What a difference a decade makes. Ten years ago, the booths on the Dreamforce show floor were little more than outposts for widget-makers but fast-forward to Dreamforce 2015 and one is struck by the number, variety, and size of the partner community. But that’s only part of the story, often out of sight is the sizeable display of talent that has consolidated around Salesforce from other industry sources.
A little more than ten years ago Salesforce was a precocious upstart vendor of SaaS computing and Siebel was the top dog—the first billion-dollar CRM company—and it held a large proportion of the available CRM talent. But at this year’s Dreamforce there were numerous Siebel alumni all drinking the Salesforce1 Kool-Aid.
Former Siebel EVP, David Schmaier, after a sabbatical from the industry, started Vlocity, a company dedicated to making vertical market apps for healthcare, financial services, and insurance. Vlocity takes a page from Veeva, a highly successful company in the pharmaceutical space started by Siebel alumnus Matt Wallach and Peter Gassner (Salesforce, PeopleSoft).
Anthony Lye, (Siebel, Oracle and others) now CEO of HotSchedules a cloud service application for the restaurant industry, was prowling the floor. Kevin Nix and Narina Sippy ex-Siebel stars are spinning up Stellar Loyalty. Steve Mankoff is now a general partner with TDF Ventures and was keeping tabs on some of his investments. And Bruce Cleveland, former GM of Siebel and now general partner with InterWest Partners was not seen but his presence was felt in companies as diverse as Aria and Vlocity.
The presence of so many old CRM hands concentrated as they are around Salesforce will likely help further accelerate the company’s growth—certainly the potential is there. The partner keynote delivered by EVP Tyler Prince, revealed a $135 billion revenue opportunity calculated by Salesforce over the next 5 years. Even if you discount that by a large factor you will still be left with a lot of billions. That’s one reason so many industry veterans are attracted to Dreamforce.
The companies in attendance have dramatically grown in stature over the last decade and the show floor included many public companies or future IPO outfits including in no order, Xactly, FinancialForce, Zuora, Vlocity, Apttus, Full Circle Insights and about 390 others. Many of this group rented storefronts around the Moscone Center to provide meeting space and hospitality to their customers and prospects. Most also sponsored big parties and scheduled user events coinciding with Dreamforce to further induce customers to attend. Apttus raffled off a Tesla, FinancialForce sponsored a scotch tasting (full disclosure: I tasted the scotch but did not win the Tesla).
At the same time, Salesforce was trying to get a few messages out so there was plenty of discussion of the new Lightning UI for desktops and laptops. Significantly, the UI was announced last year but only for mobile devices—a demonstration of the importance of developing for the small screen first these days. The company also announced SalesforceIQ a rebranded absorption of RelateIQ for SMBs and the enterprise. The IQ product is designed to capture inferential data and turn it into useful things like new meeting appointments and follow up actions without requiring the rep to manually enter the data.
To go with Lightning, Salesforce introduced an IoT cloud powered by Thunder, the company’s initiative to corral the billions of devices that will need cloud connections by 2020. There were also specific keynotes for every cloud in the company’s kit and those announcements were way too numerous for this piece. Fortunately they are all preserved on YouTube.
But the biggest bang comes whenever Salesforce assembles a gang of smart people to talk about the future. They don’t do it every year and perhaps that’s wise since major change of the type they like to discuss follows more of a punctuated course, like an EKG.
This time they had a lively discussion about what happens when Moore’s Law and Metcalf’s Law collide with business in a big way. That intersection is best explored at length in The Second Machine Age and Race Against the Machine both by Brynjolfsson and McAfee of MIT’s Sloan School and their ideas were referenced more than once. You may have read those names here a few times prior to this. The questions they ask, which we are still searching for answers to, are of the type, what happens when machine intelligence becomes good enough to begin replacing humans at knowledge work.
We’ve all seen automation replace rote manual activities in business thus boosting productivity. The standard explanation is that the human resources are liberated to pursue higher-level value-add. But the rise of the service economy with its lower wages and hard to find jobs suggests that the future might not be as rosy. What happens when “there’s an app for that” means a pink slip?
