Flying Virgin
Oh bother. They’re at it again. I’m on the long flight from Boston to Dreamforce in San Francisco and I have a lot of time to think. First stop is the Zuora user group meeting “Subscribed” happening at the Ritz Carlton. It’s Zuora’s second bash like this and it’s nice to see them doing well with a great idea like subscription billing.
I am on a Virgin flight, which is my choice for these long hauls. The plane is full of Dreamforce attendees and the excitement is palpable.
It’s nice to have the option of WiFi and power for my computer so that I can work. Signing onto the go-go inflight wireless service is always something of a Gumpian box of chocolates, you never know what THEY’RE going to get and today is no exception.
Back in July I wrote a post on a similar Virgin flight titled, “Like a Virgin” that delved into the murky world of product pricing and it looks like this might become a thing for me because I am doing my own little inflation study on the price of WiFi. If you need to catch up on my musings, you can click the link but a synopsis of my study from the original post is here:
Thanks to go-go’s record keeping, I am able to access my account history. It seems in 2010, the first time I bought the service, I paid $12.95. The cost actually went down for several flights after that either because they were running a special to get people hooked or, and this is a dim memory, someone was giving free or discounted service to all passengers during the holidays.
At any rate, my point is that the price of WiFi has gone up dramatically over less than two years. Today I paid $17.95 for the same service I once paid $9.95 for. Off the base of $9.95 we’re looking at an 80% increase and divided over two years that produces a 40% inflation rate. Yikes! Looks like the increasing cost of Internet is tracking the plane’s altitude.
Ok, so back to today. Want to guess what WiFi costs today? Today I plunked down $34.95 for a month because I am going to do this a lot this month, but a single day has a cost of $24.95 and a single day is the benchmark. Going from $17.95 to $24.95 is a rise of a bit more than 33%. Presumably they were making money at $17.95 and now that the equipment is fully amortized the additional fee is pure profit.
I know, the fee indirectly includes the free electricity for my computer but I prefer to think of it as something they throw in for the cost of a ticket since I could use the plug for anything else like charging my phone. But if I am charging a phone and not using WiFi then am I technically freeloading on the WiFi users? It gets complicated.
At any rate I think I’d have to go back to 2010 when I started using WiFi on these flights. If you go back to the July post you see that I started paying $12.95 then it went to $9.95 before beginning its inexorable climb. So take your pick. I have to keep my socks on here so my math might be off but it looks like at least an inflation rate of 100% over two years. But more interestingly, I know I am not paying double the cost of a ticket that I did in 2010 even though jet fuel is up considerably in that time. Again some quick math with shoes on. The cost of WiFi is now roughly equal to 3.8% of the ticket, not bad at all or about six gallons of jet fuel.
Ok, but like an economist I know there is more than one way to calculate this inflation rate. Consider this: The cost of WiFi is so high now that they’ve come up with a new entry point, a ten dollar cost for one hour of service. So that’s ten bucks an hour but when this started in 2010 it was ten dollars for the whole six hour flight or about $1.50 per hour. If you use 12.95 as the basis then the cost per hour is more but no matter, this is back of the envelope stuff. But the change suggests an inflation rate of 600%. Six hundred percent! Oops! I really meant 300% per year over two years. Feel better? I do.
Well enough of this I am signing off from somewhere over Wisconsin traveling at 422 mph at an altitude of 36,199 feet. It’s -73 degrees outside and $24.95 inside.
More Dreamforce, Please
Dreamforce hasn’t even happened yet and I am already wishing it was about double the time it’s set up for. I’m arriving in San Francisco on Monday, two days before Marc Benioff’s keynote kicks everything off and I am already running late.
As has become customary, many Salesforce partners are holding user group meetings just before Dreamforce to keep their customers’ expenses down and have maximum impact on them. This is an unintended by-product and benefit of being in the ecosystem. To that end I’m attending Subscribed, the user meeting of Zuora, which would be worth the trip all on its own.
I have no more time for meetings and some of those on the calendar are looking dicey. There are too many parties, dinners and coffees to possibly make all of them and there is a full calendar of really good keynotes and other meetings for analysts to attend sponsored by Salesforce. Give me two more days!
Salesforce will be briefing me under NDA about the big news that will come out of the show so I can’t help you with anything semi-official other than to direct you to a piece by Chris Kanaracus in NetworkWorld.
