On-demand

  • October 20, 2010
  • I get a lot of email.  It’s not all because of my job or because I publish my work frequently.  Some of it is like that, but it seems like my email address is on a lot of lists and I am one of the people who get spammed whenever there’s a webinar to fill.  Perhaps you know this feeling.  Last week I was invited to a webinar for a sales product and it made me think about why we aren’t more successful and what might be done about it.

    Jim Dickie and Barry Trailer at CSO Insights (www.csoinsights.com) have a big data set culled from major sales organizations over many years.  In their annual surveys they capture information about sales attainment and other things relevant to selling and managing sales people.

    It should be no surprise that in a recession, companies have a hard time making their revenue numbers and the CSO data backs this up.  Companies lay off under performing sales people, give more responsibility to those who remain and watch expenses carefully.

    I am not sure if this helps a lot but it’s what we do and you can’t argue effectively against such actions.  But in a world where we all know Einstein’s famous dictum that the definition of insanity is doing the same thing repeatedly and expecting different results the art of selling is over filled with techniques for doing exactly this.

    For instance, two strategies to be taught in a sales webinar I was recently invited (by email) to include:

    • Discover key techniques to break through the gatekeeper and get straight to the decision-maker.
    • Discover key techniques that will get your prospect actively engaging with you instead of simply tolerating your pitch and ending the call with a vague promise of interest in the distant future.

    Now, to be fair, selling is difficult under the best circumstances.  Experienced sales people know that getting appointments is hard because people don’t have time or budgets or who knows what and getting to a decision maker is always challenging but always necessary. There are times when a straight ahead strategy works better than others, times when getting the appointment is really the key to getting a deal.

    Nonetheless, we might all do better today if we consider the situation we find ourselves in rather than selling in the conditions we wish we had.  We’re in an economic recession and budgets are locked down for many companies and spending on non-essentials is carefully scrutinized.  In this situation decision making retreats up the chain of command and getting to a decision maker is indeed tough.

    At this point you might seriously think of alternative strategies.  Rather than using interpersonal tricks to get people to agree just to shut you up, you might consider selling to the pain.  Often we define a customer’s business pain as being without our product and while that’s true enough, it might not be the customer’s only pain.

    In the current circumstances, the business pain can easily extend from not having a product and its capabilities to not being able to afford it or to pay for it.  In other words, if your product isn’t selling, the feature you might be missing may be payment terms.

    I have written in this space before about creative financing in the form of the layaway plans that some retailers have fallen back on in an effort to keep sales momentum up in a down economy.  The thing that layaway or any similar approach provides is not discounting, which many vendors instinctively reach for whenever there’s a price objection.  Layaway provides a means for the buyer to maintain cash flow while paying for an item and I think this is exactly what we are missing in enterprise selling right now.

    To the extent that a product we’re offering provides a way to improve output or reduce waste, there is a natural demand bias in favor of a purchase.  So we need to carefully examine if slow sales is a function of demand or if the demand itself is being artificially controlled by funding.  In that case, finding creative ways to finance a buy may make all the difference.

    This is really a simple extension of the idea started by on-demand computing — companies pay by the month for computing services rather than in a lump sum.  The purchase isn’t financed in a classic way with on-demand, it is eliminated and the capital expense is turned into an operational expense.  It’s one thing to provide IT services this way and another to provide a durable good, but we should be able to find solutions.

    Tien Tzuo, CEO of Zuora likes to talk about the subscription economy and I think he’s onto something.  And I think one of the key takeaways from this recession might be the importance of subscriptions — metered and elastic provision of all kinds of products regardless of whether those products exist in a central location or on a customer’s premises.

    As in the case of the retailer offering layaway, we might find that an adjustment to help the customer’s cash flow situation could yield benefits all parties in a transaction.

     

    Published: 8 years ago


    Sage’s introduction of SalesLogix for cloud computing has caused me to do a lot of thinking.  The operative terms we use in the industry for software functionality delivered across the Internet is SaaS or now cloud computing and numerous vendors find themselves twisting themselves and the definition into barely recognizable forms.  Enough of this I say, let’s do a re-think.

    If SaaS and cloud computing are mysterious to you, let me provide some background.

    I started covering the field (it wasn’t a market yet) in 2000 and I devoted my practice at Aberdeen Group to it.  In those early years other terms dominated the discussion, notably, hosted, on-demand and ASP.  All applications were hosted and available on-demand but the earliest distinction, one that persists today, was between ASP’s and multi-tenant solutions.

    Briefly, ASP’s or application service providers offered client server products like Siebel served from a central location across the Internet.  It was slow going and each customer had a single instance of the software running out on the Internet.  It didn’t work out well and many VC funds took goose eggs on their report cards from the ASP’s.

    Multi-tenant was another matter.  Salesforce.com was a pioneer but so were Salesnet, RightNow and UpShot.  Ironically, only Salesforce understood the power and value of its proposition (RightNow got religion a little later) and most treated the multi-tenant on-demand solution as simply a delivery model and not much more.  UpShot was bought by Siebel, Salesnet by RightNow and the debate about superiority abated because Salesforce and RightNow (which hardly competed then) had prevailed.

