At Cloudforce, New York last Friday, we heard a smattering of things we also got at Dreamforce. That was part of the plan because Salesforce bills its regional events as a chance to bring Dreamforce to the customer. As proof I heard that Marc Benioff and crew are off to Japan this week to do it all again and there are various other trips like Europe that they also do. That’s quite a travel schedule.
One of the less well-known parts of both events is the press conference held immediately after the keynote for members of the technology and financial analyst communities as well as the technology press. It’s also the most intimate part of the whole conference, the time when we get one on one with Marc and the atmosphere more resembles a graduate seminar than anything else.
Of course, Benioff has to maintain a certain reserve given his status as the head of a publicly traded company. Questions about future earnings are not encouraged and they can’t really be answered but people still like to ask. It’s fun to watch the non-answers.
Two ideas struck my radar in the press conference — one, the idea that Windows is “over” but also, a more mature attitude by Benioff toward competition. First Windows.
This wasn’t the first time I have heard Marc say that Windows is over but this time it had the ring of truth rather than being more like the hyperbole of a competitor. Benioff thinks Windows is no longer necessary and when you say Windows you might also include OSX or any other operating system whose purpose is to provide a general purpose operating environment for applications.
You know this in your bones by now. With applications and data becoming increasingly cloud resident, a much smaller and more secure operating system that supports a browser and not much more is about all you need. Google Chrome is a kind of new era OS and the Chromebook a new device that leverages these ideas. So the stage is apparently being set and Benioff thinks that Windows 8 will be an important inflection point in the history of the operating system.
You can already see problems with Windows revenues especially in the latest numbers the company reported last week. The Windows Division’s revenue was down 33% year over year and the company’s net income was off 22% with revenue down eight points over the prior year.
Microsoft has become another example of what Clay Christensen described in The Innovator’s Dilemma of a company wedded to its golden goose unable to pivot to the new revenue generator in part because the new generator would force revenues down. New things cost less and in the ever-ongoing product commoditization cycle less means less and you have to make it up on volume — that’s the cloud.
So, devices are what’s driving the market — the handheld a.k.a. phone and tablet, which come in multiple sizes for different applications. Devices use stripped down operating systems like iOS, Android and Windows Mobile (and Chrome) and users spend much more time in a vendor’s site or app than ever making the general purpose OS less and less necessary.
Microsoft has more or less seen the same thing coming, which explains at least on one level, the company’s rush to the cloud. You might even say similar things for Oracle and its latest release 12c. It goes without saying that the UI and the data center are different places and operating systems will continue to be as important in the data center as the air you breathe, at least for now. But Oracle is showing that it understands the new reality though it isn’t necessarily playing at the same level as Salesforce, which brings us to my second point.
I also saw a more mature attitude about competition than I could see just a few years ago and I think that was at least in part because Benioff knows he’s winning. He made the comment that the competition used to say they had a better approach than Salesforce, as in Larry Ellison’s words that cloud computing was all vapor. Competitors used to say that cloud or SaaS was dangerous to your business, that it was not secure or any of a hundred other things designed to spread FUD (fear, uncertainty and doubt). But that’s ancient history.
Now, Benioff noted, all the competition is saying, “They have what Salesforce has”, which is typically a variant of cloud computing designed to provide infrastructure as a service (IaaS) and thus keep customers locked in. Nevertheless, in other words, the dynamic has shifted and the competition has learned that is has to play a new game.
Finally, one more impression. It seems that Salesforce has now articulated three distinct ways of socializing the enterprise and they’ve done a good job of showing how their products apply in each case. The three cases involve socializing the vendor-customer interface, socializing the employer-employee interface and socializing the man-machine interface.
The vendor-customer interface is the oldest challenge and the place where Salesforce and CRM got started. The employer-employee interface is a bit newer and it is still being fleshed out but Salesforce and its partner ecosystem with companies like Jobscience, are populating the market with credible solutions. The man machine interface is both the newest and possibly the thing most dreamed about for the longest time.
Much of the advancement is coming by way of Chatter, which is advancing on all fronts. With its suite of socialized business solutions Salesforce is now able to approach its customers on multiple levels. Socializing the enterprise will be a slow process and there is no telling which socializing approach will first appeal to customers. For example, GE and Coke are apparently starting with the man-machine interface but it will be logical to expect success to breed success. Success in one area like the man machine interface will give a company confidence to try something in another area like the vendor-customer interface and in so doing a company will socialize itself. Most importantly, and this should really be in ALL capital letters, the economy will be socialized as well.
