The software platform is likely to be the new battleground in enterprise software. This is not to say that analytics and security are not important but they are being handled in different ways. Security is being handled in ways that address both hardware and software vulnerabilities but these things aren’t what customers or consumers spend their days thinking about. While everyone wants security, few know enough about it and the attitude is that security is someone else’s job. So both of these topics will be dealt with but they aren’t likely to be competitive differentiators, at least not yet.
But platforms affect more people and importantly they are key to making and saving money, topics the C-suite cares deeply about. Some of them might not know data from database but they all know profit and loss.
The software platform can be directly linked to making and saving money, which is why it is such a potent potential differentiator. We live in an era of commoditization. It’s hard to find true differentiation among competing products, which naturally leads to price wars. More than that, the pace of new product and new category introduction has declined precipitously over the last decade meaning that vendors find themselves in zero-sum competitions in which winning new business means poaching someone else’s customer.
So if there’s a lack of strategic differentiation there’s a load of tactical opportunities. Without strategic differentiation we face a market in which the first to react often wins the prize. And since so much of business is undergirded by information technology, the most adaptable technology—embodied in a platform—is the one most likely to help a vendor either make or save money. So we have the platform but where do platform wars come in.
A generation ago we faced a similar situation in which the answer was not the platform but the whole product. However, in retrospect they are the same. Whole product refers to all of the things a vendor in a mature market hangs to attract customers aside from the core product. Whole product consists of not only the core but the policies and procedures, financing and documentation and many other things.
The need for whole product was a driver of CRM’s evolution. Systems were imagined and built to capture customer feedback and to support employees striving to satisfy them. But CRM was an expensive proposition, especially in customer service, which required agents initially. It’s one reason so much energy has gone into developing indirect and self-service support.
Today’s problem is slightly different in that vendors all more or less recognize a need to alter their processes on the fly. It’s no longer enough to offer the support a vendor feels is right even in multiple channels. We must now support and service customers as they wish to be treated and that dimension is always changing. Such change happens at the platform level.
In this scenario it stands to reason that a vendor with a superior platform will be likely to succeed more or more easily in tight competition. But that’s not the end of the story. You can’t logically run a business on a platform unless your people know how to use it and that requires training—ongoing training.
All of this came into sharp relief last week as I attended the annual analyst kick-off event sponsored by Salesforce. The company has been developing its platform for a long time and just as importantly over the last 2-3 years it has brought forth an online training utility that develops platform skills in the rank and file. Giving customers a usable and powerful platform is the future in my mind. Interestingly, I don’t think the messaging has come together fully.
There’s more substance than shine to the mix, an enviable situation for any vendor. In detail there’s a fine platform and a very useful training utility in Trailhead. Also, there is an extensive list of plug and play platform based applications on the AppExchange. Think of it as the three-legged stool we’ll all need in the future.
What’s somewhat missing in most quarters is the realization and effective communication that this stuff is no longer optional, that business supported by platform fundamentals is what successful vendors will be using for the foreseeable future.
Other vendors, for instance Amazon with AWS and some others, see a different need and work to meet it. But primarily providing cloud infrastructure only addresses half of the challenge and amounts to saving money. That’s a great thing but when faced with making or saving money, 10 out of 9 (I said that right) executives who are given a choice will opt for making in money over simply saving it.
That’s why platform is so important today and why I think the decision point for many business leaders in the next year or two will be over which platform to select. It’s a choice that will have far reaching consequences because platform is foundational and not easily changed.
So welcome to platform wars. It will be a thrilling time if you are a software vendor and you have one. Other vendors, not so much.
The platform land rush is definitely on. You can’t swing a dead cat, as the saying goes, without finding an announcement about some new platform or some established vendor’s attempt to enhance its existing platform. Some sorting out seems to be in order.
What’s not a platform these days?
Well, if you can easily substitute the word application for platform, then use application because it will be more accurate. We’re suffering from word inflation all over the place and application has been split into apps, those things you run on your phone, and applications which vendors shy from preferring platform when they should know better. For the record, an app is still and application and a platform should be more. A lot more.
Platforms don’t grow on trees.
