Salesforce at 15
Fifteen is an interesting anniversary. We tend to think about major anniversaries in ten-year increments with the five-year internode acting more as a gut check. Fifteen is close enough to the creation that all of the relevant parties are still around and most are still in place. But it’s also far enough in the rearview mirror to provide the perspective needed to make judgments. Salesforce.com is fifteen and celebrating it.
Salesforce was not alone in its niche fifteen years ago and if you recall the time you know that “dot com” was the watchword of the time. The Internet was still a novel innovation and companies were trying to figure it out as a business tool in equal measure with trying to get straight how to move their sunset manufacturing to ultra low wage places like China and, well, China. Maybe India too.
My story in relation to Salesforce picks up only fourteen years ago because, fifteen years ago there was nothing much except a business plan and a lot of code to write. It would take a year for the company to bring a product out. By happy accident, I joined the analyst firm Aberdeen Group fourteen years ago with a mission to cover SFA. My instincts have always drawn me to disruptive innovation and I had a notion that I was going to cover hosted deployment models that focused on SFA. How lucky was that?
I was just getting settled into my job when Salesforce representatives came to Boston to brief the analyst community as part of the company’s rollout. Having come from a technology sales and marketing background and having directed the development of an in-house SFA system in a prior life, I got it right away, especially the part about subscriptions and being able to access customer data from anywhere that I could get an Internet connection. I was an immediate fan.
But it’s important to understand that Salesforce was not the only game in town. There were lots of hosted services offering an SFA product, though today they have all either disappeared or been rolled up into larger companies. Only Salesforce remains as an independent first mover and it has become a force in the CRM industry largely because of the vision of a core group that includes co-founder and technology guru, Parker Harris and, of course, CEO, Marc Benioff.
Today Salesforce looks like a no-brainer but fifteen years ago it was anything but. It was going up against some Goliaths with a stripped down product in a market where its only innovation was not the product itself but its delivery and business models. If it or any other SaaS company was going to survive it would have to steal market share from Goliath. Not a pretty picture but the stuff of corporate lore and mythology.
It is my firm belief that absent Benioff’s genius for promotion and an iron willed determination to sculpt the future of enterprise computing, Salesforce today would be just more road kill on the (metaphorical) side of Route 101.
But Benioff and a team of believers pulled it off. He made storing data in the cloud not scary but sexy. He took on the dominant player in CRM at the time, Siebel Systems, much earlier than I thought practical, with a campaign that featured a little kid writing at a blackboard, “I will not let Siebel take my lunch money.” It was a brilliant summation of everything Salesforce and Benioff wanted to achieve at the time. Benioff wanted to deliver an order of magnitude improvement in enterprise software’s dismal cost curve while also making CRM an easy installation that even small and medium businesses could accomplish.
In the process, Salesforce became the primary industry promoter of the subscription model and started a whole economic model that resonates throughout the culture today. No they weren’t the only ones doing subscriptions, far from it, but Salesforce and Benioff made subscriptions hip and sexy and sexiness drove success.
Salesforce has undergone more self-reinvention than I can count over the last fifteen years. Actually I can count it. The company seems to reinvent itself every 2 to 3 years, a torrid pace but one that has brought it to a leadership position in numerous Gartner Magic Quadrants, and the verge of the Fortune 500.
If the company has an Achilles Heel it is the tendency that all rapidly growing companies have of reverting to the mean, becoming average. In other words how do you keep “La Revolution” going without becoming a self-parody or the Fidel of tech? Here Salesforce has had incredible luck not only with its serial reinventions, but have you noticed that the company’s reinventions have all involved building products that it needs internally that also happen to be what the market needs too?
Salesforce’s early customers were emerging companies like itself so they needed high quality systems that didn’t cost a lot but that would enable them to compete with the big boys. As the successful ones grew they needed better ways to communicate and collaborate internally to prevent the stasis and sclerosis that organizations with large populations and rigid processes inevitably acquire.
Salesforce delivered Chatter, its collaboration tool and workflow to automate as many internal processes as possible. It embraced the social wave with a bear hug that has enabled it to effectively communicate with customers and prospects and it has shown its customers how to use these tools to streamline their operations too.
The company has also paid close attention to IT and application development. Understanding the disruption that mobility is causing, it has moved to provide development, maintenance, and deployment tools that enable business systems to evolve at rates very close to their underlying business processes. Exactly what it also needs in its continuing evolution.
