What a Week
What a week. Xactly bought Centive, Salesforce.com introduced the Service Cloud, and the gridlock in Washington looks the same as ever but with new players.
If you parse the Xactly-Centive deal you might be tempted to say so what? After all the deal was a stock swap and the strike prices of the respective companies’ stocks were not disclosed. I have watched both companies as well as Callidus and Makana try to breathe life into the sales performance management market (SPM) for several years and have some observations.
First it’s a decent market but I can’t see it being as big as the $8.2 billion by 2010 described in the Xactly press release. Maybe I don’t follow all this closely enough but a quick back of the envelope calculation tells me a few things.
Callidus is a public company and according to its Web site the company had revenues of $100.9 million as of January 2008. Time for a refresh guys but close enough for our purposes. Callidus happens to be the gorilla in the corner and if the SPM industry is going to hit the billions any time soon, I would expect Callidus to be the locomotive of the train.
Callidus is also converting from on-premise to on-demand which means a lot of their revenues are still generated the old fashioned way, in big dollops not monthly trickles. What might Salesforce.com be generating if they took their revenues the old fashioned way rather than by the morphine drip?
Salesforce is a billion-ish dollar company and I doubt the whole SaaS sector is doing three billion. I could be wrong because although I am an analyst, I worry more about whether something works and adds value to businesses than how much money an industry makes. It’s just one of my little quirks.
Revenues aside (which is hard to do but let’s try) SPM could be an important new market if companies like Xactly and Callidus branch into other related areas but that will take time and effort and longer than two years even in a good economy. Even if the market eventually reaches the lofty eight billion dollar plateau you can expect a dog that big will attract a lot of fleas. Big dogs can enter the market whenever they want too, so no one vendor should feel it is in a safe haven.
So who were the big winners in the buyout? I will bet it was the investors in Centive. They’ve been at it since about 1998 and something like $96 million went into the company’s several incarnations. My bet is Centive’s soon-to-be ex-executives are very happy with that decision.
I am thinking I saw this movie before. Companies swap stock and merge to gain size and competitive advantage—bigger companies with better products. At some point though, you need to make money. This time it’s different, not because the bubble won’t burst—there is no bubble—but because of the economy. There is no IPO market currently and many companies are finding that they can’t borrow to stay afloat. The name of the game is make profits or go home because as nice as a stock swap might be, it is highly unlikely that every company in need of a liquidity event will be able to find another company with deeper pockets and a desire to merge. Again, I think the folks at Centive are feeling pretty good right now. Like the pilot who landed in the Hudson River the other day it was a soft landing and everyone got to raft away from it.
Salesforce
I like what Salesforce did in introducing the Service Cloud though I believe the right term ought to be Support Cloud since the company is leveraging social networks and community concepts to deliver support. Service still requires dealing with the vendor for things like warranty issues, payments and the like. Social networking won’t help with that or will it?
Naming aside though, leveraging a sophisticated community to provide support is logical and I predict timely. We are entering an era when we will all need to lean on each other to get some of our needs met and Salesforce’s multi-dimensional network infrastructure is adaptable to a lot of different community needs. For those reasons I think the Service Cloud is one of those right product/right time things.
I suppose Salesforce is right now working on making this new offering more suitable to true service needs, especially because I think they see an opening in government. Their experience powering the constituent feedback mechanism at President Obama’s change.gov will only serve to whet appetites on both sides of the transaction.
Speaking of government, I wish we could somehow send a cohort of laid off technology minds to Washington to fix things. I don’t usually get political here and I won’t delve too deeply, but it is striking how the sides have taken up their old chants like players in a bad low calorie beer commercial. That doesn’t look like what the voters had in mind. I bet the cohort could deliver a couple of new dashboards and some new metrics before lunch and recovery by end of the week, but I digress.
Salesforce and the Service Cloud
Last week Salesforce.com introduced its new support concept dubbed “The Service Cloud”. I have to say it makes a lot of sense both as a product direction and as a business decision.
The announcement is in line with many of the business initiatives that the company has made over the last decade in that it is a leap-frog event. The service and support niche is pretty well populated with traditional companies that deliver major league call centers as well as smaller companies that provide most call center functionality over the Web and some that do both. Whatever the case, but especially at the enterprise level, introducing another vanilla call center solution would not have generated the excitement or revenue that Salesforce needs.