According to statements made by CEO Marc Benioff, at TechCrunch on Tuesday, we can look for important announcements about a new service that’s like Dropbox, an identity management system, more information on the company’s integration with Workday and the company’s new Marketing Cloud.
That sounds like a full plate but curiously it doesn’t seem like enough. Back in 2004, Benioff had a George W. Bush impersonator walk on stage and disrupt the proceedings with a short speech to “this Fundraiser, Thanks Marc.” But that was because Dreamforce was held on election day if you can believe it.
This year I don’t look for the same kind of stunts because this year there is too much information to get across. Consider my schedule for Thursday — Sales Cloud Keynote, Work.com Keynote, Service Cloud Keynote, Chatter Keynote, Platform Keynote, Data.com Keynote, Marketing Keynote, SMB Keynote. And that’s just the MORNING! You don’t have a keynote without making an announcement of some kind so that’s why I think Benioff’s remarks at TechCrunch were useful but they’re just a teaser.
We could easily have two more days of this because unlike other shows where I could totally miss some ERP or other sessions that are not in my wheelhouse, everything at Dreamforce is relevant and important to cover. So it might sound strange with Dreamforce still in the future but I already want more, maybe not more information but more time to absorb it.
Let’s Do Dreamforce
Did I mention that I have a tiny speaking part this year. So happy! Not sure when it is yet but Esteban Kolsky, Brent Leary and I are on a panel. How cool is that? You should go.
I am also intent on meeting up with you and learning about your company, products etc. But! There are a lot of you and only one of me. So, for all this to work we need a plan, a system, a strategy. Moe! Larry! The cheese!
So here’s what I suggest. Please don’t email me asking when I am free because I expect to be sleeping then. But do email me with a couple of times that you could sustain a meeting with hurricane Denis. Let’s figure 20-30 minutes and your booth is fine if you give me the number, your cell phone and ensure that the trade show floor is open at that time. I won’t have an exhibitor’s badge and though an analyst credential get’s you far, it won’t get me past security.
If you don’t have a booth or don’t want to meet there, that’s cool, please suggest times anyhow and also (obviously) a place.
Finally, I arrive on the 17th and can take meetings that afternoon too. I am looking forward to seeing as many companies as I can. So, let’s doDreamforce!
Dreamforce Previews
So far, I’ve only been briefed under NDA so there’s not much I can report. But the earnings call from last week gave some insight into what might be on the table in September. During the call with analysts, President, CEO, Chairman and Co-founder Marc Benioff talked about some of the product lines and his interest in making the Marketing Cloud #1 in its space. You can read the whole transcript here.
The Service Cloud has passed the $500 million run rate and is well on the way to being a billion dollar revenue generator for the company according to Benioff. That’s important because the company is very keen to show it is more than an SFA vendor and half a billion bucks draws some attention.
But Benioff’s major focus was on the Marketing Cloud, which was first announced last year with the acquisition of Radian6 for $300 million and enhanced by the purchase of Buddy Media. At the earnings call Benioff said, “We believe that CMOs are going to want their own cockpit to fly, their own fighter jets, because honestly, CMOs are going to start spending much more than CIOs in technology.” You can’t argue with that. But more interestingly, he went on to say “IBM has said that, a lot of companies have said that. We agree with that and we want to invest so that we can take advantage of that spend.”
All right then.
But this raises some interesting questions. In any company there are pockets of power. The CEO has the most but each of the C-level officers has a turf to defend. If the CEO is king then the others are dukes and princes. So the thing I want to know, which is unknowable now, is whether the CIO will become more like the CMO or if the CMO will become more like the CIO? Will both positions survive?
These are interesting questions. Over the last thirty years each of these titles has evolved out of almost nothing and, believe it or not, each has traversed roughly the same path from geeky silo to strategic thinker. CIOs came out of MIS, which at one time was focused on keeping all the green lights flashing and writing programs for reports. But the CIO became a player when he or she got an MBA and began contributing strategic ideas about how IT could help the company save, and especially make, money.
The CMO has a similar founding myth. Marketing became captive of the CFO when computer based financial systems began to show the truth of the old maxim, “Half my marketing budget is wasted. I just don’t know which half.” Over time, according to friend and CMO consultant extraordinaire Thor Johnson, CMOs have also taken the MBA route and begun talking less in the board room about mailings and hit rates and more about revenue, costs and benefits.