While the company might not revert to the mean while Benioff and Harris are running things, it’s worth noting that the mean is chasing Salesforce. Every major business software vendor, plus a cadre of innovators spotting niche opportunities, is hot on the trail of Salesforce’s innovations.
Windows is effectively dead as a place to run business apps except for its necessity for supporting browsers where most applications run today. Everyone has a cloud strategy today including all of the nay-sayers of a decade ago who finally gave up being wrong all the time. Everyone is trying to develop an App Store — a term Salesforce coined before Benioff gave it to friend Steve Jobs and Apple — on that, all I can say is that Benioff is not always right. Ditto for the emerging ecosystems of partners with plug and play applications.
The list goes on and as if that weren’t enough, there’s philanthropy to discuss too. Benioff has been one of the earliest and most vocal supporters of the 1:1:1 model of philanthropy that posits donating one per cent each of a company’s equity, people time, and profits to charity. The Salesforce.com Foundation has become a model in Silicon Valley and other companies have emulated it creating a new force in public giving. Benioff is also not shy about his $100 million donation to UCSF Children’s Hospital, which will certainly enrich San Francisco and the Bay Area for a long time into the future.
There’s more but it’s enough for now to say that Salesforce.com has made a significant mark on an industry, a region, and even on the way we think of business today. That’s not bad for a fifteen year-old.
For many years I have written a piece that attempts to forecast the major themes of Dreamforce. I believe I am not always right but the exercise is fun and helps me orient toward what should be happening industry-wide even if it’s not. This year is no exception. With no briefing yet from the company, I am unfettered about what I can speculate on. Had I already been briefed I would be prevented by an NDA and common sense from doing this.
The dominant theme I have witnessed this fall from most of the other front office vendors has regarded marketing. As I have written before, most of the big guys–Salesforce included—have bought and integrated some very nice marketing solutions into their CRM suites. In the process, marketing, which was once the most qualitative and least quantitative of the CRM disciplines, has now become the most quantitative while retaining its qualitative distinction.
It’s possible that in future years we might see marketing fragmenting into two arenas for qualitative and quantitative output. We have a somewhat similar division today between corporate and product marketing but the segmentation I see coming would be between quantitative practice and creative output and the current division includes some of each in each part so there’s some refactoring to be considered. But enough, that’s a subject for another piece. Dreamforce.
So, marketing is top of mind therefore I don’t look for Salesforce to make it the centerpiece of their show. You have to remember that Salesforce made a big deal of the Marketing Cloud last year, after all, so don’t depend on them doing it again. They seem to take a perverse organizational pleasure in throwing down the glove each year so that other vendors can do their fast follower things. It’s like Lucy and Charlie Brown and the football—it doesn’t get old.
So if not marketing, then what? Platform. Around the middle of this year there were a couple of announcements that provide insight. Both Oracle and Workday made joint announcements with Salesforce that their platforms would interoperate and I conclude from this that platform will be the main attraction.
It makes good sense to me because I think platform-level integration is rapidly replacing application level integration. When integration meant two apps sharing some data, integration at that level of granularity made perfect sense. But today integration means constructing end-to-end business process support often using multiple apps that share more than basic data. In fact what’s basic data for one pair of apps might only be process metadata for another pair of apps further down the line.
This need for process integration puts a great deal of pressure on integration schemes. Increasingly vendors are building apps on top of over-arching platforms that bake a great deal of process support that is native to them into the apps. For Salesforce and its Force.com platform, this means workflow, collaboration, social media support, marketing and analytics, and mobility support that enables developers to specify an app once and target generate a runtime for multiple devices. As I say all this gets baked in simply by building on the Force.com platform and apps built to the platform standards are pre-integrated adding a powerful business incentive.
Here are some impressive stats to back up my opinion. There are now more than 2,000 ISV developed apps in the AppExchange, most are built on top of Force.com and are pre-integrated by virtue of their adherence to Force.com standards. There are also more than 100,000 companies using Force.com to build apps and, according to a recent Forrester Wave Report, about 10,000 of them are major enterprises. Finally, there are three million apps already developed and in use on the Force.com platform.
