Why No One Is Going to Buy Salesforce
After a short and not terribly informative piece on Bloomberg saying that Salesforce had engaged with bankers to potentially evaluate takeover offers, the usual activities ensued. The company’s stock went for a small ride and pundits and prognosticators all began speculating about whom a logical suitor could be and even what the company would be worth on the block. This was not the first time.
I was one of the speculators placing a metaphorical bet on IBM as the suitor followed by Oracle, HP, and Microsoft in no order. They could all use the shine that acquiring this gem would provide. But let me be clear—I don’t believe Salesforce would be acquired in its current state.
The reason is simple—even if a buyer paid a premium on the company’s $50 billion market capitalization it would not be enough because Salesforce’s greatest asset is its future and you can’t put an accurate price on that. So far in its 15 plus year history the company has innovated and helped create markets in cloud computing, social media, CRM, modern platforms, wearable devices, web and mobile computing, and more. Salesforce might go by the ticker symbol CRM but its business is front office business innovation.
All of this is exactly why Salesforce is such an attractive target and precisely why no one will buy them. Large companies, which are the only ones that can afford to be in the bidding, are not hotbeds of innovation. They hang back waiting for markets to prove themselves before swooping in to offer products and services for new niches. Cloud computing is a great example. There’s a famous YouTube video of Larry Ellison at the Churchill Club ridiculing cloud computing as a fad and so much hot air. This was before Larry got religion (and products). Less flamboyant stories can be told of IBM, HP, Microsoft, and SAP—they all waited to enter the market watching Salesforce to ensure it was safe.
Now, of course, they all talk about cloud computing as if they invented it or at least as if they perfected it. Owning Salesforce would give one of their stories great credibility and then you could see a multiplier effect going out to the other innovative areas the company is involved in. But it could also signal the end of a good thing.
I don’t see how you can bring Salesforce into one of those shops and expect it to thrive; the cultures are too different. Salesforce is laid back and takes prudent risks entering new markets as they are forming so as to acquire a first mover advantage. The others? Not so much.
Aside from Apple, I don’t see other companies innovating the way Salesforce does to invent the future. That’s why Salesforce (and Apple) have such bright futures and why buying either company would be detrimental to the tech sector and the economy in general. It would slow or even curtail innovation.
Some might say that if Salesforce ceased to be the innovation engine that it is, that some other emerging companies would have the chance to take its place, that the free market would do its thing and all would be well. I agree with that but hasten to add that it has taken Salesforce 15 years to get to this point and other companies might be able to evolve quicker to fit into one or more of Salesforce’s niches, but it would take time and there’s no guarantee that those other companies would follow the same trajectory.
To make an analogy, if Thomas Edison got kicked in the head by a mule before he invented the incandescent lamp and the modern power grid, we’d likely still have them today along with sound recording and movies and many other things. But it’s hard to see that these inventions would have been as early and if that’s true, what would the last century have been like?
This is all speculation but so is trying to figure out who might be able to afford to buy the company. I’d be surprised if enough shareholders would be prepared to sell and keep in mind that insiders still own a big block. They’re also rich already so it’s hard to see the benefit of selling now rather than letting things evolve as Salesforce’s other endeavors begin to show profits.
Apple iWatch: What’s the Killer App?
Apple finally launched its watch this week and a land rush of potential ecosystem partners has amplified the original announcement. Salesforce announced three major components of its initial product line including Salesforce Analytics Cloud for Apple Watch, Salesforce1 for Apple Watch, and Salesforce Wear Developer Pack for Apple Watch, all of which are bigger than the device (kidding). All good, but now comes the hard part—what’s the killer app for this sucker?
We haven’t talked about killer apps for a long time because recent introductions going back to the iPod, were self-explanatory or mono-functional or nearly so. The iPhone scarcely upset that equilibrium because it was a phone (duh!) that operated like a Swiss Army Knife and happened to have an ecosystem of stuff you could take or leave and thus customize to your personal preferences. And the tablet, iPad, was scarcely different—a wall with a pre-fab coating of spaghetti already attached.
