Salesforce is a large and well-disciplined development company. They’re pretty good at marketing too. They continue to innovate in all product areas from core platform to applications and the one criticism I’d make is that it’s information overload at times. Reminds me of Oracle.
Lately they’ve made a big deal of adding their AI product, Einstein, to every application area to provide insights and stack rank options. Given that this is the first year of Einstein, it’s not surprising that the foundational layer looks similar across all of Salesforce’s disciplines; in cloud after cloud we some version of next best… . I expect that we might see examples of this at Dreamforce.
But back to discipline. Salesforce is paying a good deal of attention to the applications level these days in addition to spiffing up its platform and it’s noticeable in banking and finance as well as in the IoT but the differences in approach are what’s most interesting.
In IoT, the company is taking a very different approach than in finance. The company recently announced IoT Explorer and the ability to develop IoT applications quickly. App building tools are a part of the platform so it’s not much of a surprise that more agile development is coming to IoT though it reveals an interesting take on company strategy.
IoT has a lot of moving parts right now and the natural inclination for some might be to try to dominate the end to end process from intelligent devices to connectivity to IoT platforms and finally on to business applications. But three of these four areas might easily not bring in a nickel for a company like Salesforce. Specialized vendors that Salesforce would have trouble competing with dominate devices and connectivity. IoT platforms is a similar area with companies like Amazon Web Services dominating. So Salesforce wisely didn’t try to compete and is dedicated to supporting the leading platforms leaving the business application area as its chosen place to compete.
By focusing on the apps, Salesforce is positioning itself as the key to capturing value from investments further up stream in devices and platforms. Typically a business might make independent decisions about those areas and the business app company better be able to work with whatever is in place and that’s the strategy.
Given the state of the early IoT market, it makes good sense to go with an app development strategy. It’s too early to have standardized apps that vendors might want to buy off the shelf so having a quick and efficient development tool set makes all the sense in the world.
On the other side of the industry there’s financial services and banking, two mature marketplaces with specific application demands and here the strategy is less about new development than it is about using the platform to make clean and effective changes to process oriented operational systems. So in banking and finance Salesforce can deploy its many platform based tools as well as partners like nCino and Vlocity to produce systems that cover the institution’s critical processes, like loan origination and customer service. Again, Dreamforce might have more to reveal here.
If you need an example of digital disruption, you can’t do better than the retail banking industry. A byzantine collection of rules and regulations plus the overhang of many legacy systems have conspired to prevent banks from becoming more involved with their customers. And even innovations like the ATM from several decades ago, only serve to distance banks from their customers. This leaves plenty of opportunity for upstart technology vendors to disrupt the applecart. All of this combined with a generation of potential customers who were raised on digital products and services puts an important demographic up for grabs thus setting the stage for disruption.
Not long ago Salesforce recognized the dynamics in play and moved to develop vertical applications for selected industries including banking where large institutions need to address the requirements of large customer bases. The result is the Financial Services Cloud for Retail Banking, announced last week.
Some of what Salesforce delivers in its Financial Services Cloud will seem revolutionary to many bankers. Things like a rich assortment of applications for all phases for banking from loan origination to customer management. But a good chunk of the benefit comes directly from being a cloud solution with easy onboarding and updates scheduled three times per year.
Where the Salesforce Financial Services Cloud differs from many banking products is in how it brings together banking products resident in its AppExchange that together deliver concerted solutions. For example, nCino tells a powerful story of reducing loan origination time by orders of magnitude not by building a closed system but by integrating other platform products.
Vlocity, another partner with strong banking apps based on the cloud platform is another example. It provides intelligent agent and omni channel services for financial services and insurance. In these and other relationships you can see the Salesforce go to market approach solidifying. Partners bring expertise, which can be as big as loan origination or as specific as document signature capture. All of it goes into a solution that customers can craft for their specific industry needs.
As I’ve noted many times before, when companies get to the multi-billion dollar revenue level, they can’t expect to sell the same products in the same ways they did when their businesses were much smaller. To show growth a business needs help and that means acquiring other complementary businesses and selling in concert with partners that can add specificity to the core product. Salesforce has done both and I look forward to hearing more about vertical strategies at Dreamforce.
Digital Hub is not a new idea, it’s been percolating for a few years and its roots can be traced to Dublin, Ireland where, in a cluster of 8 buildings, there’s what might be the original hub. In Dublin it’s made up of 97 companies employing 725 people and it was given a jumpstart by the government in 2003. Elsewhere we might be more attuned to the idea of a tech incubator.
Fast forward, to today and half a world away in Kuala Lumpur, Oracle has employed the hub concept to label its SME incubator and for good reason. More than two-thirds of the world’s total micro and SME market is in the APAC region equal to 266 businesses, according to an article, ”Oracle Corporation opens digital hub in Malaysia” in The StraitsTimes.
