It was a man-bites-dog story in the summer of 1999. An interesting headline RedHerring on July 30th read: “Head Count: Salesforce.com gets Larry’s blessing”. Marc Benioff was leaving Oracle to start Salesforce.com and Larry Ellison was not only giving his blessing, he was going to pony up some capital to get the company running. In exchange, Ellison got a board seat and a bit of controversy when Oracle launched a competing product but that’s not the focus of this story.
For a long time companies like Oracle and HP have been great places to have on your resume, especially if you intended to be the CEO of your own start up. With credentials like that it was much easier to raise money and the work experience provided the knowledge you needed to avoid some of the pitfalls of life in a new company.
Stories about Oracle alumni starting companies have been around for a long time and for good reason. The alumni list includes founders or high level executives at some of the most successful emerging companies in Silicon Valley including Benioff, Tom Siebel, Zach Nelson, Craig Conway and many more.
Now, the next generation of alumni is making its way onto the stage, alumni of the companies founded by Oracle ex-patriots. For example, numerous Salesforce.com and Siebel alumni are beginning to take their places as founders. Last year, for example, Peter Gassner, formerly of Salesforce.com started Verticals onDemand along with Siebel alumnus Matt Wallach as VP of Sales and Marketing.
For an emerging company Salesforce.com has always had a reasonable flow of executives into and out of the company. It’s necessary in the process of building a company and a good executive manager will always look to trade up whenever an opening presents itself. Early on salesforce hired some talented people from larger companies like IBM, Oracle and Siebel, some of them stayed and others gave it a year or two and moved on to other challenges. But things appear to be changing as Salesforce.com executives begin to leave for start-ups.
Since the beginning of the year, Salesforce.com has lost at least two executives to emerging companies. Kendall Collins former Vice President of Product Marketing at Salesforce.com became CMO at Rearden Commerce and Tien Tzuo, former Chief Strategy Officer at Salesforce.com, started Zeora with some friends. Zeora is dedicated to providing on demand billing for SaaS companies. The founders don’t expect the name to stick and they’re considering others, but it was a convenient place to start.
What’s interesting about Tzuo is that he was one of the pioneers at Salesforce.com, the 11th person to join the company. Tzuo came out of Oracle and Stanford Business School and had other experience in the valley. Even more than Collins, Tzuo represents the beginning of a diaspora of talented executives from Salesforce.com who, like their predecessors who left Oracle, are now beginning to spread out to start new ventures.
I asked Mike Braun, CEO of Intacct, if the idea of a diaspora is real. Braun has been around the valley and numerous startups for a long time he’s run companies, sat on boards and even taught at Stanford Business School . He said that experience in SaaS companies is very valuable right now and established companies as well as venture capital firms are hungry for that experience. “I think 2007 was the tipping point year for SaaS,” Braun told me. “Customers began asking different questions — instead of security and performance, they asked ‘How does it compare to other offerings.” A sure sign of acceptance and now the race is on to hire talent.
Actually, I think the on-demand model has been proven for a while now and middle adopters are well into it. The new wrinkle, though, might be that so many new companies take on-demand in stride and the kinds of applications they are building address business problems that we were barely aware of just a couple of years ago, which is where Zeora comes in.
Tzuo started noodling on his idea for a company last year and sees great opportunity in providing on-demand billing services to emerging SaaS companies that may not have the infrastructure to do the job to the satisfaction of investors and ultimately Wall Street. When I asked Braun about billing as a new niche he was very supportive of the idea. It turns out billing is one of those hard to do things that many companies build themselves though many would prefer to have a standard package. When asked about it, even Braun admits, “We did our own billing system.”
Braun also pointed out that, “If you follow the SaaS model, we (software companies) all begin to look like utilities, and a utility’s most important system is billing because getting all the permutations of products, services and fees right is tough.”
Zeora, has been functioning since the beginning of the year and when I caught up with Tzuo, he was preparing for his first board meeting. The company already has a crew of 15 people, a development shop in Beijing, some beta sites and, yes, funding from Benchmark Capital.
As with Benioff’s departure from Oracle, when the time came, Tzuo received the same blessing from his boss. When asked if he sees any parallels, Tzuo said, “Marc still considers himself a disciple of Larry [Ellison], I consider myself a disciple of Marc. Oracle led the database revolution and salesforce.com led the on-demand revolution. Maybe we can lead the next revolution.”
Is there a method behind all this? Perhaps. When asked about it, Tzuo said, “Marc believes that every 10 years or so there is a chance to change the market with brand new enterprise applications.” If you look at a calendar, the birth of on-demand computing could be traced back to that July 1999 headline. It’s now 2008 and change is again all around us.