Happy outcomes don’t automatically happen but the track record since the Industrial Revolution suggests that not only do new jobs spring up but also new kinds of jobs; an easy example is the software industry analyst. No one I know went to school to become an analyst—I certainly didn’t. There is no room for complacency though. Machines are now capable of writing reports in reasonably good English (though doubtless without the same panache as yours truly). It’s different this time; replacing manual labor is one thing but replacing thinking is much different. It will be a very different ballgame as Jeremy Rifkin writes in The Zero Marginal Cost Society when everyone has a computer and a 3D printer. That’s something the Salesforce brains trust didn’t get to this time.
Deep futures aside, it’s inescapable that the next shift in the front office and the enterprise will be adopting many of the platform technologies displayed on the show floor in order to support more automated processes which are rapidly replacing the transactions we’ve grown to accept in many vendor-customer interactions. Process isn’t exactly a new watchword yet but vendors like Salesforce and others are delivering increasingly capable suites that will make a shift to process rapid once it officially starts. (It has started, you might now see it but you also don’t want to be the last adopter.)
Also, kudos to founders Parker Harris and Marc Benioff for putting themselves on the spot and taking on some tough issues like sponsoring a Women’s Leadership Summit. They sat down for some interesting dialog and hard questions from Kara Swisher, Co-Executive Editor, Re/code about how to provide better opportunities for women in the tech industry. It was not an easy discussion because if you watch the video, you can see everyone trying to puzzle it all out. But Benioff and Harris didn’t shrink from it and expressed a commitment to put the issue at the top of their agenda (heck the summit was their idea). Though more needs to be done, you can’t put Salesforce, even today, in the same category of many older tech firms and the presence of women in the conference was notable. Still we need more.
So to net this out, Dreamforce had its requisite cornucopia of products, announcements, and invention. But it also held out some provocative insights into the future of work and our society, two things that will drive demand for its products and services long after this year’s new wiz bangs are history. To me that’s why you go to Dreamforce.
Sage and Salesforce put on a love fest on Tuesday to announce their partnership in which Sage has developed Sage Life, a product to enable small companies to connect their “customer, accounting, payroll and finance data into one system, accessible from any device, anywhere,” according to the press release. The wording leaves it unclear if the customer data is held in Salesforce’s traditional CRM or if it refers more broadly to ERP data. Sage Life will be out later this year and will likely be shown to the public at Sage Summit, a user meeting in New Orleans in July.
The shared press conference between CEOs Stephen Kelly of Sage and Marc Benioff, Salesforce, shed no new light on the continuing controversy over whether Salesforce was being pursued by a third party as an acquisition. For all we know Salesforce is or is not being pursued by an anonymous third party but certainly all of the likely contenders—i.e. vendors who can afford such an acquisition—have demurred when asked.
The fireside chat was held at a restaurant not far from Salesforce headquarters in San Francisco. Even if this was not the acquisition announcement many had expected, it was still certainly a news-worthy event. Sage is the second largest software company in Europe behind only SAP and the vast majority of its customers—85% according to Kelly—are still users of on-premise computing solutions to run their small businesses. This should be seen as a significant opportunity for both companies.
For Sage it is a significant upsell opportunity, albeit one that will go through its resellers. The danger for Sage is that its partners or customers will abandon the brand in favor of other cloud solutions such as NetSuite, FinancialForce, or other cloud solutions. On the other hand, Sage’s huge installed base represents a large community of potential users of Salesforce’s platform, Salesforce1 upon which Sage Life and any future products would be based.
Kelly was careful to note that he regards Sage customers as customers for life and that he wants to be their supplier into the future. It was his way of telling them that while cloud computing is the future of the industry, Sage would not be twisting arms to get its customers to upgrade. This is both good business and fine logic because it will take time to educate and motivate Sage’s existing partners to make the switch.
Still Sage Life offers many modernizations that Sage customers might gravitate towards such as its ability, thanks to Salesforce1 to integrate collaboration, social, and an array of other apps on a single handheld device. Significantly, Kelly said that the new application and its underpinnings is as important as the introduction of the iPhone for his customers.
Benioff had no comment when asked about potential acquisition rumors, a position which he, as the CEO of a publicly traded company must take to keep from running afoul of the SEC and Justice Department. Nonetheless, Benioff’s demeanor and business casual dress suggested that this meeting would not produce the kind of news some had expected. When asked specifically about Microsoft, a company once rumored to be a suitor, Benioff praised CEO Satya Nadella as an, “Incredible partner,” for his openness and the mutual effort to get the two software giants working together over the last year.