You could say with a lot of justification that the call center market is mature. However, this is not to say that it is in decline or that there is no real money to be made there any longer. Maturity in this circumstance simply means that adding another vendor would be like bringing coals to Newcastle. The major vendors have the territory pretty well carved up and what they don’t want forms the basis of a very nice market in the under 200-seat on-demand space. So what was Salesforce to do?
I believe the word is innovate and how better to innovate than by bringing together several of the technologies that the company is so enamored with at the moment. I am, of course, speaking about social networking.
The conventional call center market is based on a hierarchical premise: people need and want to talk to the vendor and to a degree this is true. We want to speak with a live person when we have an in-depth problem that cannot be solved through manipulating the options in a web site or when there is confidential information to be exchanged. But there are a lot of times when a hierarchical solution is inappropriate and a networked solution can deliver the goods.
Service Cloud that Salesforce introduced last week is innovative precisely because it leverages a network paradigm for service. A network has more elements or people with the right expertise to help someone solve a problem and more elements can handle more issues and hence reduce waiting or accelerate learning. Take your pick.
Of course, you have to be careful that the network paradigm that you are leveraging offers real solutions and not simply crowd wisdom, which can be wrong because it is often nothing more than an accumulation of opinion, which rolls up both good information and things that are just wrong. The best comic example of this in my view is Monty Python’s Medieval skit that determines whether or not a woman is a witch.
The new paradigm leverages written contributions from people who are expert in the solution to a specific problem. In principal nothing is new here. Various support vendors like RightNow, Parature and Lithium can proudly point to their knowledge bases and search technologies. What makes Salesforce’s approach different is that it also incorporated its new Sites technology and its integration with social networking products such as Facebook.
The benefit is that rather than having a solution stay in a single knowledge base, it is syndicated through a social web and, at least in the demo, the knowledge can find its way to disparate places including vendor and partner sites as well as topic sites and the ubiquitous search engine sphere where it might become immortalized.
All this is good but my one quibble might be in the naming. By using service rather than support I think something is implied that doesn’t exist but could come along at some point. My idea of service is customer service and it encompasses more than answers to how-to questions; it provides the customer with things that only the vendor can supply. Customer service is dealing with account balances or warranty issues and the like. The network paradigm is ideal for people helping people to get the most out of their investment in a product or service and is properly considered support.
In my mind the Service Cloud is an automated support group; it is a loose form of community in that it focuses on a kind of feedback. I suspect that smart vendors will also be able to use the Service Cloud for discovery too. Just hook up an analytics engine and note the type, quantity and quality of issues that customers encounter and you will have some very valuable and unique input to your product development efforts.
So as a business decision, Salesforce has proven its service and support chops in a unique way and this will help it elbow its way further into that market. As a product it is a great idea both because it leverages social media and the company’s platform technology. As a strategy it further opens up a new business process channel that is self-reliant (and therefore resilient) and low cost. All things we can especially use right now.
Salesforce and Obama hook up
You really have to read the last three posts backward. I was trying to make a point about leveraging Internet technology to connect people and save time and money over conventional business processes that involve face-to-face meetings. It’s very hard to make this claim, but this is about as close as I have ever been to being in a moment when a lot of things changed all at once. Check out this thread.
Salesforce’s second PR of the day is a wonderful slap upside of the head. In case you doubted the importance of the support cloud announcement, the good people at Change.gov—Barack Obama’s tell-me-what-you-think-is most-important citizen feedback site just announced that they are using Salesforce CRM Ideas to collect citizen feedback. Not bad for a product that will be announced in three hours.
Salesforce announces support web
Well, that was quick. Normally I post something and it hangs around for a couple of days and eventually becomes obsolete. The last post lasted about fifteen seconds and truth be told it was DOA. I feel like I am twittering in long hand…
I just read Salesforce.com’s press release and saw their video regarding their announcement today of cloud support. It’s what I was alluding to in the last post. Modern infrastructure which includes more conventional technology like telephone, email and the like married to social networking sites like Facebook, partner sites, corporate help sites and even live support agents.