Danger and opportunity in social media
I have been giving a lot of thought to the challenges of social networking/social media over the last few months. Actually, I have been following the phenomenon since about 2002 when Diane Hessan, CEO of Communispace, first briefed me on her company. But like a lot of new things, context comes slower than the reality of the product. At first I only saw the incredible benefits that social media could provide and it has taken a while for the technology to mature and begin to take its place in the tool set. As it has done so, the down side has come into sharp focus.
A lot of the potential down side of social networking, has already been seen in other social media, specifically in blogging (gulp!). That’s right, blogging, and there’s a still smoldering debate, dare I say controversy, over the differences between blogging and ‘real’ journalism.
Journalism is both practice and profession and it is overseen by a loose but very effective set of professional standards such as the US Constitution (let me be provincial here but other Western countries have similar but not identical safeguards for the freedom of speech), libel laws, and professional standards like fact checking.
Take one of these standards, fact checking as an example. Journalists hold themselves to (usually) high standards for verifying facts before they are reported; bloggers, as Jon Stewart might say, not so much. While the First Amendment provides a great deal of protection to the fourth estate, over the centuries, journalists have done a reasonable job of not hiding behind it to publish pure rubbish — at least in this country and not including the New York tabloids or their British cousins.
My simple point is that social media has loosened our moorings and we really get all stripes out there from responsible users of social media to its polar opposite. (Parenthetically, this reminds me of the sexual revolution when suddenly people were ‘free’ to pursue the opposite sex, in both directions. It was a fun party for a while but sooner or later we all came to realize that just because societal norms were loosened it didn’t mean we no longer had a need for personal standards. People who learned this lesson late suffered from all sorts of ill effects like disco bars.) But I digress.
Loosened standards is what makes social media at once both a danger and an opportunityfor business. In business we need facts and firm data upon which we can make decisions. Not understanding the limitations of the data churned up by social media can seriously hurt a company and your career.
All of the innovations in social media over the last few years have provided enormous freedoms to people, putting the "means of production" a wonderful old economics term, into the hands of the masses but without controls.
So the issue really is one of personal standards, knowing what you want to get out of the new technology and even knowing when you’ve gotten it. Whether it’s social interactions, blogging or social networking, it still behooves us to accept a certain amount of personal responsibility for the new freedoms that technology has wrought and to act with caution on the output.
Living on the asymptote
I was speaking with a CRM vendor the other day about positioning and messaging for sales force automation. The vendor was telling me that the company wanted a back to basics message that would focus on the importance of SFA in helping sales people recover some of the time they invest in unproductive activities.
On the face of it, this sounds like a reasonable approach and in fact it is one of the staples of the SFA world. Sales force automation got going when companies like Siebel began telling their customers that sales force productivity could improve if sales people could spend more time in front of customers and less in dealing with administrivia. It’s been a grail quest ever since.
I gently tried to point out to the vendor that since this message has been a staple of SFA messaging for over ten years that it might be time to look elsewhere for a way to improve selling. After all, the need for new messaging is all around us. All you need to do is look at the inroads made by Sales 2.0 ideas and Web 2.0 technologies to see.
We ended the conversation without any minds being changed. I continue to believe in the changing nature of selling, the need for new positioning and the messaging it entails. The vendor is committed to a back to basics approach. Perhaps I was not making good arguments or maybe I was just speaking with a person who is not able to decide on change and further internal discussions will result in a different tact. We shall see.
It all got me thinking about the limit or, graphically, the asymptote, of the sales productivity improvement curve. If ‘asymptote’ is an unfamiliar term, imagine a curve that rises from left to right and gently falls over like a blade of grass in a breeze. The asymptote would be an imaginary flat line above the curve that the curve never actually reaches. In mathematics, the curve reaches the asymptote at infinity but, as a practical matter, in real life it takes progressively more effort and energy to close the gap.
In business when confronted with an asymptotic boundary condition savvy managers look for ways to change the game and, in effect, jump the boundary so that the ceiling becomes the floor and a new curve, or blade of grass, is established. That’s what is so intriguing about the Sales 2.0 movement that incorporates Web 2.0 technologies and social networking ideas.
As I have said before, we have spent a lot of time and effort trying to improve the sales process with products like SFA and sales methodologies. Those tools have been great at making big gains in productivity and face time, but there is only so much time in a sales person’s day to optimize and at this point pushing further will come at great cost. For a company or a sales person who does not currently use automation, the opportunities for improvement are still vast but that population is dwindling. For example, the other day at the Force.com event in San Francisco, a CEO told me that these days his company rarely has to hire a sales person who does not have experience using some form of SFA. It has become ubiquitous.