    Then something interesting happened.  Vendors like Oracle (which bought Siebel) started dabbling in on-demand services and began delivering application services that hybridized the on-demand and ASP models.  They did this by re-architecting away from client-server and supporting applications in browsers.  They then began hosting their applications in a have it your way scenario.  The re-architected applications had been retrofitted to support the multi-tenant model but multi-tenancy was strictly voluntary.  Customers could elect to run their applications as single instances in their IT departments or from a remote data center.

    With multi-tenancy everyone shares a single instance of the application and through metadata configures and customizes their instance.  All data in a multi-tenant system is stored in one server farm with metadata again serving to segregate it.  Some people worry about this virtual segregation but so far it has been resilient to corruption and hacking.  Nonetheless, some vendors offered single tenant solutions to assuage jittery nerves.

    But wait there’s more.

    Terminology evolution continued and SaaS or software as a service and cloud computing have been front and center for several years (in the case of SaaS).  In its quest to differentiate multi-tenant from conventional single tenant, the industry keeps adding differentiators.  SaaS has usually meant multi-tenant and cloud usually refers to a plethora of computing services available on the Internet.  So, raw computing power is also called Infrastructure as a Service (IaaS), there’s still SaaS and cloud seems to refer to platform — the whole computing stack of hardware, operating system, database, middleware, applications and more.

    So where does this leave us?

    In a word, confused.

    The relative dearth of terms has caused us to re-use what we have in ways that have confused the market.  I also do not leave out the possibility of savvy marketers hitching a ride on a popular term to bend it to mean whatever they need it to, which lead me to my opening paragraph.

    So I propose the following.

    ASP is the new term used to describe a single tenant implementation in some remote data center that serves applications across the Internet.  A vendor that serves multiple customers with this architecture would be said to be delivering an application service in single tenant mode. Full stop.  No need to apologize for it.  If that’s what the customer wants then sell it to them.  It doesn’t have all the advantages of multi-tenant cloud computing but some people clearly don’t see these things as advantages anyhow.

    SaaS refers to multi-tenant application delivery across the Internet.

    Cloud computing is an umbrella term encompassing ASP and SaaS as well as IaaS and Platforms.  ASP’s and SaaS providers may very well use infrastructure from other cloud providers as Sage is doing with SalesLogix.

    My whole point in doing this is simple.  I think the industry and the market are mature enough for us to develop some new terms or possibly adapt an old one.  Since there are obviously several models for delivering software as a service, why not differentiate enough to give concreteness to them?  Calling everything SaaS without qualifiers is not helpful to the market or the customer and the confusion it can cause can only slow down a sales cycle and who needs that?

    Published: 8 years ago


    A long time ago I wrote a white paper about how on-demand technology would change business.  The paper covered all of the ideas you’d expect including lowering costs and improving access to on-demand applications.  But there was another part of the paper that speculated that if technology was that easy to come by then the next thing to look for was enhanced service based on the technology.

    In other words, technology access would cease being a gating factor in executing business processes.  Replacing technology as a gating factor would be having the smarts to use it optimally.  I envisioned that service companies that had operated more or less locally would, or at least could, become national or global by selling their expertise based on the on-demand technology.  The computer and telephone enabled public relations firms to become national in scope, but a bit more is required for a marketing services company or a design company for example.

    It has taken a long time and it seems what happened first and what I had not fully foreseen was the globalization of applications based on platform technologies.  Right now, Salesforce appears to be the most successful practitioner of that art.  But now we appear to be at the beginning of an era when business services will become global or at least national based on the consolidated expertise of some organizations.

    Judging by some of Sage Software’s recent actions, that globalization might be taking off at the SMB end of the spectrum.  Recently, Sage announced new marketing services for its ACT! customers.  The first service will be email marketing available on-demand.  Now this may not seem to be a very big move since there are many independent email marketing providers already on the market like Constant Contact, ExactTarget, VerticalResponse and many others (you get 36 million hits on Google).

    But don’t lose sight of the bigger picture.  With a three million user installed base in North America that has many marketing needs beyond email, Sage is poised to build a services engine that could eventually rival its software business.  This would be a very smart end run around the company’s own business model limitations.  To be precise, Sage sells its products exclusively through a reseller channel.  The resellers deliver product, customization and advice leaving slim pickings for Sage beyond the license revenue.

    The primary way Sage grows in this model is through product sales and by recruiting new partners.  But no market is infinite and the market of resellers is relatively small compared to the market of end users.  You see where I am going.  There is nothing prohibiting Sage from offering services based on the products it makes and the installations that its partners effect.  As a matter of fact, offering this kind of service, which only makes the end customer more productive, should drive demand for the products themselves.  Looks like a smart and virtuous circle to me as well as a new kind of on-demand service.

    I believe the era we are entering will be constraining for many companies in several ways, not the least of which is transportation.  As fuel prices resume their rise with the recovery, companies will need to find ways to take travel costs out of their value propositions.  That should mean a need to enhanced marketing as in, how can we use marketing rather than face time to close more deals?

