Situation: A large enterprise threat to churn unless we support an on‑prem, air‑gapped deployment. They’re strategic (high ARR, reference value) so I evaluated three options: build full on‑prem product, offer a hybrid managed gateway, or decline and risk churn.
Option 1 — Build full on‑prem, air‑gapped product
- TCO (5‑year, assumptions: dev team 6 FTEs for 12–18 months, 2 FTEs ongoing maintenance, per‑customer provisioning/installation costs $50k): ~ $3.0–4.5M fixed + $120k/year variable per customer. Includes testing, packaging, installers, local dashboards, audit logs, upgrade tooling.
- Roadmap impact: Heavy — reallocates ~40% of engineering capacity for 12–18 months; delays cloud feature roadmap by ~6–12 months.
- Support & security: Requires new support tier (field install, local troubleshooting), formalized hardening guides, FIPS/SCAP work, patch distribution method. Increases operational risk from fragmentation.
- Legal: Need clear SLAs for on‑prem uptime, liability for data loss, export controls, and IP protection clauses. Validate third‑party license compatibility for air‑gapped use.
- When to choose: Customer is extremely strategic, high lifetime value, and willing to co‑fund or commit multi‑year contract.
Option 2 — Hybrid managed gateway (preferred compromise)
- Description: Provide a small on‑prem gateway that brokers metadata and policy locally, with optional periodic outbound sync over a customer‑controlled egress or via physical transfer; core service remains cloud.
- TCO (5‑year): ~ $800k–1.2M dev + ~$30k/year per customer for provisioning and support. Gateway is lighter-weight, reusable across customers.
- Roadmap impact: Moderate — creates a focused engineering track (3 FTEs, 6–9 months) without halting cloud roadmap.
- Support & security: Lower operational overhead; gateway hardened, signed binaries, automated offline upgrade bundles. Still need secure key management and clear trust model.
- Legal: Easier — no full data custody shift, simpler compliance mapping; still require responsibilities for secure gateway updates and support windows.
- When to choose: Most cases — meets air‑gap policy while keeping long‑term cloud economics.
Option 3 — Decline and risk churn
- TCO (5‑year): Opportunity cost = lost ARR (e.g., $2–10M depending on account), plus reputational risk and prospecting costs to replace.
- Roadmap impact: None directly, preserves cloud roadmap velocity.
- Support & security: Simplest operationally, but may lose strategic insights from that customer.
- Legal: Minimal change, but customer may publicize dissatisfaction.
Negotiation plan / commercial offsets
- Prioritize Option 2 as the default offer. Present a technical demo of a minimal gateway within 4–6 weeks.
- Commercial offsets: Offer a time‑limited discount, multi‑year commitment with annual billing, or shared engineering investment (cost‑share: customer funds X% of gateway dev). Provide onboarding professional services credits to cover installation.
- Transition terms: Pilot phase (90 days) with limited scope, success criteria, and rollback clauses. If pilot succeeds, formalize a 3‑5 year contract with premium for on‑prem support and agreed roadmaps for additional features.
- If customer insists on full on‑prem, require a multi‑year minimum commitment and cost‑share (e.g., customer funds 50% of one‑time engineering cost or minimum contract equal to 3–5x license value).
- Exit clauses: Define upgrade/patch cadence, responsibilities for security patches, timeframe for critical fixes (e.g., 30/90/180 days tiers), and IP/ownership boundaries.
Recommendation and next steps
- Recommend pursuing the hybrid managed gateway: fastest to value, lowest TCO, preserves core cloud roadmap while addressing security. Prepare a technical solution brief, 4–6 week POC plan, and commercial term sheet with cost‑share and pilot success metrics. If customer refuses hybrid, present full on‑prem scoping with a funded engineering schedule and rigid contractual protections before committing.