The move now, in my opinion, is not to proceed further in trying to wring out more face time, though some improvements can still happen. For me, the biggest opportunity is not in improving the sales process but in improving the inputs to the process which include the lead itself and the information flow to the customer.
If you look at Sales 2.0 that’s exactly what is happening. Companies are using advanced marketing technologies to better segment and mature prospective customers so that when a sales person gets a lead, it is far more actionable than the leads that were handed out just a few years ago. In taking this approach the ceiling has become the floor from which a new productivity curve is rising.
A whole industry segment which was once called sales effectiveness is growing up around this idea. What was once considered a hodgepodge of disparate point solutions is organizing itself into solutions for the pre- and post-sales processes.
So that’s why I am not a great fan of the improved productivity message. Productivity is still important but truth be told it has had its day. Productivity improvement is now taken for granted, table stakes in the larger conversation about how to sell today.
Salesforce.com goes on tour
Marc Benioff, CEO of salesforce.com, once began a conference in San Francisco with a surprise keynote address by a George W. Bush impersonator, so when I was invited to this week’s “Tour de Force” announcement I had inklings that we might see a facsimile of the new French president, Nicolas Sarkozy, or possibly get a glimpse of his new 40 year old ex-supermodel-tire-heiress-girlfriend, Carla Bruni. I should have known better. News outlets spread a rumor that le president married the tire heiress at the beginning of the week and they were unavailable. Then it was all taken back and, just to add clarity about his marital status, the 52 year old president told journalists “Don’t count on me to confirm or deny it. My response is ‘no comment’.”
Instead, all we had to go on was the multiple entendre title of the conference and a French dictionary, and what a clever name it turned out to be. Originally billed more as a takeoff on the famous bicycle race, the “Tour de France”, the Tour de Force was more of a self-congratulatory eponym advertising the next step in salesforce.com’s evolution from CRM company to application enabler. There was also the promise to go global with the event so I am still holding out for Sarkozy-Bruni in Paris. It was also part of a bid by the company to make its software as ubiquitous as a bicycle on, well, the Tour de France.
To make sure I had my facts right, I looked up tour de force and the definitions all seemed to point in the same direction: a stroke of genius, so I think I am on safe ground with the self-congratulations angle. At any rate, the company actually made three announcements in total. It announced the products that now make up what it calls its Cloud Computing Architecture or CCA which is supposed to bring virtually unlimited computing power to the enterprise through the Internet. The products include the Force.com Metadata API, a developer environment (Force.com IDE), a developers’ community for code sharing (Force.com Code Share) and the re-introduction of the Force.com Sandbox for testing.
Taken together, it’s an array of industrial strength tools that all have analogues in the traditional application tools space — good thing, too because it is hard to see how on-demand application development could be expected to effectively compete with conventional coding unless these tools were made available and inexpensive. Not to worry, the next announcement took care of that.
The second announcement dealt with just how much cloud computing would cost and it seems pretty cheap. More important than the pricing though, is the way the pricing works. I don’t have any information on the cost per developer and the announcements are mum on that though I recall a fee of a bit less than $200 per developer per month but that is so last year.
Whatever the developer cost, the user seat cost is metered by the login. For 2008 the cost per login for infrequent users (5 or fewer logins per month) is only $0.99 each, though above that level, more typical users will pay a flat rate of $50 per month.
Given the cost of conventional software, this sounds pretty good but the fly in the ointment is that a company with running (and paid for) software won’t have a great incentive to reinvent its applications just to take advantage of all this new and wonderful technology, at least not right away or in the volumes that might make shareholders sing. These announcements are about the future, so, not to worry again, the last announcement truly pulled a rabbit out of the proverbial hat and it might be the last announcement that deserved the accolade of tour de force the most.
Teaming up with Emergence Capital, salesforce.com put up a $1 million prize in a venture competition for entrepreneurs and companies building on the Force.com platform. Simply put, it does for Force.com developers what “American Idol” does for aspiring singers. Emergence Capital will play the part of Simon Cowell judging entries along five parameters:
· Likelihood of long-term company success
· Demonstration of customer success and user adoption
· Market opportunity
· Track record and passion of the entrepreneurial team
· Adoption and innovative utilization of the Force.com platform technology
The winner will also get free space for a year at the salesforce.com Incubator and spa in San Mateo. That all sounds very reasonable to me. I have seen a few business school competitions that do many of the same things with prizes that are mere fractions of what’s on offer here.
