On-demand

  • September 16, 2009
  • Salesforce.com took an interesting step in its evolution as a platform company today.  The company has been in the process of expanding its footprint over the last few years moving from an on-demand application for front office business practices to a Cloud Computing Platform with the intent of moving enterprise computing from the glass room to the Internet.  (They have also repeatedly added that they have no intention of exiting the CRM business.) Today they pushed further down that path with an analyst-only briefing featuring one of their customers — Fort Worth-based 20/20 Companies.

    In the set up Salesforce revealed some of the results from an internal customer survey of one thousand randomly selected companies from 25 industries.  Salesforce Vice President of Product Marketing for Force.com, Ariel Kelman, said that 27% of those customers had already built custom applications using Force.com the company’s cloud platform.

    There is no way to verify the data but we know that Salesforce is a stickler for accuracy so the claim of nine times faster development and a 58% cost savings average sounded reasonable.  More interesting to me was the statistic that said the average company had built not one but five applications.  Clearly, the first experience was good enough to lead to more.

    The top five application areas for the survey group in order were: analytics, project management, contract management, quote/proposal and event management.  The list is pretty long but what strikes me is that the AppExchange has pre-built products in most of the areas surveyed for so some explanation is needed for whether the developments started from scratch or were integrations with existing applications.  For example, the top category, analytics, is not something you’d think that a developer using Force.com would build from nothing.  More data here would be enlightening.

    The top five barriers that customers surveyed faced with on-premise development resonate and they include ability to customize processes, lack of IT skills, poor requirements, lack of capital and integration costs.  The whole point of platform computing is to help reduce most of these needs so that, for example, companies that lack skills or capital can take on projects because they require less.

    One thing that platform computing won’t help with directly though is the issue of poor requirements gathering.  For as long as there has been software we have lived with poor requirements but the good news might be that with advanced tools, planning can be replaced by iteration.  There is far less pressure to get it right the first time when you can easily make a change.

    Then Mark Warren, acting CIO, 20/20 Companies, came on to describe how his team developed a complete order to invoice to payroll application for his company that specializes in high quality marketing and sales services.  The applications were impressive though the cost savings did not reach the 58% that Salesforce had announced.  Warren said his three-year cost for the Salesforce solution was about $1.7 million against the estimated $2.0 million for a .net approach.  Warren indicated that the Salesforce solution took only ten weeks to deliver compared to a .net estimate of six months or possibly more.  So the risk reduction was certainly an issue for Warren.

    Finally, Force.com was not the only product in the configuration but this deployment shows how useful the platform was for integration.  In addition to force.com, 20/20 used Data Integrator from Pervasive and Crystal Reports from Business Objects for analytics.

    There was no demo though Warren said they had met their objectives with the project.  This was a good first effort by Salesforce to bring to the world some indication of the power and real world capability of Force.com and certainly a customer relating his experience is valuable.  But it would be better in the future if some independent parties got to kick more tires.

    Published: 13 years ago


    Market analysis firm IDC figures the market for service and support software will reach $4.2 billion before the end of the first Obama administration.  That’s reason enough for software vendors to want to be all over the market like a cheap suit, like white on rice, like a junkyard dog.  But as the market moves from on premise to on-demand you can expect the revenue potential to go way down.  That’s the beauty of on-demand computing — score one for the customer.

    But whether it’s a billion or four, it’s still real money and enough to motivate lots of people’s behaviors so it was no surprise that both Salesforce.com and Oracle shored up their service and support offerings this week.  What was fascinating to me is that despite all the secrecy surrounding each company’s announcement, which I witnessed first hand, the two CRM titans managed to make similar announcements within a day of each other.

    I attribute the coincidence to the simple logic of the situation.  Each company has built out very good offerings in sales and marketing and each is making its attempts in social media so it was time that each gave some attention to service and support.

    To be rigorously fair, each company has devoted significant time and attention to the subject and each made announcements about intention and direction earlier this year or very late last year so it is no surprise that they decided to redeem their pledges and September is a great time to do just that.  So what’s what and what different?  Well…

    Oracle announced integration between Oracle CRM On Demand and InQuira’s Web self-service applications.  The integration lets customers go seamlessly from self-service to live agent-assisted service, according to the press release.  This is a big deal because it enables customers to escalate their service requests and provide the service agent with a warm case full of basic information about the customer and the problem.  This completes a trip started with integration between Inquira and Oracle’s on-premise service and support systems.

    Meanwhile on Wednesday, Salesforce redeemed a promise it made when it announced the acquisition of InStranet.  Salesforce said that it has successfully ported the technology to its cloud platform so that its customers can now use all of the cloud platform functionality such as user interface development and customization tools as well as workflow and approvals and its knowledge publishing capability.

