Show season changes the CRM market, it always does. One day you’re in the vanilla application software space and a week later you understand the need to incorporate social media, or analytics or machine learning or you see a need for enhanced integration and development through platform services. It goes on.
Today, in the wake of Oracle, Salesforce, Microsoft, and many other companies’ trade shows, we’re again taking a look at the available suites. But this time, we need to think less about what’s been added and how well integrated the components are.
With Oracle now a year into rolling out its cloud strategy, we can’t say we’re in cloud computing’s early days any more. We’re in a race to computing as a ubiquitous utility like electricity, water and natural gas.
Oracle was the last cloud holdout, the last company that led with its legacy on-premise products. Today they’ve reinvented themselves to offer infrastructure, platform and applications or any combination as services. They might talk a good game about supporting legacy customers forever, and that will be necessary, but they’d like nothing better than to convert the legacy base to cloud infrastructure. And make no mistake about it new cloud based apps is the eventual goal. Much the same is true of Microsoft whose end user products like Office are now being delivered by subscription even if some of the software still resides on the desktop.
Salesforce was, of course, born in the cloud and it hasn’t suffered through a transition though for almost 20 years it has been undeniably causing one. The disruption impacted everyone else but the next disruption, or whatever we’ll call it, is affecting even Salesforce. With typical poise Salesforce is taking it all in stride and is even taking a leadership position.
The disruption turns form purely delivering technology to focusing on how it is used. The focus is very important to Salesforce and all the others because it will have a direct impact on how much of its services (we used to call it software but this is now) get bought and deployed.
So we see increasing emphasis on learning how to develop apps and administer them even to the point of opening up the training platform, Trailhead, to enable partners to develop training programs for their custom apps.
In the background there’s also an effort to standardize on processes that deserves attention. Back in the day, a process was carved in stone. Your organization used a 7 step sales process or maybe a 5 step one. Introducing a 7-step process into a 5-step organization was enough to set off a riot. It was something you did only very carefully if at all. In that era there were sales methodology companies (still are) and there were software companies and each would tell you their products were agnostic. They were too, with a little coding.
But today it’s different. The introduction of AI and machine learning has made both methods and applications secondary. Yes they’re still important but, no, they don’t rule the roost. Everywhere sales people seem to be sidestepping the argument about which method is better in favor of adopting an attitude of doing what the AI system suggests is the next thing needed to advance a deal. As it should be.
Platform based CRM with robust partner communities and their apps have brought us to the point of fully integrated and automated business processes. Customization has never been easier thanks to the platform too. The next step in our journey will be inventing new business processes that derive from our need for, and attempt to be, more agile, to flexibly approach new opportunities.
That’s what has been most interesting to me about show season. Each vendor has, in it’s own way, made a tacit nod to the primacy of data and analytics for automating processes. In that event, they’ve also begun closing the door on business processes that momentarily pop out of the automation sluice and into a spreadsheet or other manual thinking.
The change isn’t only recognizable in sales though selling is a big beneficiary with solutions that include SFA, CPQ, admin functions, AI, ML, compensation management and gobs of graphically rich reporting. Marketing is a rich area with its newfound abilities to identify, target, hand off, score, and journey map. And service has its own rich tool set most significantly analytics married to multi-channel abilities to take customers from beginning to end of a support journey without necessarily bringing in a human.
In all of this businesses are freeing up employee time for higher-level tasks that add value to customer experiences well beyond getting a deal or a right answer. This is where the customer facing jobs of the future will come from. They will demand more and different people skills as well as technical mastery.
That’s why this show season has been a turning point. I think it will be looked back on as the time we began a more disciplined approach to customers and employees as people who interact with technology, not just as various flavors of technologists.