I am fond of studying macroeconomics and looking at long-term economic cycles called K-waves after the Russian economist Kondratiev. From Wikipedia we get this on the Kondratiev cycle:
Kondratiev’s economic cycle theory held that there were long cycles of about fifty years. In the beginning of the cycle economies produce high cost capital goods and infrastructure investments creating new employment and income and a demand for consumer goods. However, after a few decades the expected return on investment falls below the interest rate and people refuse to invest, even as overcapacity in capital goods gives rise to massive layoffs, reducing the demand for consumer goods. Unemployment and a long economic crisis ensue as economies contract.
If that sounds at all familiar you understand my interest. So my big question as I continue to watch and report on the evolution of the Social Economy is simply to try and understand if social is the new K-wave or at least part of it. It’s not the only contender and things like raw materials and resource management and alternative energy development seem to be more germane as fundamental K-wave candidates. But social will at least be an important substrate for the next K-wave linking together people and, increasingly, devices and that’s why I go to events and try to listen carefully at press conferences.
I was sitting in the “blogpound” at Cloudforce New York, the seating area where Salesforce.com considerately places press, analysts and bloggers along with tables, power and Wi-Fi, when it dawned on me. Despite all the articles, blogs and books (and Paul Greenberg’s ceaseless public speaking) dedicated to the social media phenomenon in CRM, we may have been under reporting its importance all this time.
It’s hard to say or believe this, I admit, but look at some of the evidence. We’ve all generally agreed that social represents a major disruption in business but somehow it seems even bigger than other disruptions. While those other disruptions were legitimate, they left the business world more or less intact. Client-server replaced mainframes and we got a few more application types (like CRM) but business went on. The same can be said for the Internet revolution and even the mobility upswing.
These all made business move a bit faster but it was still business as usual. Brian Solis published a very good book recently called “The End of Business As Usual”
In all those cases the same application types survived into the next generation to be built upon and extended. But social represents a break that is not limited to computing or hardware alone. Social is a bigger break because it goes to the heart of how a business operates, what it does and even what is considered its secret sauce.
It used to be that the secret sauce was a patented product or process that you built a business model around to protect. That often meant controlling information flows between your company and your customer. Your company was the sole source of the product or service as well as being the sole source of truth about it. That’s been gone since the Internet boom started but companies have nonetheless been able to operate, though somewhat hobbled, in their old models. But not much longer.
Cloudforce, New York, made it official. With the rather low key introduction of the Social Marketing Cloud Salesforce has completed at least the rough outline of the social enterprise — a term used by CEO Marc Benioff lately and one that you’ll need to get used to. Here are some reasons for my thinking this.
At the press conference just after his keynote, Benioff told us that the attendee list for the event had multiple instances of companies sending anywhere from 20 to 50 employees to the event. You do that kind of thing when you are marshalling resources and implementing a plan. In this case the plan is about how to pivot the business to become a social enterprise.
That’s not all. There were significant early adopter examples on display at the event. Angela Ahrendts, CEO of Burberry, has a vision of making her company a social enterprise and is using the Salesforce suite of solutions to get there. She spoke live with Benioff during the keynote but perhaps more informative was a two-minute video in which she said — of becoming a social enterprise — “If you don’t do that I don’t know what your business model is in five years.”
There was also a conversation with the head of GE Capital that provided a similar moment. But the show stealer was the video of Toyota’s CEO, Akio Toyoda, in Japanese with subtitles in which he said, “This has changed my life.”
So from all indications the early adopters are on board and they are influencing other early adopters and in the next year you can figure the early majority will come along.
This disruption will be incredibly fast as this sort of thing goes. Unlike the decade long march from standalone computing to networks I think, given Ahrendts’ timeline, the next several years will see a great deal of activity as big and not so big companies scramble to get to the new, new thing. There is a growing sense that there isn’t a lot of choice in the matter and when there isn’t a lot of choice there isn’t a lot of time either.
All this is good for the economy. Every recession needs a new idea to drag it out of the trough and reignite growth. The social enterprise is that thing and not simply for the obvious reasons that I’ve mentioned already. Social enterprises should be able to operate far more efficiently using less inputs for the same or greater output. That will be a critical driver in adoption as companies constrained by the ongoing credit crisis learn how to do more with less capital.
What’s most interesting to me is that Salesforce has found a way to preserve its differentiation in a marketplace that has exerted itself to catch up with its cloud computing innovations over the last decade. All other CRM, and let’s say major software companies, have developed cloud offerings that mimic the basics that Salesforce pioneered — hosted applications operating in weightless browser interfaces. Some have even made inroads in social computing.
But most have stopped short of multi-tenancy preserving the data center model by simply moving it to the sky. Microsoft executives recently told me that keeping data separate was the only serious way to handle the stuff but they didn’t tell me why. I wonder if it’s radioactive; perhaps it is or maybe it’s simply toxic to the old paradigm.
With its emphasis on the social enterprise, Salesforce preserves its blue ocean strategy as its competition is still locked in an old paradigm. Benioff told us the company will do three billion dollars in revenue in its next fiscal year on its way to a goal of being the fastest to ten billion in history. For reference, in 2011 Seaboard was number 500 on the Fortune 500 list with revenues of $4.385 billion.
