by a month? How do you actually give a 20% discount in the next three months of your subscription because you had a payment issue? How do I upsell and cross-sell you in the call center?

What we saw were literally customers spending over half a year to try to wire payment into all of their touch points and to do the logic of how to actually do subscription billing, how to actually upgrade, downgrade. So payments is trying to provide some of these core tools, but you still have to build around all the APIs to get it done.

What we have is it’s all pre-wired, so that customers don’t have to do it themselves. So you talk about pre-wiring not only in a way that allows me to service a customer and do all these processes, right, but to also do them at every touch point consistently. Self-service in the call center with a direct salesperson.

Finally, it’s around the middle box we call sort of simplified scale. This is where there’s a huge amount of infrastructure.

HP was nine months into their project of wiring their own gateway, by the way. They have payment inside of HP. They had everything. They have their own gateway. They have multiple payments relationship. They were nine months into a project, putting, trying to build around billing, multiple ways of managing entitlement.

This is what’s interesting about services. When you talk about cloud, digital goods are infinitely configurable. Why is that different than a product? A product, you’re going to go buy it, right? There’s one of them in a store. Maybe I’ll give you two different types, a small one and a big one. With services, you could have a hundred different combinations of entitlement. On Mondays, you can read this. On Tuesday night, you can read it.

I mean, you can come up with any combination of craziness. To me, they’re going to want that combination because it personalizes them. When you look at the rules… and now how do I wire together by ordering through the front-end? How do I wire together to tell my ERP system the right thing to do? How do I bill it on a regular basis? How do I define these products?

How do I actually create all these different price points and different models and just get them out there to test, for scaling, experimenting?

To do this would take a large amount of time to wire your old systems together, as we found almost all our customers were doing.

In fact, Constellation Research did a recent study. Over 33 different systems participate in a single order. What you’re doing is with someone like us, it’s not replacing the system, not taking away your ordering system, et cetera. It’s around orchestrating them and being able to create a virtual bundle that I can sell to my customers.

This revolution that happened in telcos now – which only big companies could afford at that point in time – is now happening in multiple companies around the world. We’re working with hardware manufacturers that have recognized that their hardware is getting lower and lower margins, but they can install software on top it. The analogy I use is like a Tesla. There’s a $40,000 to $60,000 difference, depending on how much stuff’s in there. Majority of that difference in performance is software; the sustained hardware, sustained cost.

How do I, as a hardware provider, become a platform for add-ons? As Bezos said, “Every hardware platform better have a ecosystem with add-on solutions to grow your total solutions value.”

How are finding new and innovative ways to pay driving change?

Already, payments is revealing those huge innovations happening, because everything can be wired for being a point of sale. More and more, services are buying at that point of sale. It’s not just where now I’m using a cash register. It’s really a service in itself, which is much larger than products in this industry are being sold and productized online.

The question is, is payments enough? When you look at what’s needed, what we’re seeing over and over again is customers understand how much they end up having to do themselves.

They actually need to go up from payment and look for solutions to bring together the touch point, putting together the billing and the commerce pieces, putting together smarter levels of payment to help them manage the chargeback, to help them manage the financial reconciliation, to help them manage having to go global and manage global compliance.

Just a little bit off-topic, does that include supporting Bitcoin payments?

Bitcoin… not yet.

Not yet? Do you have plans in the works to do that?

Yes. So part of this is… services, yes. We’ll just leave it at that.We’re bringing on new innovation, and cryptocurrency is one that we see as fundamental innovation in the industry and one that is welcome. So innovation and things to turn it around I think are ones that not only are we looking at, but our vendors are looking towards as well.

So all this innovation of Bitcoin actually, fundamentally, you find a way to lower the cost. In fact, if you look at… I think a major card provider was saying it may not be Bitcoin that thrives at the end of the day, and of course, they may wish that. But the infrastructure, the technology and protocol is something that we can actually start using in our networks as well, right, and that will lower the cost. It’s a great innovation.

We’ll see if the old guard can update their platform and learn from that. I think the second thing is that you see effort. The resellers are creating their own network, right, on mobile. They see that potentially, mobile payments, mobile POS becoming an approach towards bypassing the card networks and become big enough that they can actually challenge the hegemony of the card networks and the price they pay.

A little bit about you. What’s your history and how did you get involved in Avangate?

Sure. I’ve been in the Valley here for about 20 years, both in… and actually, all in software; both at large as well as small companies.

So I’ve been a VP, executive at Oracle, PeopleSoft, Amdocs. So those experiences really… looking at not only customer management but billing, as well as being in a variety of startups, both venture and PE-backed.

I’ve been lucky, knock on wood. I’ve survived the mass exits in most of these and see this as just a huge opportunity to move forward.

I’ve primarily been in customer management; like I said, middleware. And as such, my background matches very well with B2B and B2C. Now, I would say that when you look at this industry, why Avangate and the industry itself is undergoing such a massive change in product services.

And like I said, the cloud touches every industry. The fact is that Nike+is a product company. But did you see their investment? Nike+ is just a platform. Did they expect to make a lot of money there? No. They invested in 30 startups that are creating services on top of Nike+.

Look at each new thing. The things themselves may not be the big drivers of revenue. In fact, many don’t see it. They see it as a huge generation of data.I mean, it’s not just the startups around Nike+. It is the e-book publishers.

You got folks who are publishing to folks who love to generate their own backyard garden and feed themselves and get off the power grid. You have all types of interesting folks who are self-publishing, creating not only content, but also services because of the cloud. It makes it so cheap to get it out there. And we become a platform that grows with them. Because we only take money when they make money. So that we see a huge growth in all these vendors leveraging the cloud, leveraging the tools we have that are necessary for a service type of business to grow. So it’s a lot of fun.

Mike Ni, CMO/SVP Marketing and Products

Michael Ni brings over 20 years of experience as a marketing and product executive in bringing successful innovation-driven businesses to market - from startup to Fortune 500 companies.

Michael’s business experience spans across software, telecommunications, consumer packaged goods and digital media.

Prior to joining Avangate, Michael served as VP Products at Amdocs, where he drove the definition and development of next generation customer management, retail and commerce applications. In addition, he has held executive positions at leading CRM/ERP vendors, technology startups, and in strategy consulting. These roles include GM/Managing Director at MyWire, a venture-backed new media company; VP of Product at Oracle / PeopleSoft, where he drove the definition and development of the “Fusion” next-generation applications platform; VP of Product and Operations at venture-funded OnePage, Inc. (acquired by Sybase, Inc.) as well as Marketing Strategy Consultant at PriceWaterhouseCoopers.

Michael received an MBA from Harvard Business School, an MS from Stanford University and a BS in Mechanical Engineering/Robotics from Massachusetts Institute of Technology.