Richard Branson, the business icon and entrepreneur extraordinaire is back on the bookshelves with another autobiography, “Finding My Virginity,” which, um, bookends a shelf of previous autobiographies like, “Like a Virgin,” The Virgin Way,” and “Losing my Virginity.” Branson’s appropriation of virginity was mildly shocking once but in these times, it serves well to describe a man who admittedly knew very little about many of the endeavors he embarked upon but who also proved to be a remarkably quick study on the way to amassing a fortune estimated at $6 billion at one point.
“You can only lose your virginity once.” he writes in the prologue. “But in every aspect of my life—building businesses, raising my family, embarking upon adventures—I try to do things for the first time every day.” In other words, he is a serial virginity loser, which helps explain his success.
Branson’s daring, impulsivity and ability to take a hit and keep on functioning have made him a legend, a fortune, and at least once saved his life but as is often true of the great ones it’s the failures that tell much more. For instance, there was a New Yorker article a few years back that described his death defying attempts (yes there was more than one) to circumnavigate the earth in a helium balloon. The first attempts ended in oceans and with introductions to some very nice navy and coast guard types but the attempt that sticks is the one that made it, naturally.
But there was a more harrowing experience in which Branson and his wife were sailing in the Caribbean with another couple when the boat’s mast broke. They were by Branson’s estimate miles from land and the foursome had to decide whether to stay with the wreck or swim. Branson and his wife didn’t think twice and made a swim for it. The other couple was never heard from again. It could have easily gone the other way, but it didn’t.
Closer to the present, I started following Branson’s career in earnest about ten years ago when he offered a prize of $25 million of his own money for a method that in prototype could absorb one billion tons of CO2 from the atmosphere per year for ten successive years and keep it out. Branson’s thinking was that such a demonstration would likely scale up to a level sufficient to help ease the planet’s problem with carbon pollution. As an owner of airlines he felt some responsibility for finding a solution.
Naturally, there was news coverage. In my book, “The Age of Sustainability” I quote headlines in the New York Times including, “A Cool $25 Million for a Climate Backup Plan,” in the Science Times section on February 13, 2007, above a story by John Tierney. Referring to global warming at that announcement, Branson said, “Man created the problem, therefore man should solve the problem.”
No matter that what Branson wanted was a way to un-smoke a cigarette, he compared his Virgin Earth Challenge to the quest to discover a method for determining longitude at sea which was inspired by the 1714 Longitude Act of the British Parliament.
But four years later another Times story, “Cash Prize for Environmental Help Goes Unawarded,” told a very different tale. Branson and his team had reviewed more than 2,600 challenge submissions and found none of them worthy. What happened in the intervening four years is a lesson in large-scale research, development, international cooperation, invention, and expectation setting. In short, Branson’s discovery that at least some of the solutions required tampering with earth’s natural systems, and violated various international treaties poured cold water on the effort. Then too, many of the solutions simply didn’t work for various reasons. Solving the problem would require international cooperation at the level of nation states, an area where Branson’s expertise was, and still is, virginal.
Today the Virgin Earth Challenge is in a state of suspended animation, no prize has been awarded but people are definitely working on projects and no one is very concerned. After all, solving the longitude problem took up most of the 18th century and the productive lives of those who chased the dream which culminated when a self-taught clock maker, John Harrison, produced the first true marine chronometer which enabled mariners to compare the time at a home port (later the prime meridian at Greenwich, UK) with the local time derived from celestial observations. After that, a simple calculation could tell you where you were.
In all of this Branson has played the role of catalyst providing capital but also, and more importantly, vision and encouragement derived from a belief that problems have solutions. In essence this divides the world into two camps engineers who can figure out solutions to problems, and those who dream quixotically of doing the impossible, like repealing the law of gravity. Branson is many things but he is not, contrary to the image, quixotic.
I spent the first week of the month in San Francisco at Oracle’s customer event, OpenWorld 2017 and when I wasn’t drinking from an information fire hose, it was alternately fascinating and exhausting. There were major announcements in database, blockchain, AI, cyber security, and other stuff I have only a tangential association with. For instance my eyes glaze over when they start talking about bare metal servers and going serverless so I’ll limit these observations to database and security with a few dashes of other things.