The glue that keeps the CIO and CMO inextricably bound is IT but IT isn’t what it was when this all started. IT today, as Benioff’s company has been positioning it over time, is positioned more at the line of business. The marketer has less need for IT in a world that is increasingly socialized through products that can be manipulated almost as easily as an iPad.
Also, with products like those from Salesforce and other cloud providers, costs are lower and therefore budgets can shrink somewhat. This is not to say that IT and the CIO are becoming relics or that there are no big technology hurdles left to overcome. Just the opposite. But when we start to look at budgets, money is power and the dukes and princes all want more.
So that’s the genesis of my question — will the CMO become more like the CIO or the reverse? This kind of quandary is rarely Boolean and so a dark horse like the CRO becomes very interesting. Of course, this is all way ahead of things. Right now we’re trying to figure out if the Marketing Cloud can generate billion dollar revenues for Salesforce as Benioff is predicting butit’a also part of a future we need to discern.
At the earnings call, Salesforce increased its guidance to analysts that it would have revenues in excess of $3 billion in its current fiscal year. Getting service and marketing to contribute at the billion dollar level gets the company into the five billion dollar range and into the Fortune 500 with a comfy margin.
Benioff was also talking up the company’s developer platform and internal social network for enterprises of all sizes (Chatter). So far much of what we’ll learn at Dreamforce is still under wraps but one thing being actively discussed is the raft of CEOs attending which will include Richard Branson (Virgin), Jeff Immelt (General Electric), Angela Ahrendts (Burberry). Dreamforce has never been dull but this one is shaping up to be something else.
2011 Say Bye-bye!
Every year around this time I write two columns one on the year that was and another on what I expect the new year to bring. There is no methodology for this process and I believe this lack of method is important. I take a blank screen and fill it up with what has been on my mind for the last year and what made it out through my posts. Here are a few ideas that bubbled up.
Steve Jobs
We lost Steve this year and the outpouring in the media was inspiring. For some reason, many people felt the need to try to reconcile Jobs’ fastidious and demanding personality with the beautiful products he inspired. One who did not was Malcolm Gladwell who placed Jobs in a long continuum of people who did not invent original products but who tinkered with and improved them significantly. The world needs all kinds. That might have been true for the GUI but Jobs still gets high marks for things like iPod (an improvement on Walkman) and especially iPad, iTunes and the store for which there was little if any precursor.
A quote from a Time Magazine (July 10, 2011)review of GM executive Bob Lutz’s book from 2011 “Car Guys vs. Bean Counters” http://amzn.to/sZEwaq
makes an important point: “It’s interesting to note that the one area of the U.S. economy that’s adding jobs and increasing productivity and wealth is also the one that is the most relentlessly product- and consumer-focused: Silicon Valley. The company off Highway 101 that best illustrates this point is, of course, Apple. The only time Apple ever lost the plot was when it put the M.B.A.s in charge. As long as college dropout Steve Jobs is in the driver’s seat, customers (and shareholders) are happy.” Thanks, Steve.
Social, mobile and analytics plus cloud
On deck to assume the Jobs niche in the tech industry and beyond may be chairman and CEO of Salesforce.com, Marc Benioff. To be clear, Benioff and Jobs are very different people in most respects but Benioff has the same blue ocean strategy that Jobs had and a knack for entertaining his customers. Benioff also likes to invent things. He has driven the rest of the industry to embrace social, mobile, analytics and cloud much faster than it would have left to its own devices. This combination of attributes is really all any Martian would need to know to understand the market upon arriving here. The drive to embrace these technologies first is what separates Salesforce from all other conventional CRM companies and is a big reason for the Silicon Valley quote above.
Cloud computing
We’ve been hearing about cloud computing for many years already and interestingly 2011 was a year of a dramatic demonstration of its power in reverse. Target Stores pulled its web site from the cloud into the premises in time to launch a huge marketing campaign featuring Missoni brand clothing. The campaign was so successful that it clobbered the site and crushed the ambitions of any other IT leaders who might still think on-prem will be a workable strategy as we go “all in” on social, mobile and analytics. Right?