The result is a kind of support web that brings together people and technology to deliver customer solutions in very close to real time. No more waiting for answers from over worked support people, some of whom are have a world away. Support can come from anywhere which should increase customer happiness (I am tired of satisfaction since I am not sure what it means anymore) and reduce the strain on corporate support departments.
Is this a permanent fix? No, there are still times when only speaking with a company representative will do, such as warranty service and account status. But the service cloud is a great step forward in building and coordinating feedback communities, which I have written about recently.
Ironically, I am in San Francisco for the announcement today, which will happen in a few hours. I could have stayed home and caught it all on the Internet. Someday I am sure that’s how it will be.
Virtual meetings, real savings
Last summer I wrote a paper about CRM and sustainability. It’s available here in case you missed it. At the time, gas and jet fuel were over $4 per gallon and transportation costs were going through the roof. Although those costs have been cut by more than half in the last few months, we’re far from being out of the woods on energy.
The low cost of energy today is attributable to the economic hole we’re in. Fewer people driving fewer miles and all that has an aggregate depressing effect on energy demand but as soon as the economy kicks back in you can expect to see the same cost spiral. So the need for “doing something” about our energy consumption habits is never out of sight and if early indications are correct the Obama administration has energy pretty high up on its to-do list both for renewing the economy and for green causes.
All this was on my mind when I downloaded a free white paper from IDG about collaboration and unified communications. The paper’s focus is on the cost savings that real companies get when they reduce their reliance on face-to-face meetings. The savings can be seen in a variety of areas that you might not think of at first.
More than simply setting up an online conference now and then, on-line collaboration takes advantage of a lot of infrastructure like video meetings, IP telephony, instant messaging and much more to provide an environment that shrinks time and distance and makes key people more or less always available (Ok, within parameters but you get my meaning).
We are all familiar with the notion that reduced travel can result in reduced costs but many people might be skeptical that the virtual meetings that replace “real” meetings might be deficient in some subtle ways but consider these savings areas that have nothing to do with meeting quality:
Reduced real estate investment. Companies that use a modern mix of web meetings, IP based telephony, instant messaging and more can position their people at home or at other locations that might not be in high rent headquarters buildings. The paper shows these cost reductions can be impressive.
Faster time to decision or result such as product roll-out. The days spent in the air to bring key people to meetings and back are largely unproductive despite the work that most get done on their laptops. Let’s face it, laptop batteries are good for four hours tops unless you turn yourself into a pack animal and bring extras. Moreover, key people in the air means key people out of touch with the rest of the organization and other issues that require their attention.
Fatigue factor. Sometimes you just don’t feel very productive after a six or eight hour plane ride (or more) and if you do this kind of thing week in and week out, it takes a toll. The fatigue factor has always been acknowledged but it has never been easy to place a number on it and it would not have done much good, since there were no alternatives. Now you don’t have to think about it because the cost savings in other things like transportation, hotels, out of pocket and time are more than ample to justify a virtual communications strategy.
The paper provides multiple good use stories that show specific areas where companies substituted virtual meetings for some face-to-face meetings with significant savings in time and money. My favorite is a bit ironic. Airbus, builder of large passenger aircraft used video conferencing to build the Airbus 380, the largest passenger aircraft in the world. According to the paper, “Airbus found that video conferencing could measurably accelerate the key project timelines, and wound up shifting an average of 1,200 face-to-face meetings a month to video sessions.” Cost savings were in the millions and the project accelerated nicely too.
Of course, there is a big green benefit to this kind of savings too. What’s striking to me is that substituting virtual meetings for some traditional meetings does not reduce the quality of the meeting or the lives of the participants. It’s just smart and a win all around.
You don’t have to be Airbus to save big on meetings and, as a matter of fact, in this climate anything that smaller companies can save is golden. Taken to another level, if there is so much goodness in using virtual meetings internally, imagine what might be achieved when we turn virtual meetings on for sales and support personnel. There is a huge CRM story to be written on virtual meetings and leading companies have already begun taking advantage of this technology.
Understand me, we’re not going to do away with face-to-face meetings anytime soon but the availability of new technology has made it possible to think of creative ways we can use it to economize in hiring, training, product design, sales and marketing. Most importantly, a recession like the one we are in is a perfect time to experiment with this kind of cost saving measure.