    The answer to that question goes beyond email marketing and probably beyond the meager efforts that so many SMB companies now use to sell their products.  Centralizing key services that can be delivered at scale via the Internet will enable SMB’s to continue to compete in select markets against larger competitors.  It is also a growth market and who doesn’t like that?

    Published: 8 years ago


    I was at a user meeting with NetSuite in Boston earlier this week.  The company has bought two companies since going public — OpenAir and QuickArrow — both of which support the professional services market.  Companies sell things as well as services and CRM has been applied most successfully to the former.  Companies that sell services have been left to their own devices to figure out how to automate and manage sales and delivery and their situation resembles that of the thing-sellers pre-SFA.

    NetSuite’s idea is an integrated solution combining ERP and services oriented planning and sales modules going by the name of SRP — services resource planning — and the idea has legs.

    As you can imagine there are some significant differences between selling things and selling projects.  Most importantly, services companies have bigger issues with fixed overhead because you have to have smart people on staff if you expect to sell their time.  Economists might say that supply is inelastic or certainly less elastic for the services guys than for the companies that can throttle up or down the manufacturing process.

    All this got me thinking not about the two different types of selling but about the two different styles of building a company exhibited by Salesforce.com and NetSuite.  Both companies have purchased other companies when it made sense as a way to build out their offerings.  But each company also has a multi-tenant architecture and a cloud platform, which makes it easy for third parties to build or modify applications.  Nonetheless, if I had to describe each company’s strategy I would say that NetSuite is more likely to buy than make compared to Salesforce — if you include the partners.

    Salesforce appears to have decided on an approach that encourages a partner community to build native applications while NetSuite seems to encourage partners to deploy and modify its core solutions though not necessarily build wholly new ones.

    Now, this is a rough approximation and it looks more black and white than it is — there is a lot of grey area in all this.  But it drives an interesting question that I believe can’t be answered, at least not now.  Which approach is better?  Should the primary vendor be the only one involved in new product development or should the platform vendor simply let a thousand flowers bloom?  Certainly the existence of the platform makes the second option possible.

    Part of the answer can be found in how each vendor views itself.  Salesforce is obviously looking for a big new market to penetrate that’s bigger than CRM and it has selected application development tools for the enterprise and smaller organizations.  NetSuite might have a serviceable platform but for the time being it appears to be more interested in the market for integrated front and back office applications, which is more crowded.

    I don’t have any good answers here or prognostications, just these observations.  Salesforce has always been in the business of inventing the future and while they’ve been successful they have had their stumbles along the way too.  Other companies have been content to stick to their knitting, but the future rarely keeps to a script.  There are many markets just opening up, at least in part because there is reliable and low cost software available to support them and that says good things for both companies’ chances.

    The big question to ponder is whether there is enough demand for in-house development to support Salesforce’s vision.  It groups are notoriously backlogged and it is unclear to me if the backlog is a result of too much demand or inefficient tools.  For decades we have argued that it is the tools and we’ve seen generation after generation of tools that promised to fix the problem.

    Tools are important but if you read “The Black Swan,” which I recommend, you might get the notion that backlogs are inherent in what we do, in part because we do such a poor job of understanding and planning for future requirements.  If so, one of the next logical acquisitions for either Salesforce or NetSuite should be a company that focuses on improving forecasting and planning methods.  Does such an animal even exist?

    Published: 9 years ago


    For the second day in a row Adobe made an important partnering announcement.  Yesterday the company said it had teamed with Salesforce.com to produce Adobe Flash Builder for Force.com, which will speed development of Flash-based user interfaces for Salesforce customers.  Today Adobe announced that it has concluded acquisition of Omniture, a web analytics vendor based in Orem, Utah for a whopping $1.8 billion.

    It seems an obvious strategy to leverage some of Abobe’s ingredient technologies, like Flash, to make a bigger presence for itself in Cloud Computing.  The addition of web analytics is very interesting.

    At this point in the evolution of CRM, if you are not already a big player the chances of starting from scratch and getting big are nugatory so the strategy has to be to buy.  But Adobe’s choice of partnering with a leading CRM company for user interface design and following up with buying analytics is intriguing.  With these two ingredient technologies, Adobe appears to be 1) betting on the future importance of understanding customer moves and motivations and 2) clearly understanding that robust simplicity must rule all software interfaces regardless of platform.

    If you ask me, these are two good bets.  While there are clearly many good analytics products on the market either freestanding or embedded in business applications, my research tells me that regular users are still too confused about analytics to fully leverage them.  Ask ten people in our industry the difference between reporting and analytics and you will see what I mean.

    My quibble with analytics and analytics vendors generally is that few acknowledge the effort required to capture good data.  Too often the MO is to capture large samples and get some averages, a good but not great approach that, in another setting, once left a bemused Benjamin Disraeli to list three categories of lies, “Lies, damn lies and statistics”.  There’s no substitute for understanding demographics, biases, attitudes and the like to better predict behavior.  Here’s hoping that Adobe gets it and uses Omniture to go the more rigorous route.

    Published: 9 years ago