Building a platform takes work. It is doubtful to me that you can declare a platform into existence as a startup. Chances are good that a new platform is really a standalone application whose investors don’t want to see it become orphaned. But platforms take time and effort to build. If you look at the majors—Oracle, Microsoft, Salesforce, and SAP, they’ve been in the business for decades acquiring and integrating solutions to make something with a large footprint that they call a platform.
But it’s not just about quantity of functionality, there’s quality to consider too. For instance, in addition to all of the integrated apps, a platform ought to have a really good tool set that enables users to maintain what they’ve got and build new things including simple database apps as well as sophisticated processing apps that incorporate the social, analytic, integration, workflow, mobile, and other capabilities that make a platform real.
To be sure, there’s more than a casual difference between the majors and their offerings, but generally speaking, each is trying to become the one-stop-shop for customers needing software technology. Each also differentiates itself through emphasis on different aspects of deliverables while hewing to the cloud mantra.
Is it too late to become a platform?
Well, quite possibly it is too late. It takes a very large amount of investment and the time and talent of scarce and very smart people to make a platform, and while all that development is going on the market is not standing still. So recently we’ve seen some successful companies being acquired by large platform providers and I suspect the rationale for the sellers was that it was time to join rather than attempt to compete.
Microsoft bought LinkenIn recently but they’ve also bought large numbers of other technology companies that more or less fit their vision of platform. Oracle has bought more companies than I can count and continues to fold them into its platform or suite of clouds. Same for Salesforce, which just completed its acquisition of Demandware an ecommerce product.
As large as these collections of applications or platforms are, they can easily get bigger. We’re already at the point where very few businesses would likely use all of any vendor’s platform offerings because there’s just too much stuff. Many of these vendors have provided multiple tracks such as SMB and enterprise offerings, which would seem to automatically disqualify an organization from taking on everything on offer. Still there’s the grey area where an emerging business has one foot in each camp so hybridization is a definite possibility. It’s in the hybrids that the true value of a platform emerges.
Hybrids can also mean mixing offerings from multiple vendors and the gob smacking reality of today’s platforms is that as huge as they are, they are still not big enough to crowd out the competition. That’s a tough reality because part of the reason for embarking on the platform trail is to help lock out competition. But no such luck.
All vendors know they have to provide an elegant approach to integrating whatever is on a customer’s site. Of course, this goes double for the legacy systems every business runs. The legacy systems might have analogs on every vendor’s platform but legacy systems also go by the name of foundation systems, responsible for a business’s bread, butter, and profits. Businesses are thus naturally cautious about upsetting the apple cart so integration is a critical need.
Ecosystems come into focus
The platform wars are in full swing but the outcome seems assured. There will be several major competing platforms and we know which providers have them. Resistance is futile, announcing a new platform today is spitting into the wind. But at the platform level the group of applications made by third parties, commonly called the ecosystem, there’s plenty of opportunity.
In the bad old days, third parties couldn’t commit to a single vendor because markets were not big enough. Today though, committing to one vendor’s platform is smart business. Committing means abandoning the need to maintain source code tuned to this or that operating system, database, hardware, and even language. With that, it seems to me that smart startups should begin life with a commitment to an ecosystem and thus a platform. It also means figuring out a useful offering in a market that seems to have everything, that’s a story for another time.
A couple of weeks ago Allison Arieff wrote a piece in the New York Times titled “Solving All the Wrong Problems” that gets to the heart of the technical times we live in and its focus is not what you might think. She includes a long list of things we can buy or subscribe to such as:
A service that sends someone to fill your car with gas.
A service that sends a valet on a scooter to you, wherever you are, to park your car.
An app that analyzes the quality of your French kissing.
A “smart” button and zipper that alerts you if your fly is down.
A sensor placed in your child’s diaper that sends you an alert when the diaper needs changing.
It goes on but you get the idea and you can always read the article here.
All of these things have in common the idea that just because we have the ability to make them doesn’t mean we should. Presumably the ones that got venture capital financing had someone asking, how does this make money and receiving an acceptable answer.
At about the same time this article ran, I needed a water heater so I went to a big box store and searched for—wait for it—someone to wait on me, to answer a few questions in other words. There were three models on display but in a perversion of good, better, best, there was standard, deluxe, and WiFi. The top of the line water heater could send information to my smartphone about, oh, I don’t know what really.