The idea is to announce the winners at DreamForce2008 which will be held in November. Nevertheless, it defies logic that the competition will end with a single champion; venture capital doesn’t work that way. Usually VC’s like to develop a basket full of upstarts and I expect there will be second, third and maybe runner up awards or at least recognition. It seems most likely, to me at least, that the class of 2009 — roughly twenty Incubator participants — will come from the ranks of this competition.
So this announcement takes salesforce.com just a little bit further away from CRM, though I would not suggest for a moment that the company will ever take its eye off that ball. But these announcements do make Force.com more viable and it certainly points us all in the direction of a vast and uncharted future. More interesting to me than even all this is the fact that the million dollar competition also takes salesforce.com further into a completely new realm — venture capital.
With a complete development and deployment environment, salesforce.com has cornered or vertically integrated the means of production for one brand of software. For its part salesforce.com can expect to make a living building and enhancing the means of production while its partners will increasingly focus on the business idea and service to the customer.
Economists take note, David Ricardo lives.
Social networking’s limits
I am still trying to figure out what the primaries are telling us about social networking. I think some of this will be important for CRM and as I have noodled on what it all means, I have been surprised myself. Before I go on, this is not a discussion of who won or my candidate preferences, just musings on how it went down.
First, I think there is something overlooked about the differences between Iowa and New Hampshire — and if it has not been overlooked, it certainly has been underreported. The big difference is in how the votes are cast — and it’s important. In Iowa, as everyone knows, the general description is caucuses and the format is open voting; in New Hampshire, they have a formal election and use a secret ballot. Caucuses are a form of social networking designed to form consensus. In a traditional secret ballot, the consensus is made evident only once the votes are counted.
It might be surprising, but the secret ballot is a relatively recent introduction to politics. The ancient Greeks and Romans used a form of secret ballot, but when democracy made a comeback after a roughly 17-century hiatus, a lot of people couldn’t read and open balloting was the form.
In the 1850s, Australia introduced the concept of a secret ballot, and in the U.S. in 1888, Massachusetts was the first state to do so. Kentucky was the last adopter in 1891, which means that Grover Cleveland in 1892 was the first U.S. president to be elected solely by secret ballot.
Consensus is a good thing, but open balloting is open to abuse and intimidation in voting, and that’s one reason secret balloting came into being. Intimidation can be a subtle thing. It doesn’t require a bunch of big guys with narrow foreheads to affect a vote. For some people, it can take a lot of courage just to stand in a small group to be counted for a particular candidate, or anything else for that matter.
I wonder whether Hillary would have won in New Hampshire if they had not used secret ballots. Since many people apparently made up their minds late (according to news reports), some of them may not have had their reasons fully worked out in their own minds.
In other words, their choice might have been more gestalt than conviction, and they may have not been able to articulate their reasons. Without the ability to clearly articulate their reasons in a caucus format, some people might have folded and selected another candidate. We will never know, but we certainly have proof of a big discrepancy between the information the pollsters collected and the final results.
It’s quite a different thing in the marketing world, though, and one of the valuable attributes of social networking outside of politics is its ability to capture the thought process as an idea percolates and matures — and consensus is reached — in a population. Since people make actual purchase decisions in the privacy of their own minds, the intimidation factor is either not operative or greatly reduced.
That brings us to a related issue, the sample population. Diane Hessan, CEO of Communispace, a company that develops and manages customer communities on behalf of corporate clients, gave me a few insights about populations last week. One of the overlooked issues there is the quality of the population as measured by individual activity levels.
As with any population, there is a bell curve for participation — some people participate a lot, some visit once to sign up, look around and never return. Within those extremes there are gradations — people who visit a site but only read, some who read and post new content, people who show up once in a blue moon and others who are addicts.
When a social networking site’s raw population numbers are quoted, beware. We also need demographics, metrics and filters to understand the meaning of the data that gushes from these services.
According to Hessan, a site’s total membership cannot realistically be expected to be engaged in any single issue, so understanding who is engaged — and how many of them there are — can mean a lot if you are expecting that population to act as a surrogate for the market.
Marketers with high expectations for their data and low thresholds for interpretation can be surprised when reality does not live up to the numeric expectations generated by a community. Furthermore, if a company’s production apparatus takes the raw data and runs with it, complications can be nasty.
All this goes to show that we’re still finding our way. The technology available is powerful, important and valuable for politics as well as conventional marketing but we need to learn how to use it effectively. We need controls, standards and insights to truly understand the data that comes to us in torrents from new tools.
At this point, we’re still watching for ultimate results to see how it correlates with the data we’re collecting. Nothing wrong with that, it’s just the adoption process at work.