Now, with the watch, size is the primary differentiator since the watch works best when it is synched up with your phone to bounce things on to and off of the small device’s limited electro-real estate. It is therefore time to discuss killer apps since a device this limited cannot be all things to all people.
The killer app has a long and distinguished history going back to the earliest days of computing. Mainframes were the province of the CFO who kept the books and printed reports and bills. Gradually, department solutions like HR, manufacturing, and lots of other stuff oversubscribed the expensive mainframe and demand for mini-computers was born.
We don’t talk much about mini’s these days preferring to ignore them and go straight to networks. But networks would not have become the vogue if Ethernet, TCP/IP, 4 GLs, and other cool things hadn’t been invented there. Minis were department solutions pure and simple. You could hook up manufacturing machines to them and optimize your process by collecting and analyzing process data, an approach called kaizen by the Japanese who perfected modern manufacturing with good old American know-how from people like W. Edwards Deming that was ignored at home.
PCs and their networks were made viable by office work especially spreadsheets and word processing which at the time were considered hogs that can bring larger machines to their knees. Laptops enabled road warrior sales people (I was one) to carry presentations into meetings and manage databases of prospects while on the road, a great leap forward.
So that’s a brief and probably unnecessary look at killer apps. We’ve been through the intelligent devices of this century already but the question still lingers—what’s the killer app for wearables?
May I suggest that there is none and that the appearance of the watch, while emblematic of a new category of wearables is also setting the definition of a new category of apps and of information—the personal. Think about it. The progression to this point has moved us from unambiguously corporate data (i.e. the GL) to the unabashedly social running on the handheld with naked selfies and “Look what I ate” indicators of an asymptotic march to diminishing returns.
This is not to suggest though that the watch and its ilk are without merit, just the opposite. But the watch also signals the advent of the intensely personal. Fitbit gave us a taste of personal data collection for personal use. Sure we can socialize our personal data—“Look at my blood pressure!” But who cares?
The value of what’s personal and the scale of the watch provide some clues about what will be important apps on this device and the best analogy I can come up with is biological. The watch is a silicon and metal receptor that attaches to your surface the same way an insulin receptor exists on a cell’s surface. Cells have all kinds of receptors and hormones like insulin act by attaching themselves, which in turn sends a signal through the cell membrane causing action within the cell.
Hormones typically don’t cross the membrane because they’re kind of big. They are also very efficient messengers, insulin doesn’t offer a verbose instruction set of to do’s like let in glucose and store it as fat or burn it, etc. etc. This messenger simply says glucose is on the way, you know what to do.
In the same way a powerful app for the watch will be in providing all kinds of alerts to its owners who will know what to do—not just simple messages like, “You have a meeting in 5 minutes or 2 hours.” In the IoT, alerts might come from other devices such as those also owned by the owner of the watch and might take the form of “I need toner” or “I’m off line” or some such message. An alert might also come from a pre-formed search that could include a constant federated search and data analysis to inform the wearer of a change in the environment that the wearer and only a few others might care about, such as a buy or sell signal for a complex derivative. Take note of Salesforce’s Analytics Cloud for Apple Watch, for instance.
So in some ways the watch and wearables bring us full circle from corporate to personal data and back again. In this construction wearables are likely to be the first of ever-smaller devices that might someday occupy places in organs or the blood stream to correct tissue deficiencies or repair disease.
It’s hard to speculate how this will roll out but I think the next advance could have a name that’s bigger than the device and consequently Apple will jettison everything from its little “i” naming convention save for the dot.
But Wait, There’s More
A second article in the Times (following up on yesterday’s reporting on Apple’s smart Watch) says Apple has been oh-so-smart to produce a developer’s kit so that the market can decide the killer app for the device. Killer app here is code for justifying the product’s purchase in the first place.
All hardware goes through a period where we wonder what its utility really is and it took word processing and spread sheets to justify PCs, graphics packages to do the same for laptops and email kind of knitted everything together. When the smart phone came along (i.e. iPhone), it was already a Swiss Army Knife of a sort being able to make calls, check email, play music, and take pictures. The application ecosystems that followed were largely frosting on the cake.
