There are two questions that emerging companies in the CRM space field when they face the analysts — when are you going public and why don’t you build out a full CRM capability?
The first question is easily and deftly handled by most executives and it must be. An IPO has its own cadence and the Securities and Exchange Commission is very keen to protect its turf even in an age when congress keeps tight control on regulators’ budgets. It takes almost no effort to fine an over exuberant executive for making statements about things that are not in the official filing or during the quiet period. So, smart executives stay very far away from those questions.
The second question is, or at least can be, a quagmire. There are many marketing software vendors who have necessarily built functionality that spills out of the pure marketing definition and that’s enough to keep some people wondering. A customer database is a good starting point. The argument goes like this: you already have a customer DB so how hard can it be to blow out another wall and add sales functionality and then, Voila! CRM.
That logic misses the point by a country mile and a decent customer service function, yet it doesn’t go away. But there’s more to it than even raw functionality. Why would any sane CEO of a fast growing marketing automation company decide to blow the budget and slow growth to build out sales and service in a market where the CRM niche is rather full?
My advice goes like this. Don’t do it. Don’t build CRM, there is absolutely no reason for anybody to build another CRM system. The niche is covered so move on. Take as an example the last decade-full of successful software vendors. Siebel didn’t build ERP and the reasons are the same. ERP was full, it was better for Siebel to focus on building out its CRM functionality and that’s what it did. Late in the game, before the acquisition, the company was working on master data management and making its client server solutions at home on the web. Siebel didn’t build ERP though many people asked why not, because the company was looking for the next big thing not the last.
Siebel got acquired and its independent plans were sidelined. But look at Salesforce and you see a similar pattern. Financial Force, Intacct, Zuora and many other companies sprung up to provide financial functionality to the fast selling CRM but Salesforce CEO, Marc Benioff, has been adamant about not pursuing ERP. He’s focused on building out a new interpretation of the front office that’s social, mobile, and customer experience focused. That’s called a Blue Ocean Strategy and I have written about it before.
The rest of the big players — SAP, Oracle, Microsoft — all have pretty good CRM and they all trail Salesforce according to Gartner’s recent rankings. Generally, while their products are good, they trail Salesforce by about a generation when it comes to leading edge front office ideas like collaboration, customer journey, and the like. They aren’t innovating so much as trying to be fast followers.
I think any marketing automation company that tries to build out CRM functionality would also be a fast follower. They’d trade in what they’re very good at to regress to the mean, the middle of the pack. Instead, here’s a question that they could profitably answer. How are economic and demographic changes affecting how people and companies buy and how does marketing fit into that changed environment?
People and companies have become comfortable and adept at shopping online and making decisions without the assistance of traditional sales people. At a minimum this suggests a winnowing role for traditional SFA. But it also suggests a rising opportunity for marketing automation defined as nurturing customers on their buying journeys.
It also suggests an expanding role for the call center, which might get smaller in the next decade while changing at least part of its mission. I don’t think today’s marketing automation has yet tapped all the possibilities inherent in that one observation, nor do I think that the incumbent CRM vendors have embraced the idea.
So, when I hear talk about new companies entering the CRM market, I cringe. CRM is robust and thriving but it is also consolidating. There won’t be five major CRM vendors ten years form now. The availability of good, fast, standards-based integration is high and products are getting better all the time. The next move in the front office is best of breed, not tightly integrated solution sets. The front office platform might be stabilizing but the apps that play on it continues to expand and they work increasingly well together.
The move for fast growing companies in the front office is in furthering the embrace of the customer through advanced tools and techniques that include social media and inbound marketing. No traditional ERP for sure and no CRM either and that’s becoming increasingly obvious.
Could we have a moment of sustained loud noise for all of the companies that form the various ecosystems around major product lines? I mean it. The ecosystem, and maybe not even social, is the story of the last five years. While many of us have been running around like Chicken Little talking up the advantages that social will bring us, the ecosystems and the companies that make them up have been growing and adding immeasurably to the customer experience. Consider some of these points.
Ecosystems have made possible the promise of long tail applications. In case you’ve forgotten, a few years ago we all couldn’t talk enough about the “long tail.” It was the place on the Bell Curve where markets are thin and though there might be considerable need, there are few solutions.
Well, the long tails represent areas where there might be demand but markets are thin. A company might buy a hundred seats of SFA but relatively few seats for things like document signing management (exemplified by DocuSign, just to pick one). But if a company only buys few seats then a vendor has to work harder to bring in revenue or the vendor has to raise prices to a level that makes the numbers fall apart.
For document signing the alternative was to use overnight letters to send contracts back and forth for signatures or fax machines and email for edits. That all has a cost in efficiency and opportunity but those costs are hidden and as long as the overnight letter is the state of the art that’s what we do. The alternative of paying big bucks for automation just doesn’t work out even if you can demonstrate an ROI after a couple of years.
But along comes the on-line store and suddenly all kinds of apps that were un-economical but needed, have a different framework. Customers can buy document signing services at an acceptable price with the result that a new application niche arises, the ecosystem becomes a little more robust and the primary vendor (e.g. in this case, Salesforce) becomes a little more valuable to its customers because, hey, look at all the apps that just plug and play.
So in my mind ecosystem services have done yeoman’s service in bringing about the rise of the subscription economy. They are mostly subscriptions and they make subscription operations easier by a lot. Today there are services for all kinds of niche areas where just the right app has changed the dynamic, the business model and even the profitability of a department or an enterprise.