In my long life I’ve noticed that water heaters either work or they don’t. When they don’t work, I take a cold shower and summon a plumber to rectify the situation. The idea of having a water heater that I could interrogate through my smartphone seemed importantly like a moment in history when a new neurosis is proclaimed—hydrothermia gondii, perhaps.
But I have an explanation or actually two that seem to pacify my mind. The first harkens back to Linus Pauling, a two time Nobel Prize winner who once famously said that if you want to have good ideas, you need to have a lot of ideas. Translation, it’s a numbers game and most inventions don’t make the cut. Of the long list in the Times article, most if not all but the one that evaluates the quality your French kissing, are bound for history’s ash heap.
But Pauling’s point was that you never know what’s going to hit so you take the risk of ridicule and ruin for the chance of success and all that attends it. Still, some of these inventions up to an including the WiFi water heater strike me as over the top science fair faire.
The other reason in my mind might be closer to the truth. It’s that we’ve reached the end of the current paradigm. By paradigm, I mean the thing that frames our economic and social lives, the technology boom. According to the late Russian economist, Nicolai Kondratiev, a paradigm animates our economic lives and lasts between 50 and 60 years before another replaces it. Within a paradigm you can have trends and business cycles but the paradigm is ascendant.
You can know when the end is nigh because it gets really, really hard to innovate around the core tenets of the paradigm without bumping into something else that does pretty much the same thing. In other words, all of the niches are full. When that happens people try to invent niches which is why you get online water heaters and French kissing apps.
Eventually Kondratiev’s wheel turns again and we start anew with a different paradigm. But new paradigms are expensive; they result in what another economist, Joseph Schumpeter, called creative destruction in which some of the earlier and perfectly good established economic order is trashed. So, not surprisingly, the establishment will resist change which brings on a period of stasis.
You know you’re there when someone invents something equivalent to a sensor placed in your child’s diaper that sends you an alert when the diaper needs changing. Come to think of it, that’s a perfect metaphor for the times we live in. We’re waiting for change.
Salesforce seems to be on a roll this quarter making new clouds available left and right. We’ve seen two already in Healthcare and Education and today they announced general availability of the Financial Services Cloud. As I have written before, back in the day Siebel had over 20 industry versions of its flagship CRM product so I would imagine this will not be Salesforce’s last industry offering.
There’s apparently a hierarchy or naming convention that needs to be observed when discussing industry versions. Just under the industry is the vertical. So for instance, if I understand it right, Financial Services would be home to verticals like banking and insurance. It appears the announced product focuses on wealth management and that makes sense.
Agents who want to show some love to wealthy clients will appreciate the CRM functionality that makes it easy to keep all the important customer information at hand as well as customer asset information available for easy retrieval. But the interesting thing about this announcement is how many partners work together to deliver the whole solution. By my read, specialist software companies’ products are involved in mediating most major transactions. The announcement cites some processes and partners including:
“Account aggregation: Athene Group and Envestnet | Yodlee aggregate account data from multiple sources, such as bank accounts and 401(k)s, to provide advisors using Financial Services Cloud with holistic views of their books of business.
Document management: DocuSign and eSignLive plan to add integrations that could allow advisors to send, sign and manage financial documents within Financial Services Cloud.
Data aggregation: Informatica and MuleSoft bring information from multiple sources including on-premise systems, SaaS applications, enterprise databases and more into the Financial Services Cloud allowing advisors to access data from siloed systems in one place.
Implementation services: Accenture, Capgemini, Deloitte, Fortimize, INVISR, LiquidHub, NexGen Consultants, PwC, Silverline and Unlimited Technology Solutions deliver professional services for implementation of Financial Services Cloud, ensuring the product is customized for each firm’s individual needs.
See the company for the whole list.
I imagine that launching a new financial services solution set could be a tough slog for most software companies. It’s hard to see how people in such a conservative industry would just come flocking to a new or relatively untested vendor. But by surrounding itself with experienced partners Salesforce can focus on its core strengths of platform and CRM while letting more expert software partners handle the arcane parts. It’s a good idea and I can see it giving the new cloud a big push.
Salesforce has been partnering like this for a long time and I think they’ve got the mix right. But with the advent of the Lightning platform I’d expect the pace to pick up in this industry as well as others. Platform is the key to industry solutions because each company that uses a solution depends on the ability to uniquely define its business processes for its clients. It seems Salesforce has all the pieces are in place.