Benioff noted that Nadella’s Microsoft, is the “old Microsoft” that would reach out to software development partners to help them incorporate its products—such as office, Azure, Outlook—deep into their own to provide users with a well integrated experience. This is a posture that Nadella has taken with other software companies including NetSuite just last week in making a joint announcement during SuiteWorld. Some had seen this as a flirtation that would precede acquiring Salesforce but they were likely reading too much into the gesture.
At the same time, there was no mention of a Salesforce purchase of a minority interest in Sage, from time to time Salesforce has taken a minority position in other software companies; but not today. Others, like me, had expected this to be part of the announcement. For the most part the Q&A centered around relatively safe topics such as the need to treat customers well, the powerful combination of Sage and Salesforce in the market, and Kelly’s coming effort to transition Sage’s business model to reflect the recurring revenue aspect of cloud and subscription models.
It will be interesting to see if Sage Life is only the first of multiple cloud offerings based on the Salesforce1 Platform, or a one off. A lot depends on being able to convince partners that the time to get to the cloud is here, even for them. Failure is not an option for this transition and if the current partner base fails to seize the moment, Sage may have to consider either new recruits or a different business model.
Some of the drama over the rumored acquisition of Salesforce.com by a larger software industry rival could come to a head today when Salesforce CEO Marc Benioff and his Sage counterpart, Stephen Kelly, share a joint press conference in San Francisco.
For weeks the rumor that Salesforce was being courted have been fueled by speculation in the financial press about Salesforce’s apparent engagement with investment bankers. The speculation was that it was figuring out how to deal with an unsolicited offer but all along I have felt that the signals were not very strong and that a Sage deal made more sense. I think Salesforce will take a minority position in Sage, in part as a good will gesture.
There was plenty of evidence if you knew where to look. Salesforce and Sage had made a joint announcement in the first quarter about Sage porting some of its accounting software to the Salesforce1 Platform and becoming a member of the Salesforce ecosystem. The existence of the press conference, being billed as a fireside chat, and the general plan, has also been known for two weeks.
On the other hand, the rumormongers failed to produce any solid evidence about who an acquirer might be and relied on hearsay and unnamed sources to build its case. The thing that tips the balance against the rumors for me is that so much that has gone on has been done behind closed doors. In a takeover attempt you normally see a lot of posturing and negotiating in public. Recall the spectacle when Larry Ellison’s Oracle decided to buy PeopleSoft and Siebel. Now, those were acquisitions!
We will know in a few hours, or not. Just as a paranoid might have real enemies, Salesforce could still be being pursued. But, if Salesforce were to invest in a piece of Sage, it would complicate the calculations of its valuation and could tip the balance against acquisition. I suppose you could view this as a form of poison pill.
A little while ago I got a nice comment from buddy and guru Mark Tamis. He wrote, “I was thinking, it may be a good thing for Oracle to use its cash and buy up Salesforce, and then stick Benioff at the helm. What do you think?”
I have to say it was and is an interesting idea because Larry is 70 and just stepped up to Executive Chairman, leaving the CEO duties to Mark Hurd and Safra Catz. This idea has been surfaced before too. About a year ago it came up and died a gentle death when few outlets picked up on it.
Also, it might be human nature to think like this — to look for a single strong leader to take us to the promised land (whatever that is) — but real life experience seems to run in the opposite direction. Rather than seeking the uber boss, societies, at least the successful ones, instead split the organization whenever it gets too big.
There is a lot of historical precedence for the split over the big boss approach and it has changed over time in a predictable way. To understand the predictability you need a little math in the form of the Dunbar Number.
The Dunbar Number is actually a very elastic thing and could more easily be described as a concept or even a law of sociology (I dunno, I ain’t a sociologist). It says that the average human can keep track of about 150 or maybe 220 people and after that not so good results. This seems like a big number to me but I am an introvert, not shy, just not into maintaining lots of relationships and I am quite comfortable with ideas.