According to Oracle managing director of Malaysia Fitri Abdullah, “The KL digital hub is set to leverage Asia Pacific (APAC)’s small and medium enterprises (SMEs) immense growth through providing our Oracle Cloud solutions to streamline operations, boost innovation and build a platform for growth.”
All well and good—and timely too—with Oracle OpenWorld happening next week. Oracle has learned the lesson of its main rivals for supremacy in the cloud that, in addition to creating product (supply), it also needs to create demand, which would seem to turn a foundation of economics on its head. Say’s law states that supply creates its own demand but the literal meaning of the term might not be what applies.
It is true that supply of new category products and services creates its own demand. Often customers aren’t even aware of their need until a product shows up that demonstrates a void in life. For example, how many people really knew they needed an iPhone before it was announced in 2007? By the same token how many businesses knew they needed cloud computing before Salesforce introduced its product in 2000? I was there and I can tell you, not very many at all. Businesses were crying for enterprise software that was easier to install and maintain and that didn’t cost the equivalent of the GDP of an emerging nation. Cloud computing provided that and these attributes are why the cloud succeeded initially.
But now, many years later, the bloom is off the rose, and while I think Say’s law still operates quite well under the right conditions, it doesn’t operate in cloud computing because supply is ubiquitous. Time to focus on demand. We know the cloud and most of us don’t even consider it as risky as having data under the control of a corporation. Just look at Equifax and all of the other data breaches over the last few years, they’ve nearly all been breaches of in-house data centers.
But back to Oracle. Good on them that they’re recognizing the need to generate their own demand in this key segment. We live in a different and later part of the cloud computing cycle, a time when cloud isn’t new or unique. It’s a time when the cloud has been proven better than what it replaces; a time when price concerns are a big part of decisions. With price concerns comes commoditization and automation as cost cutting measures and the soon to be announce Oracle autonomous database is a great example of those trends. There’s a stampede to the cloud happening right now. Perhaps it goes by the name of digital disruption but it amounts to the same thing and low cost producers are in good position to dominate.
I don’t know whom but Oracle will soon have competition in Kuala Lumpur. According to the Oracle story in New Straits Times, another large company (I’m guessing American) will launch another hub there in October. No names yet but if you need some ideas just check out the incubators along Route 101 south of San Francisco.
Salesforce recently announced the partial attainment of one of its long-range goals. In its second quarter earnings announcement the company said it had eclipsed its goal of a $10 billion run rate. This will be followed by similar announcements over the next year (first $10 billion year, etc.) and why not? They should celebrate.
Second quarter revenue hit $2.56 billion a 26 percent increase year over year, but for all the fanfare, anyone watching the evolution of the company and the market should not be surprised. Take nothing away from the skillful engineering and deft management over a prolonged period, but this day should surprise no one in that it was inevitable that some company would reach this milestone.
It’s also not surprising that a long list of established software companies such as Microsoft, Oracle, IBM, or others didn’t get there first. To understand the moment, we need to understand some of the economics behind it all.
First and foremost, Salesforce embraced a disruptive innovation like no other company. Established businesses like Oracle and Microsoft initially gave SaaS no attention and if they did, they denigrated it. The denigration was a great sign that the big guys were concerned but as always it seems concern didn’t turn into action until very late in the game. Siebel was upended by it. Oracle and Microsoft are right now still trying to establish their credentials. Established markets and business models prevented others from taking advantage of what SaaS could offer.
At the same time direct competitors of Salesforce did something just as foolhardy, they underestimated what they had. As an analyst covering the emergence of SaaS I could see that most other vendors saw SaaS, or hosted computing as it was briefly called then, as merely another delivery mode for software. As far as they were concerned they’d sell you the same product with various delivery options, such as a VPN, and call it a day.
What nobody saw, perhaps not even Salesforce, is that SaaS was and is a dramatic commoditization of IT. The SaaS era is the second half of what I refer to as The Age of Information and Telecommunications in a forthcoming book. In every age the first half is expansionary and inflationary and the period from 1971 to 1999 did that for IT. Those were years of costly systems, over runs, and big commission checks. But sooner or later markets revolt against runaway costs especially because a new technology has become so integral to life as we know it.
That’s when an industry turns its attention to efficiencies and economies and that’s precisely what Salesforce offered out of the shoot. Where other CRM products were complex and hard to customize, Salesforce positioned itself as easy (it had to be—the original product only had 4 tabs). Where others had expensive licenses, Salesforce charged by the seat-month. And where others needed expensive hardware and training, Salesforce bundled the hardware and promised an intuitive interface (again thanks to having just 4 tabs).
It all worked. Many people, including me, have explained Salesforce’s success along the lines of “The Innovator’s Dilemma,” and there was certainly a grass roots, bottom up factor operating as there is with most disruptive innovations. But the fact that Salesforce has been able to grow to dominate the industry that it was a late entry to suggests more was at work.