You know what I’m talking about?
Enterprise 2.0 came to Boston this week and it provided an interesting snapshot of an emerging market. At the same time Deloitte and the National Venture Capital Association (NVCA) released a study that calls for a more robust IPO market. I see connections.
First, E2.0 as it is abbreviated, made its annual visit to Boston. The show is gaining momentum and with it the paired ideas of the social customer and, I hope, the social enterprise. E2.0 moved out of a big hotel and fit comfortably into the Hynes Convention Center where there is room to expand over the next several years. There are also many more places to hold after parties in the new location, something that many vendors and analysts took full advantage of.
E2.0 is the leading edge, the point of the social spear. It is the place where people of a certain mindset go to share big ideas about the future of business but it wasn’t that well attended. I thought more people representing more companies wanting to get on with socializing their businesses would attend but I was wrong. I chalk it up to social being still in its early days.
There were not enough customers telling their success stories and too many vendors attempting to be neutral thought leaders, which I don’t think worked. And ironically for a social show, the big established vendors of everything technology related made their best old school attempts to own the space.
IBM emitted a press release with this headline: “IBM Named Worldwide Marketshare Leader in Social Software for Business”. The PR contained this: “IBM social software including IBM Connections provides tools such as communities, forums, wikis and blogs and new capabilities like advanced special analytics, enabling users to expand their network with recommendations of people to connect with based on prior connections and similar interests.” It was only missing a concluding, “You all can go home now, we’ve got this.”
But in fact, no one has this and no one probably will for a few years. The thing I find odd is that there was little discussion of the need for the enterprise to change, to morph from a hierarchy to a community, to become social. It felt like the only thing the big guys were concerned with was corralling the social customer while leaving the hierarchy intact. Good luck with that one.
Conspicuously absent from the festivities was Salesforce.com a company with as much to say about the social enterprise as anyone. But it seems like Salesforce only goes to its own shows where it can be the star and control the message. That will work in this market’s earliest days but if Benioff, Inc. wants to capture the vast social enterprise market they’re going to have to start coming to some of these events.
I think Salesforce has a good message as evidenced by the company’s Cloudforce event last week. They’re talking about the social enterprise and the social customer in ways that the others are not. The others, IBM and company, are still proselytizing about their technology while Salesforce is relentlessly pushing a message of empowerment, of how to be better at what you do through the use of social technology. That’s what I thought was missing from E2.0. I didn’t get to all the sessions but I spoke with a lot of vendors and some, especially the smaller guys like, Clearvale (BroadVision) and Saba and very small guys like Yammer and DoubleDutch each in their own ways gets it and is pushing the ball toward the goal line.
Future editions of E2.0 need to sell that new religion and it might be helpful if they reduced the number of shows to one per year rather than the current East and West approach. I might suggest turning one of those into a virtual event to showcase another part of the social revolution. The show’s got to start eating its own dog food.
In a related matter, the NVCA issued a report that takes a polite shot at the financial community by pointing out the obvious. The financial meltdown of a couple of years ago still emits a kind of financial cosmic background radiation which has made IPO activity difficult and since the IPO is essential to a healthy venture industry, the industry has a bit of a cold. From the release:
“Clearly the industry continues to feel the ripple effects of the global economic downturn — most notably in the form of limited exit opportunities,” said Mark Jensen, partner, Deloitte & Touche LLP and national managing partner for venture capital services. “However, with signs of improvement in the economy and easing of the liquidity crisis, the tide may be turning. Innovation continues to be an important driver in our economic health and a strong exit marketplace is critical to the venture capital ecosystem driving much of that innovation.”
Low IPO activity means it’s harder to raise funds and for investors to take on risk if there’s limited upside. That’s too bad because when you think about it, the hundreds of billions of dollars that have been invested in the last thirty-five years have generated many tens of trillions of dollars worth of business activity. As I wrote in a recent post, building the information economy has driven U.S. GDP from $1.6 trillion in 1975 to over $14 trillion today. That effect has been mirrored all over the world. So while it might seem like the venture industry is a remote part of our lives, it’s critical to our well-being. I take this report very seriously.
No doubt some new investment is flowing into social technology vendors but the amounts are still small and judging by the number of booths at E2.0 there aren’t enough new companies dipping a toe in the water. Disclaimer — I am not giving financial advice here.
Still, what I gave seen in the last couple of weeks with E2.0 and Cloudforce suggests an early stage market with some good ideas that has yet to catch fire. There’s a core group of vendors and influencers who get it, some of whom might be a bit too enthusiastic but that goes with the times. To me it’s a no-brainer to keep at it, we’re mostly on the right track but we need to find new ways to attract large companies to this new approach to business.