But primarily OpenWorld 2017 was a coming out party of sorts in which the culmination of billions of dollars of investments in advanced technologies became unavoidably visible. From here on Oracle might still support its legacy customers but make no mistake, they are legacy and the future is at minimum about moving the datacenter to the cloud and moving your traditional licenses there. Oracle even has a name for that practice BYOL or bring your own lice
Oracle is making that task as easy as it can be and I spoke with customers who were doing it or just finishing who were pleased with the experience. We don’t often think about it if we keep to the big picture but there are a lot of old systems in the enterprise that need to be replaced because they no longer support their missions. There is no better indication than that for determining that the next few years will be full of stories about cloud migration.
The key to successful and necessary transfer to the cloud is Oracle’s autonomous database, 18c. The new product will be available by end of year and is supposed to self-provision, self-maintain and self-patch while running thus eliminating the need for most downtime. CTO and founder Larry Ellison said that it takes an average of 13-14 months from when a patch is available to when it is installed in a majority of customer shops. If a patch covers a security problem that leaves bad guys a huge amount of time to steal data, which has become epidemic.
As Ellison said in his opening night keynote, “People are going to get better at stealing data, and we have to get better at protecting it.” Fair point. The database will be a big part of that protection along with some semi-autonomous security software (that will become autonomous soon enough). Both products rely on Oracle’s AI and machine learning tools as well as advanced database hardware.
That’s the catch, but it seems eminently reasonable: you have to be on Oracle gear to get the full benefits of the software’s power. Actually it’s less of a catch than you might think. While there are enterprises that are big enough to need and to purchase the hardware, many if not most, customers will receive the full benefits of Oracle’s technology as consumers of its cloud services. So many of these announcements can be rightly seen as further inducements to move to the cloud.
Ellison is fond of saying, “You can get all of this, but you have to be willing to pay less.” That’s fair if you’re looking at the monthly or annual subscription charge but one suspects that over time many companies will be paying more overall though there’s the issue of refresh that many companies avoid but which are a standard part of the cloud. We’ll see, in the end you get what you pay for.
Oracle also announced a foray into blockchain, the distributed ledger technology that provides greatly enhanced security, speed, and transparency to inter and intra-company transactions. For instance you will soon be able to use blockchain to track the provenance of parts in a supply chain, and one can only hope that credit reporting adopts similar safeguards in the future. We can also hope to track some customers and their purchases that way, especially in a B2B setting to facilitate sales.
Lastly, there’s AI and data. Whether it’s called AI or machine learning, the technology requires lots of data to train a model to be useful in predicting the future. Most enterprise data is deficient in one or more axes of data on hand so Oracle’s solution has been to provide clean data to augment private data and deliver the big picture view that’s needed in sales, marketing, service and a lot more. Oracle also introduced a new set of IoT applications aimed at specific business outcomes. It’s impossible not to say more about this later.
But to summarize, Oracle’s long-term investment in cloud technology has begun to pay off. We’ve seen this in the company’s earnings reports over the last year and OpenWorld was a kind of coming out party for numerous solutions at literally every level of the software (and hardware) stack. The company will be a formidable competitor in the years ahead as its legacy base is up for grabs. They’re all going to move to the cloud at some point and Oracle wants to keep them. Other vendors with good solutions are competing at every level from Amazon and Google to Microsoft, SAP, and Salesforce. At Oracle OpenWorld 2017, Oracle more than made its case. Time for the others to step up.
There will be little New Year’s Eve celebrating but much potential morning after hangover for US businesses not preparing for ASC 606, the Financial Accounting Standards Board’s (FASB) new rules about revenue recognition set to go into effect on January 1, 2018. The news is much the same for Europe though with only the rule’s name being different; for them it will be IFRS 15.