If you look at human organizations, pre-social media, the Dunbar concept applies remarkably well. Of course, CEOs are always trying to limit their direct reports but go up or down a level and you see interesting things. For example, in the Middle Ages, monasteries were working communities of about the Dunbar number. When one got too big, the abbot split off a unit and told one of the members to go elsewhere, build a new monastery, and keep up the tradition. That’s actually how the monastic tradition spread and if you read “How the Irish Saved Civilization” by Thomas Cahill you’ll see the story played out.
Now, social media has turned the Dunbar Number on its head but even with that assist there is a practical limit to the number of friends you can have even online. Perhaps that number varies by individual but the point is that it’s finite and probably not as big as the number of followers many of us have.
There are other examples too such as the military company, the atomic unit of military effectiveness. Corps, divisions, regiments, and battalions are all different aggregations of companies. But what’s this have to do with Oracle? Well it’s indirect. A story in today’s New York Times announces that HP’s CEO, Meg Whitman, wants to split the company into a PC unit and an Enterprise one.
My analysis is that HP is too big to be effective at pursuing a strategy even with all of the computers and communication infrastructure the company has so it’s a natural to seek a way to group similar products and skills into separate companies. Refer to the monastery idea and consider Dunbar and ask yourself if this makes sense.
So, all this is to say that my response to Mark Tamis and his idea is to think small-er. Rather than trying to find the uber boss, if that person even exists, it might be time for Oracle to consider cleaving itself into logical units that have more autonomy than they currently do but that still tree up to a single entity. This might be a worthwhile trend for a lot of first generation Silicon Valley companies.
Oracle is currently made up of a Byzantine assortment of in-house developed technologies and bought companies. It is also a player in almost every part of the tech sector from hardware to apps. The company’s current tag line, “hardware and software engineered to work together” is well chosen to give an impression that is no longer needed. The goods might be engineered together but that’s not the same as being designed and built for the purpose from whole cloth. In fact, Oracle reflects the marketplace it tries to serve which is sophisticated, complex, and aggressively heterogeneous, whatever the marketing lingo says.
Certainly Meg Whitman is rolling the dice with this split but from my perspective it is a logical and appropriate thing to do, and one that has historically delivered results. Would Oracle ever consider splitting into a hardware enterprise, a legacy software company, and a third dedicated to more modern web/social/mobile technologies? Never say never out in the valley, except maybe to the idea of Benioff taking over Oracle.
Subscription billing and payments pioneer, Zuora, today announced its series E funding. The tranche of $50 million brings the company’s total capital investments to $132.5 million, much of it spent on sales and marketing. This convinces me that the hardest thing about being a disruptive technology is the cost of getting the idea into people’s heads. Salesforce spent a similar amount on sales and marketing while getting going and it’s reasonable to say that this is now the formula.
The really good news is that all of the company’s original investors have ponied up repeatedly to buttress the company and that includes individuals like Dave Duffield founder and co-CEO of Workday and Marc Benioff, co-founder and CEO of Salesforce.com as well as conventional venture companies like Benchmark Capital, Greylock Partners, Redpoint Ventures, Shasta Ventures, Tenaya Capital. You could say the smart money is on Zuora in anticipation of an IPO at some undisclosed point in the future.
All the cash gives the company a cushion that translates as an IPO someday but on its terms, there’s no rush. And the financial news and prognostications are nice but the underlying fundamentals say even more. They say that Zuora got it right in 2007 when the company identified the back office of subscription companies as the place most in need of help to make the model work. Co-founder and CEO Tien Tzuo had an intuitive understanding of the back office having seen first hand what a fast growing subscription company had to deal with each month getting its billing done right.
At Salesforce, Tzuo was chief strategy officer and, when he recognized the need, he built a sort of version one of what would become Zuora but he didn’t stop with billing at Zuora. The company now offers solutions for payments, or commerce, and finance but even more than this, it is innovating around the idea that the subscription business model is fundamentally different from the conventional product or service models we’ve lived with since the Medici invented double entry bookkeeping. Keeping an eye on the business model means the company will be able to innovate around the core idea for a long time and that’s a good thing.
Zuora makes its mark taking the broad view, which is in part why I like them. The response from the market and the venture community tells me they’ve struck a nerve and the fact that there are many other companies plying the same waters tells me this is important.
So, good on you Zuora. I am looking forward to speaking at their user conference in a couple weeks in San Francisco. It should be quite a party.