Here’s a hypothetical example of what all this platform integration could mean in the real world. A subscription company using Salesforce SFA and Apttus CPQ (configure, price, quote) can complete a deal, send the order configuration back through Salesforce to process the order in Kenandy ERP, and it might bill for the subscription through Zuora’s subscription billing, payments, and finance product. If the company also sells products in the conventional manner, Zuora can also provide financial support for a subscription sub-ledger for a conventional ERP system.
That’s a simple example too; it goes on and on. It makes no mention of the myriad support options—ServiceMax for field service automation for instance—and market and sentiment analysis tools available on the platform also.
So I think platform will be a (the) major theme of Dreamforce. I could be wrong of course but the platform has come a long way in just a few years. Once the home of a thousand widgets, Force.com is now the redoubt of many robust apps that can run with or without the core CRM. To continue propelling Salesforce’s growth I think a very easy approach runs through getting more partners and ISVs involved in selling the service that undergirds their solutions. In a couple of weeks we’ll see what my two cents is really worth.
Microsoft Buys Nokia, Gets Elop Back
With a nod and a wink Microsoft announced it was buying most of Nokia today getting its own mobile phone platform to further its ambitions in that space. It also got ex-Microsoft executive, Stephen Elop back into the fold. Elop had left Microsoft to head up Nokia and when current CEO Steven Ballmer announced recently that he would retire, Elop was among the people cited as possible successors. At the time though, Elop’s tenure at Nokia looked to be a significant barrier. It’s amazing how many hurdles $7.2 billion can clear away.
So the question immediately becomes, does Elop want the job? Does the board want Elop or was the acquisition just more business as usual? Well, with or without Elop as the future Microsoft CEO, the deal makes sense. Microsoft’s Windows Mobile has not seen great adoption despite its really attractive and intuitive interface. Google’s Android leads the parade (it’s hard to argue with free) and Apple’s iOS is the defacto standard in the industry which makes it difficult for Microsoft to play catch-up, a game that’s not second nature to it to begin with.
So what’s the net?
Assume Elop is the future face of Microsoft keynotes. A blind horse knows the future of computing is in wireless, handheld devices and the cloud. But too much has been made in recent years of the device and not much consideration has been given to the huge changes ahead in the data center to make the magic in the device really work.
The device is the new 3270, smarter for sure and much smaller, but it’s a relatively dumb terminal at the end of an extensive network of satellites, storage, and brute force processing. Given this, success in the cloud will be governed by more than whose OS is in your hand. It will be about the back end. Larry Ellison understands this and his team is working overtime to build the plumbing for the new edifice. And there are loads of vendors like the Benioff Company that are staking a lot on the front office and the device while doing a fair bit in the back of the house too.
But Salesforce may be to the cloud what Apple was for a long time to the desktop. Elegant, forward thinking, entrepreneurial — pick a half dozen more nice adjectives here. This doesn’t mean Salesforce is destined to have a measly five percent share of the market, Benioff is too smart for that. But it does mean there is still an open niche in the cloud for a Microsoft-like competitor that understands the front and the back end of the transaction and that wears the mantle of trust so assiduously cultivated by IBM in the business world. It might as well be Microsoft.
So, given all that, I look at the Elop acquisition, er, I mean Nokia actually, and I think this could work. Elop’s understanding of Microsoft and his recent baptism in mobile might be a good combo in the new Microsoft chief.
There are other issues well beyond those, however. The new CEO at Microsoft will need to be a consensus maker and someone who can break down the fiefdoms that long time Microsoft executives have constructed. The company has to get lean and to check its multiple egos before it is ready to take on the changed market — from somewhere that’s not the bottom but certainly is not the top either. Also, it’s no guarantee that you can take the once great phone maker, Nokia, and the one time titan of the desktop and get anything more than mush when you put them together. Elop, or whoever gets the nod will need to be a leader of Bill Clinton proportions.
Ballmer Will Retire in the Next 12 Months
From the get-go Steve Ballmer had an impossible job to do. Long the number two man at Microsoft behind iconic founder and chief geek, Bill Gates, Ballmer got to take over when the Gates bubble was beginning to wear out. Gates built the company he founded with Paul Allen from zero into the powerhouse of the high-tech revolution to the point where it straddled the industry like the colossus it was.
How do you top that?
Perhaps you don’t, at least not initially, and it was Ballmer’s job, increasingly of late, to be the guy who kept the wheels on as PC sales began to dip, cloud computing became the next big thing, and Microsoft had to scramble to be relevant. Ditto with mobile devices. Its phone has small market share, its tablet, despite an attractive UI and a real keypad, lags the iPad in sales. Bing, the search engine positioned to rival Google is facing an uphill climb.