A recent KPMG report, “The Deadline Is Approaching for Accounting Change” has some hard numbers and equally hard facts, among them, the change is hard to do. Where have we heard this before? Some findings include,
- Even though the effective date for revenue recognition is just months away, 60 percent of public companies said they are facing challenges staying “on track,” and a similar percentage of private companies felt the same way.
- Only 6 percent of respondents believed they were faced with minimum impact requiring “little of no action” on their part
- Total expected implementation costs had increased from the prior year for 57 percent of the public company respondents
- Most respondents did not think the new rules would have a significant impact on their company’s tax issues
- Internal communications need to be improved; 33 percent said C-level executives had little or no involvement in the process
Additional data shows that the largest clusters of companies were either still in the assessment phase (39 percent) or in implementation (35 percent), only 6 percent said their implementation was complete.
With so much foot dragging, it’s a reasonable bet that a healthy number of companies will miss the January 1, 2018 implementation deadline. Then what? To put it all in perspective, many companies don’t have a revenue recognition issue and 57 percent, according to the survey, say their organizations are not planning for system changes for the new standard. This may be a good indicator of the percentage of companies throughout the economy don’t rely on subscription business, at least not yet.
But it’s hard to see what companies are in this group. Even companies as old school as Caterpillar, the earth moving equipment maker, have significant initiatives in offering their products as services. So, a logical follow up might be, why aren’t these companies more focused on the economic opportunity provided by subscriptions?
The answer might lie in the way that subscriptions have been handled so far. With few standards for revenue recognition or definitions for how sales are booked and commissioned, it’s likely there are companies that offer some form of subscription services that don’t think the new rules apply to them. But since the new rules also apply in the EU and there are penalties for non-compliance, we might look for a sudden burst of activity in this area after the first of the year as the laggards finally discover that the new rules really do apply to them.
To be fair though, there really are companies for whom the new accounting standards really are a non-issue. Zuora, the subscription billing and financial management company trying to shepherd as many businesses as possible into the new standards, has developed a website that tracks many big-name companies that might have an issue with the new rules. Indeed some do but it’s surprising the number of them that don’t foresee an impact on company cash flows, including Salesforce, Caterpillar, General Electric, and many others. Perhaps that’s because these companies are so big that they’ve had to deal with revenue recognition for a long time. Or perhaps they’re so rich that they’ve been tracking the issue and getting ready for it. The information is gleaned from public records of 10-Q filings so it’s reliable.
What’s a company to do if it doesn’t fall into any of these buckets? It’s not too late and Tien Tzuo, CEO of Zuora has this advice.
“Even if a company has not yet started their ASC 606 project, there are a few things they can do to get set up for reporting under the new standards immediately. First, get an accounting firm to do an assessment and determine the risk of impact on revenue. Then, identify the timeframe required to fully automate revenue recognition to reduce that risk. If that’s not possible, a company will be forced to suffer with expensive, manual-intensive labor to report on time. Doing manual calculations will be error prone and can cause restatements later due to complexity of 606. If you’re stuck doing manual processing now, think about launching an automation project at the same time to collect data and analyze it for the first reporting cycle under 606.
Ok, it’s time for the other shoe to drop. All of the above is for the consumption of public companies. If you work in a privately held company, and especially if you’re one of those large pre-IPO outfits called unicorns, you’ve got an extra year to figure this all out and you ought to do it ASAP. As Tzuo points out the danger for the unicorns is this,
“Deloitte released a new survey of 3,000 companies indicating slow progress among private companies on implementation of the new revenue standard may delay IPOs. That’s a bad sign, especially when Fortune’s Data Sheet reported that the IPO window is now again open for tech companies following successes of Roku, CarGurus and MongoDB.”
Imagine working for ten years to build a company and bring it public but then failing to do so at the optimal time. Come to think about it, don’t, it’s too depressing. Better to get to work on finding your optimal solution. It’s out there.