    To me Oracle’s announcement is more about service – and I think it’s important to tease apart service and support here.  Service being an issue that a customer has that can only be dealt with by the vendor and support falling into the category of how to use/fix a product.  Each is important and this in no way elevates one over the other, it’s just my observation.

    Ok, the Oracle scheme takes a customer with a service issue from a self-service modality to an interaction with a live agent while preserving the thread of the interaction.  No more, “Can you give me your account number again?” and hopefully faster more accurate service.

    The Salesforce announcement says that customers with how to use/fix issues can access the wisdom of peer users.  This is a good thing and a little brave on the part of companies who use it because it says a lot about the faith they place in their customers and ultimately the confidence they have in their own processes and procedures.  Using social media like Facebook, the Salesforce solution helps companies to gather input from customers and organize it through stack ranking and other crowd sourcing techniques to bubble up answers to customer problems.

    Vendors like the Salesforce solution because it has a very low cost profile and customers should like it because it gives them the answers they need much faster.  Vendors should like the Oracle approach for very similar reasons.

    Frankly it’s nice to see such heavy investment in customer service and support and the resulting benefits.  I think these announcements say a lot about the relative importance of keeping existing customers happy in today’s economy vs. the never-ending quest for new customers.  It speaks to the growing maturity of the CRM market and the growing clout that customers have.  Good for us.

    On another note, Oracle is running a string of successes in CRM.  They’ve made some good numbers recently and they are generating some interesting products.  It has been a few years since Salesforce has been challenged to the degree that Oracle now challenges it.  Nonetheless, in two consecutive weeks with big announcements (last week was contact manager) Salesforce is the common denominator.  Simply put these guys are investing heavily in R&D and they have the goods to show for it and I would give the edge for raw sex-appeal to Salesforce.

    But two weeks is just a snapshot.  Oracle Open World is coming in October, and Dreamforce is in November.  Expect some fireworks.

    Published: 13 years ago


    There is a lot of unspoken information in last week’s announcements by Sage More about Sage Software andSalesforce.com (NYSE: CRM) More about Salesforce.com about their respective contact managers. Each is creating a disruptive innovation that affects the other, and the symmetry of these dual and dueling announcements is frankly beautiful in a funny way.

    To review, Sage announced the 2010 version — with new bells and whistles — of its flagship contact manager ACT!, and a day later Salesforce introduced its Contact Manager Edition (CME). On the surface, it looks more like Sage introduced its routine annual update and no more, while Salesforce jumped into a new market. However, if you look closer at the two situations you might get a different impression.

    Price Competition

    For a long time, Sage has been adding functionality to ACT! that has made it a very powerful and complete contact manager, and some would say that it crosses the line into SFA (sales force automation). If that’s so, then Sage has a major price advantage in the SFA market and can steal SFA business from any number of vendors, including Salesforce.

    However, Salesforce’s CME announcement does to Sage what Sage has been doing for quite a while to SFA vendors. At a mere US$9 per month per seat, Salesforce CME is a no-brainer for individuals and entrepreneurs who want to keep track of customer information on-demand but whose businesses are small and do not require all of the functionality of CRM. ACT! could fit the same need and usually does, but now there’s price competition.

    Both companies face other competition from vendors like Microsoft(Nasdaq: MSFT) More about Microsoft and Outlook, which is a virtually free, though limited, repository of basic contact information. But for our analysis, a customer still using Outlook or Apple’s (Nasdaq: AAPL) More about Apple Address Book is outside of the discussion.

    Market Disruptors

    In The Innovator’s Dilemma, Clayton Christenson described the phenomenon of disruptive innovation in which a new entrant to a market disrupts a well-established vendor by providing a stripped-down product at a lower cost. The reasoning is that the established product vendor has, over time and because of increasingly demanding customers, over-engineered a product to meet the needs of the most demanding users. The disruptor enters the market with the advantage of having a smaller product that meets the needs of a large segment of the population and an upper price limit of the established vendor.

    It is never a problem for the challenger to make money below the cost level of the incumbent, and frequently the incumbent flees the lower end of the market to chase the more profitable customers up market. That’s what Salesforce did to Siebel and what it is attempting to do with Sage right now in the contact manager space. However, Sage is more or less doing the same thing in SFA. ACT! is not a full-function SFA product, but it has a lower price point than even a Salesforce, Oracle (Nasdaq: ORCL) More about Oracle, Siebel or NetSuite More about NetSuitesubscription, and it offers a lot of functionality that many SFA customers might find adequate.