The reason for all of these is the same — being late to the market with a similar product. Microsoft was so busy being successful that it couldn’t see a time when it wouldn’t be. It happens all the time and Clay Christenson documented it so well it’s not worth discussing further. Yet, to see Microsoft in this predicament is disheartening. Microsoft is the company that, along with Intel, Lotus, and Apple, is most closely associated with America’s rise to prominence in all things high-tech and it’s hard to see what looks like a sun setting on what has been a great three decades.
But, of course, that’s the wrong way to look at it. You can’t do anything about yesterday so, as they do rightly in baseball, you put it out of your mind and only focus on what you can do today.
Ballmer’s headed for the exits and he has already been very well compensated. According to Wikipedia, he is only the second person in history to have become a billionaire without being the founder of a company, simply through various forms of compensation. His successor will likely not be compensated as handsomely no matter what the company’s results. The new person will need to figure out how to address a market that has become much more fragmented, one which has, if not eliminated the need for, at least has reduced its dependence on Microsoft’s core cash cow offerings.
The new CEO will need to go back to the well, to think deeply about what Microsoft can be and I hope the newbie decides to put more wood behind the enterprise computing arrow than behind the games. Microsoft became great by imagining (or at least borrowing) things that didn’t exist and commercializing them. CRM, ERP, Windows, Office, content management, the browser and lots of other things were perfected by its developers for an audience that wanted standardized applications that worked. There were notable exceptions like Vista, but largely, it did all work, and those standards fueled the industry’s growth.
The rivalry for most of the company’s existence was with Apple and most of that was inspired by Steve Jobs, Gates was serenely above the fray. But I think the next rivalry ought to be with a company like Salesforce.com whose charismatic leader, Marc Benioff, has a knack for Blue Ocean Strategy consistently finding new places to play, away from significant competition while he tinkers with a new business process that his company can uniquely support.
As Microsoft looks to be more of a services company it would do well to emulate some parts of Salesforce, the company that, more than any other, brought Software as a Service to the world. I think that should be a useful target for the search committee now starting up and it provides a rough outline of who to look for. On the other hand, if the committee finds a soulless bean counter, it will be time to put out the fire and call in the dogs. There is a lot riding on this, as if you needed to be told.
Salesforce and Oracle in a Deal
I am a little shaken up and I spent a lot of time trying to get my head around the Salesforce-Oracle announcement from earlier today. I didn’t want to make some rash pronouncement because this could be rather important going forward.
So far, I know that Oracle and Salesforce will merge their clouds in a process that will take nine (not ten) years. We know that Salesforce will standardize on Oracle Linux and middleware and that the company will use Oracle HCM. Meanwhile, Oracle gets a new customer for its Exadata product, a bigger than big storage system with speed to burn. Salesforce could always use more speed in the data department — who couldn’t?
But long term, what’s it mean? To me it looks like Oracle is buying SFDC but to skirt the SEC and DOJ, and to avoid sticker shock, they’ll do a slow motion merger and present the market with a fait accompli in 9 years. Larry gets a lifeboat strategy for a company whose applications were (mainly) architected a long time ago and whose developer tools have not been a resounding success. Marc gets entre into new customers, though arguably he didn’t need the help. And Salesforce and its ecosystem will be the face of Oracle apps as older products like PeopleSoft and Siebel wind down. Also, newer acquisitions made by Oracle, such as RightNow, are already integrated with Salesforce so there will be no slowdown.
Larry is no spring chick so there is a succession issue to consider at Oracle and Marc would be a good fit because nine years from now Larry will be about 77 (his birthday is in August). Marc is almost exactly twenty years younger than Larry.
The other shoe is that Larry already owns NetSuite, a respected cloud ERP vendor headed up by another Oracle alumnus, Zach Nelson. I look for a similar announcement from Oracle-NetSuite in a few years too. So, Oracle will have reinvented itself at the end of this with best in class cloud computing that it could not have developed on its own due to internal friction. Oracle brings Exadata to the party, which is quite good, and completes the setting for a completely re-architected, product offering that includes hardware, software, and social that should be good for the rest of my working life.
You could see this coming and it makes a certain amount of sense but the audacity and sheer size and scope always made it unlikely in my mind.