What’s even more interesting, as I alluded in the beginning, is that many of the ecosystem services we see have very little to do with social. It’s as if vendors and their customers looked at social and said, that’s nice, but we need to get today’s work done today and we have a gizmo that solves easily identifiable pain. Let’s take it to market.
I am not saying that social is not important (I am crazy, just not that crazy) but it’s far from the only game in town that we sometimes make it out to be and if present conditions are any indicator, then the world of add-on apps that don’t use social is at least as important as the part that does.
I have spent a decent amount of time recently examining some of the best apps in the Salesforce ecosystem and the company also recently announced its Customer Choice Awards for 2012 for AppExchange applications. What I saw in examining both groups was a broad array of clever apps that make many business processes better. There are things not more than widgets and there are whole applications that can stand alone.
Most significantly, the capital markets are paying attention to ecosystems. Several of the companies I’ve written about recently have received significant venture capital inflows and I expect them to have IPOs in the not too distant future. Certainly there’s risk in backing an ecosystem company. What if the ecosystem’s primary producer decides to change and hide the API for instance? But at this stage things like that are doubtful because the primary producer is just as dependent on the ecosystem as each of its members.
Some people might lament the multiple standards that ecosystems represent. If you are a Salesforce customer, your choices of ecosystem partners are somewhat limited to the universe of the AppExchange, for instance. But that risk is easily mitigated by integration services available, where else, but in the ecosystem. So maybe that’s not such a concern either.
Any way you slice it, the various ecosystems deployed over the last seven years have greatly enriched the customer experience by providing solutions that make enterprise software more agile via tailoring it to the circumstances at hand.
Very often we mark progress by the arrival of a shiny new object like social, but time and time again, we see progress is insidious; it comes in through the bathroom window (apologies to John and Paul) and it changes us at least as much as the arrival of the shiny new object. That’s why I am so impressed with the ecosystem providers and why I think we should all be making noise about them.
The technology world made significant behind the scenes contributions on behalf of both political parties in the recent presidential election. That was all kept out of the spotlight for good reasons during the campaign but now that it’s all over some of the people involved are talking, most notably the people at Salesforce who provided IT services to the Obama campaign.
No doubt you recall how close the election seemed and how some people were using old style gut feel to predict a GOP victory. Meanwhile people like Nate Silver of the New York Times and MSNBC were using data analysis and regression testing and who knows what else to tease apart reams of data to arrive at very different conclusions.
The data came from many sources and much of it was collected on iPads and mobile devices and sent to Salesforce.com where the national campaign workers could aggregate, cull and analyze the data and then deploy resources exactly where they were needed. It’s very difficult to discuss almost anything political these days and in New York Marc Benioff emphasized that this week when he introduced this video.
Forget about who won, who you backed and all the other stuff. This is about something else. This video is about how a billion dollar organization came to life and ran full tilt changing its software on the fly as needs arose. As a business case it’s pretty stark too because unlike business an election is a one time thing, the #2 company in a market might still have plenty of opportunities but not a political candidate. That’s one of the things that make this video and what the Obama team did using Salesforce so interesting.
There is an interesting article in the New York Times this morning that I hope lots of people read — that means you Mr. Benioff. It’s a tale of a shoemaker’s kids going barefoot.
It seems that Yahoo, trying to breathe life back into a sclerotic organization, has cancelled its work from home policy and is now mandating all workers report to the office every day. Good luck with traffic at the bottom of Silicon Valley. The commute has just gotten worse.
The discussion covered in the article sounds like a low calorie beer commercial from the 1990’s. One side says we need people in the office every day to promote collaboration, creativity and innovation. The other says at home workers are more productive so leave us alone. Tastes great! Less filling!
Sometimes I wonder if our inability to compromise as a society stems from this simplistic Boolean logic in which there can only be two sides and by definition the side you oppose is wrong. It harkens back to the religious wars of the Middle Ages, but I digress.
But hold on; let’s tease this apart. Yahoo wants to ape Google’s culture and that’s understandable given that the 37-year-old CEO, Marissa Mayer, hails from there. That culture devotes less than 100 square feet to each employee and channels foot traffic to encourage human-to-human interaction, the better to cause serendipitous face-to-face meetings and things like collaboration and innovation.
That’s nice, even laudable, but in the twenty-first century, this new dictate seems a bit draconian. Hasn’t Yahoo ever heard of collaboration software? Social media? Chatter? Yammer? I realize Yahoo is in San Jose and Salesforce and Yammer and others are way up the coast in the big city but they could track these solutions down on…the Internet perhaps?
It is astounding that a company like Yahoo could be in such a situation and that it could be so ostensibly unaware of how this looks to share it with the world. While the issues of collaboration and innovation are the right ones for any company to chase, this solution only works for people reporting to the same building and there are only so many interactions you can prompt in a day.
Most importantly, there’s Dunbar’s number, which is the cognitive limit to the number of people with whom you can maintain a stable social relationship. Depending on the individual that number is between 150 and 220. Social media like collaboration software helps to extend Dunbar’s number for many people and it breaks down the barriers set by geography, something that companies with more than one building have to cope with. Collaboration tools make no distinction between collaboration with someone down the hall, across the country or half way around the world.
The beauty and importance of collaboration and social software is that they break the limitations of human contact so the only question for me is why isn’t Yahoo — a pioneering Internet company — publicizing its uptake (we hope) of this new technology instead of moaning about this policy from the last ice age?