    There are many complications having to do with the idea of product line cannibalization — each company has an SFA/CRM product with better margins to protect, for example. So Salesforce limits its CME offering to two users; if you need more, you need SFA, they believe. The same is true for Sage. SalesLogix More about SalesLogix is their full-function CRM package with SFA. So neither company can swing for the fences with their disruptive innovation strategies. Success for either of them at the low end would result in some takeaway business from the other guy, but it would likely hurt the house brand SFA too.

    Room for a Third?

    There is a danger in this thinking because it leaves the way open for a third competitor to enter the fray unencumbered by a need to protect an up market product. I am not sure such a vendor exists — at some point you get to the top of the food chain. Nothing hunts lions other than humans, but that’s a different story.

    It’s hard to say which vendor has an advantage. Salesforce has well over 1 million seats deployed, and ACT! has about 2.9 million licenses under maintenance contract. Salesforce is a sales Download Free eBook - The Edge of Success: 9 Building Blocks to Double Your Sales and marketing juggernaut, and Sage sells through a channel that is the envy of many vendors in the space.

    This situation is the picture of yin and yang and should be entertaining to watch. Meanwhile, the competition definitely benefits the customer.

    Published: 13 years ago


    Two days in, September has been a busy month for contact managers.  I haven’t seen this much activity in years.  On September 1, Sage announced its ACT! 2010 release and then Salesforce.com dropped a small bomb — as of today they’re into the contact manager space too.

    Contact management has been a poor cousin to sales force automation (SFA) for many years.  Initially, there wasn’t much difference between the two.  Contact managers were sort of a subset of SFA which tracks deals, opportunities and leads as well as contacts.  For many sales people, the choice — if the choice was theirs to make and not the company’s — was largely one of work style.  You could organize your work around the stair-step categories or just glom it all together in a contact manager through your own system of user defined fields and notes.

    Real SFA also offers the important ability to connect to the broader CRM suite thus making the information collected by the sales person more useful and available to the rest of the company.

    The two announcements — so far — this week blur some distinctions and to a degree trade roles of the leading vendors.  Sage has been around for a long time and ACT! has gone through several ownership changes but has resided with Sage for many years.  The ACT! 2010 release is a luxury edition, if you can call it that, which includes integration with Facebook, Twitter, LinkedIn and Plaxo.  Sage has also introduced an optional integrated subscription-based E-marketing service, a very nice and new user interface and fully customizable opportunities to support multiple sales models.

    All told, this isn’t the stripped down contact manager that was introduced in the late 1980s and you might quibble about whether ACT! 2010 is really a contact manager or if it has crossed the line into SFA territory.  I don’t know.  I am a realist and not too interested in theoretical issues like that.

    Interestingly, Sage went out of its way to benchmark the new UI with a Keystroke Level Modeling study conducted by Measuring Usability, LLC.  The company claims in its press release that the new UI achieves up to 35% better productivity than competing products.  Clearly the company invested significantly in the new release to send a message to its 2.9 million users and any competitors, that contact management is a viable category and one that it intends to compete aggressively for.

    You could say similar things about Salesforce.com today.  The company had been testing a small version of its SFA product for some time and the announcement of its Contact Manager Edition culminates that process.  There are several advantages that Salesforce brings to the table with its approach including its increasingly popular Cloud Computing Platform and easy migration to full CRM capabilities if and when the customer chooses.

    How much upgrade or up sell business Salesforce generates over time is a question without an answer now.  Contact managers tend to support two very different segments — small users like entrepreneurs who intend to stay small and for whom CRM would be overkill and large sales groups that are disconnected for many reasons from the rest of the company.

    The later group might include the sales team of a partner in an indirect channel, for example.  Such groups rely on internal lead generation and OEM marketing programs that are fairly detached from day to day selling.  I am not saying this is a good idea, just reality.  The first group, entrepreneurs and similar people, keep their own counsel and may not do much formal marketing preferring instead personal relationships, so they don’t need CRM.

    Nonetheless, the recent announcements by Sage and Salesforce serve to blur many distinctions.  ACT! is a high-end contact manager these days capable of taking on some of the less complex SFA functions and Salesforce, with its upward compatibility now reaches from the smallest to the biggest users.  Salesforce may have an advantage in pricing at nine dollars per seat/month but at that level the cost differential is much less than a daily latte and I doubt it will affect many buying decisions.

    Published: 13 years ago


    NetSuite put its tongue squarely in its cheek today and announced its own “Cash for Clunkers” program.  You can probably guess what the program entails — converting from premise-based ERP and CRM to NetSuite.  But the concept is funny and memorable and gives a broader context to the effort.  Not only does NetSuite assert that it can help companies to save money, it also shows them how to save energy — just like its namesake.  Nice concept and nice merging of green ideas and business savvy.

    Published: 13 years ago