And when Steve Jobs introduced iPad, he vaguely referred to it as a content consumption device, which it is despite the fact that users tried heroically to link wireless keypads to it. As it turns out tablets spawned a market for light and detachable laptops though many vendors like Microsoft and HP are still trying to convince us that their keypadded devices are really tablets.
Wearables are different because they present us with a 2D matrix to figure out. The platform is amorphous, first off, meaning there are wearables for your face and eyes (Glass and its kin), your wrist (various watches), and your pocket/neck (pendant-like things). Each will have, I think, a different killer app though I can easily see spillover. For example a watch could also identify you entering a building and emit your location to your nanny but so could a pocket device. And every device maker worth its patents wants to be the next Fitbit. However, I think the face appliances that capture and show video will be in a class by themselves.
So the point isn’t that there needs to be a killer app, it is that each device type could do with one or risk being eliminated by other more versatile solutions. We’ve seen this before for instance when the smart phone replaced the candy bar model and the flip phone — it wasn’t because call quality could only improve with a handheld, it was because for the same money you got so much more.
Apple is not the only vendor in the wearables space with a developer’s kit and you could argue that its kit might not even be the best if all it does is generate apps for a single device or device type. For more robust developer functionality you need to look at something like the Salesforce Wear developer’s kit, or whatever it’s being called. Just last week the company announced significant momentum in its wearables initiative nearly doubling its core developer partner group to eleven. And yes, this includes multiple device types.
Salesforce Wear can generate apps for all of the major device types including watches, glasses, and pendant or pocket thingies. In this early market that appears to be a superior approach because it gives the market a voice in determining not only the killer app but also the killer device or more precisely the killer device for a particular circumstance. You can’t separate those two converging needs.
So good luck to Apple on launching the Watch, the company picked a safe platform compared to Google and its Glass unit, though in retrospect Glass seems an inspired idea. Apple should have the wind at its back due to its reputation, its huge developer ecosystem, and its choice. As the market heats and consolidates, it would not be surprising to see Apple and Salesforce battling for app supremacy but right now I don’t think Apple is in the catbird seat. Apple is still a hardware maker while Salesforce has been down this road of providing developer resources for many platforms several times already.
The Forbes website posted a very short story about Angela Ahrendts, exiting as the CEO of Burberry to head up Apple’s retail operations. If you thought Apple had broken a lot of ground in technology retailing already, hang on.
You might remember Ahrendts as the pretty, stylish, and all business-gravelly voiced guest on stage with Marc Benioff during recent Dreamforce extravaganzas. Her face was plastered on a wall of the Moscone Center too. Ahrendts took on Salesforce and its social approaches to all things related to customers and transformed Burberry stores around the world to the point that the iconic fashion brand also became the hip tech retailer inserting technology and information into the customer experience.
The result has been a shopping experience that puts the customer into a mindset that envisions the experience of ownership and that’s a long way from simply having a great shopping experience. Hey, if you’re shopping at Burberry’s you are going to spoil yourself so the shopping part of the experience hardly needs work.
So, Ahrendts will presumably bring her avant guard retailing savvy to Apple and perhaps help transform it further from purveyor of consumer technology to one that helps customers make a statement about themselves through their technology choices. Maybe she’ll even upgrade the geeky T-shirts the staff wear.
That’s a smart move for Apple. Given the recent activity in wearable technology such as the watch (for which Apple owns the trademark on iWatch) fashion might be the next tech battleground. The only question in my mind is what role Salesforce might play in this configuration.
AppExchange Seven Years On
The AppExchange is undoubtedly a significant portion of what makes salesforce.com unique. Pre-integrated solutions dramatically reduce the cost to the customer to extend the capabilities of Salesforce and the fact that it has already gone through growing pains means it will take other providers years to mimic its capability and impact.