Perhaps the biggest question now is where we go from here. Most of the time, a company in this situation consolidates its position and rides off into the sunset. For Salesforce that would mean becoming the biggest name in CRM which they’ve done, at least by measures like Magic Quadrants. But so far they’ve resisted the temptation to go on autopilot. Every two years or so, they introduce new wrinkles that roil the markets and make everyone scramble to be the fastest follower.
Concentrating on their platform, machine learning and analytics, mobility, social networking, its partner ecosystem, and other topics has given the solution set a breadth and reach that is more appropriate for a general purpose software development house. That’s clearly where the company is taking this. There might still be 50 percent white space in the CRM market but it’s very niche oriented. So it makes sense to take a broader look at the market to ask where a 10 billion dollar company can have an effect that will move its revenue needle enough for Wall Street to notice.
Small companies especially have a distance to travel in adopting CRM-like solutions and much of their future adoption will depend on ease of use driven by the analytics and machine learning that Salesforce and others are building. Another growth possibility is IoT but I see yellow flags in the distance. IoT is in many ways another approach to commoditizing IT, but for non-human customers, and it is a market that will consolidate quickly around a few standards. More worrying, I think IoT will reach commodity status very quickly with few vendors able to make a living there.
For now it’s all in the future. Salesforce has done an amazing job of navigating this far for so long with such good results. It’s one of the biggest software companies in the world right now, the fastest to grow to $10 billion. Good job! Now back to work.
Many businesses still don’t use CPQ, or configure price and quotation, tools in their routine sales processes. Maybe they don’t need it but if these businesses still cling to spreadsheet-based approaches to track things like price lists and product catalogs chances are good that they’re dealing with more overhead than they need to. Worse, they’re wasting time and therefore money. The choice between quote accuracy and timeliness is a false dichotomy. Today you need to have both or risk always being the best second choice.
Businesses without CPQ have to check and re-check quotes before they go out the door adding delay and the potential for error. All businesses need to update and edit their catalogues and price lists periodically, but without a CPQ system, they also need to ensure that the right, or current, documents are being used, a never-ending task. As a result, these businesses have to focus on mechanical quote generation rather than the overall quote to cash process (QTC), which is more interesting and way more profitable. Here are some of the top reasons that CPQ automation is no longer optional for your business.
- Think faster and clearer. CPQ lets you think faster and to be one of the first vendors in the sales cycle to put a proposal before a customer. CPQ lets you propose quickly and with confidence knowing that your proposal will be complete and compliant with your catalog, price list and other business rules. It also gives you the ability to reconfigure quickly which is often needed.
- Lower risk. Standardized quotations take the risk out of giving the house away with an errant quote, making it possible for reps to do their own quoting thus reducing cycle time. Rather than having sales managers review all quotes, a time-consuming process, CPQ enables vanilla quotes to speed along while alerting managers to those that need review.
- Accelerate revenue. Faster and accurate quotes help ensure that your offer will be on top of the stack when decision time comes thus speeding decisions.
- Better billing. CPQ enhances billing when the two systems are well integrated, by providing an exact itemized list of purchased goods and services for your billing system. Exact copies of quotes can automatically go to the billing department so that when they are accepted and a deal closes, there’s no wasted time producing an accurate bill—and far fewer disputes too. For deals that deliver in multiple parts, CPQ provides clear itemization of what’s promised and what’s already delivered.
- Visibility through analytics. A database of quotes is fertile ground for assessing concretely what works well and what doesn’t in your sales process and helps in the never-ending quest to improve it. But that’s another big data problem unless you have a system that can provide the analytics. Bonus points for a CPQ solution that is integrated with your overall CRM, for a deeper view of the sales process, not just the close. Analytics can also flag for review those quotes that stray from accepted rules.
- Cloud-based, mobile first. If you’re lucky enough to be using a modern CPQ tool, your quotes can be available on multiple screens—from the CFO’s desktop to the sales manager’s phone, thanks to modern cloud infrastructure. This ubiquity enables better team selling and faster closes no matter where your team is operating.
Modern CPQ evolved from applications that replaced spreadsheets. But those systems were often expensive and time consuming to operate so they were primarily used by big companies with complex rules and large catalogues. Times have changed and business has accelerated so modern CPQ with its small footprint on multiple devices, cloud capabilities, and built-in AI can now address a larger audience of businesses in a competitive landscape.
Experienced sales people know there is no silver bullet for advancing every sales process, but they also know of the need to stay competitive. That’s why CPQ that can run on your mobile phone and that integrates with other key systems like CRM, SFA, and billing is no longer a wish list item for most businesses. Professional services companies have their own analogous issues that are solved with services systems that do similar things to CPQ, that’s a topic for another time.