Curation
The Missoni fiasco gave me a chance to showcase curation software from Storify. Curation products enable anyone to find and bring together relevant content from the web to produce a one of a kind package of related information that is greater than the sum of parts. Curation plucks gems from the torrent of things rushing by in the digital river (pun!) and it will be an important part of how we use the web in the future.
The Subscription economy
With cloud computing more valuable than ever we see a new idea taking shape called the subscription economy. You probably recognize it and consider it old by some measures. But the interesting thing about the subscription economy is that so far it has been at best held together with bailing wire and spit. Old style ERP systems have been a major impediment to subscriptions and many of us never realized it. I quoted others talking about how ERP has held back business innovation but also about Zuora and others who are pushing the envelope with billing and payment systems that enable subscriptions like never before. Zuora announced its series D round of $36 million recently and I look for them to be a major IPO in the next 24 months.
Blue ocean strategy
In a press conference early in 2011, Benioff said he had no interest in developing an ERP system to complement his company’s growing front office footprint. Without using the words blue or ocean in the same sentence he let us know that there is too much untapped potential in the front office, often in the form of applications of social concepts and business processes that have still not been invented or fleshed out. By the end of this year that approach seems to have put Salesforce into a category of its own as most of the ERP players I watch seem to be focused on re-selling their legacy bases.
Oracle and Salesforce
One such ERP company is Oracle, a self described fast follower, that has nonetheless made big investments in the front office. In 2011 Oracle acquired ecommerce provider ATG for one billion bucks and followed up about six months later with a $1.5 billion acquisition of RightNow. We’ll miss RightNow but Oracle seems to have blue ocean plans of its own regarding retail in the future. Watch this space.
Dreamforce and OpenWorld
We got an eyeful of how competitive the atmosphere is in San Francisco and Silicon Valley when Larry Ellison disinvited Marc Benioff to speak at OpenWorld. At first it looked like a bizarre move by Ellison but later it looked liked improvisational comedy by a couple of masters. It was certainly entertaining. Ellison used the opportunity to announce his own cloud computing and social strategies though true to form I was not shown much product or given a date for general availability for some parts of the product line.
CRM Idol
Speaking of entertainment, Paul Greenberg got the industry organized around the Idol theme in the first annual CRM Idol competition, which I was part of. The concept is still rough around the edges — one wonders how entertaining business ought to be — but it brought the industry together across most of the world’s landmasses and fun was had by all. We discovered some very interesting companies and at least one, Assistly, was bought before the competition even finished. I think Idol has legs if we can get a better set of pre-conditions in place to screen out some companies that are clearly not competitive. Just sayn.
What’s going to get the economy moving again?
Over the summer there was fear of a double dip as the economy seemed to slow but that scare seems to have passed and the tepid recovery continues with job growth in the last 21 months and counting. Not enough jobs to erase a big unemployment number mind you, but progress, slow and steady.
Marketo CEO Phil Fernandez offered his own prescription for recovery saying that the revenue performance management (RPM) methodology that he and others (Eloqua, Cloud9) are promoting could generate as much as $2.5 trillion in new revenue globally. Maybe he’s right, but…
It’s all about energy
In May I was in Chicago to give a talk and noticed the prices for gas were almost hitting the five-dollar mark. The cost of energy, transportation and raw materials all derived from petroleum, hold the key to recovery (and, yes, European bankers and politicians). There’s no longer any slack in the petroleum production system and when demand spikes so do prices and when that happens, the economy cools. We’re in for some uneven performance as long as that is true.
Books I have read recently such as, “The End of Growth” by Richard Heinberg http://amzn.to/vYJesf and “World on the Edge” by Lester R. Brown http://amzn.to/sv0pvy, tell the same story. Nothing grows forever and on a finite planet there are finite resources, which ultimately places a cap on many things. That doesn’t mean doom and gloom but it does mean we need to think about our next steps as a species. Global warming isn’t going away on its own.
All the technologies we’ve been debuting in the last few years will be an important part of the next strategy, especially as we are required to pivot away from dead plants as our energy sources. That’s one vantage point from which I will be evaluating our industry in the new year. The business processes we use are directly related to the technologies we have to work with — the subscription economy is a case in point. Along with helping us make money, our great new technologies must serve our need to get carbon and costs out of our business processes ASAP.
But for now let me simply say thanks for reading my column this year and for your many good observations and comments. I hope you enjoy your year-end celebrations, however you do them.