~Narinder Singh, co-founder and CSO, Appirio
Nine Years ago I wrote The New Garage. It was a thought piece that tried to peer into the future of Software as a Service (SaaS) and make some predictions from a business and economics perspective. Salesforce had recently started promoting its platform in the making (then called S-Force) and encouraging third parties to develop applications that complemented and extended the basic Salesforce CRM solution so there was reason to speculate about the impact this new approach would have.
But also, the history of business and industry is a long story of better, faster and cheaper and at that moment all three were all in the driver’s seat. Back office software had already demonstrated many business process improvements leveraging automation and the Internet, and I thought it was time to turn some of these techniques on software. SaaS was a good start but it had further to go, I thought.
Early impacts lead to tipping point
I saw S-Force as a tool and an economic system that could revolutionize software, making it possible to create and deploy it in a just in time fashion. At that time you almost had to be nuts to think that. After all, even after the initial success of SaaS, software was still something you installed and slaved over for a long time before you got it right, not something you could just plug in like an appliance. And integration? Don’t ask! What was I thinking?
“We’re at a tipping point,” that’s what I was thinking.
The cold, hard truth of the matter was that you couldn’t expect to sell software subscriptions for a few bucks a month and encumber yourself with all the overhead of a traditional software company because you’d go broke. Something had to give. Either software would forever be something you sculpted from a block of marble or you had to figure out how to stamp out perfect copies that plugged in and just ran — no excuses.
My bet was that we could do the stamping but it wasn’t based on any hard economic data. It was based only the conviction that commoditization would have to continue and that something like what’s now the AppExchange would be the result. In truth, there were predecessors to the AppExchange. Steve Jobs opened an online store at NeXT in 1997 and six years later in 2003 Apple set iTunes in motion and today you can buy tens of thousands of apps at the AppStore for all your Apple devices.
All in a name
It’s hardly remembered today but the AppStore (name and domain) were originally Salesforce properties and that CEO, Marc Benioff, gave them to Apple. According to a 2008 Benioff interview with Bloomberg, Jobs had met with Benioff and his team in 2003 to offer advice on the Salesforce online store and the gift was a gesture of gratitude by Benioff to Jobs.
A store for enterprises
But those were consumer sites; there had never been an online application store for enterprise grade software until salesforce.com launched the AppExchange in January 2006. This year marks the seventh anniversary for AppExchange an odd anniversary to celebrate perhaps, but a good chance to look at the AppExchange to see how well it is living up to the original vision. Here are some of my observations.
- The partners have built a long list of useful solutions including HR systems, field service, accounting systems, sales tools and marketing automation products. These are systems that enrich the Salesforce experience but at the same time represent application areas where Salesforce has decided not to concentrate its resources. Where Salesforce has stepped aside, the partners have stepped in.
- The AppExchange created the opportunity for a very long tail of credible business solutions. In the more than 1,700 applications you can find on the AppExchange, there is a host of small applications that just make life easier for the Salesforce customer; some are strategic and many are exceptional. They are applications that integrate with other applications, distribute incredibly fine-grained information and automate processes in unlikely ways that just happen to work well for populations of users who need those exact solutions.
- The AppExchange is a good place to do business for companies of any size, especially for SMB’s. Many AppExchange vendors tell me that they make their living building and servicing their apps to the point that the permutations of Salesforce CRM with partner applications is, if not infinite, then at least very large (roughly 1700! or 1700 factorial). I had predicted this in The New Garage but I had envisioned problems with revenue splits and single sign-on. Both challenges have been dealt with.
- Perhaps most importantly, enterprises go to the AppExchange to find and buy solutions. One of the constant refrains I hear from AppExchange CEOs is that enterprise buyers find them on the AppExchange and buy solutions through it.
So here we are after seven years and the AppExchange is by all measures a big success. This blog is the first in a short series of posts that report on the AppExchange’s growth and the success of some of its many partners from small boutiques to large businesses. This series pays particular attention to ten AppExchange partners that distinguished themselves last year including in no particular order: TaskRay, TOA Technologies, Contactually, The TAS Group, Tango Card, Zapier, Apttus, KnowWho, nCino and KXEN.