February, 2009

  • February 27, 2009
  • Over the last few weeks I have been speaking with a lot of companies about their experience with on-demand vendors and their products for a report I am writing.  These customers can tell me anything they want—and they do—but one thing that surprises me is the easy way they have almost universally brought the customer relationship into the discussion.  Service is a big part of this but it isn’t the whole story.  These customers are happy with they ways they are being treated all down the line.

    It’s surprising because customer service is good and customers are going out of their way to say so.  In interviews like the ones I am doing, people can talk about themselves, their experiences, how they did an implementation—in short it’s all about them, them, them.  I encourage them to speak that way because that’s how I get data. 

    So when someone pulls up short in the middle of the conversation and says, “And, you know, our vendor is really great.  Whenever we call with a problem, they are right there with an answer”, it’s interesting.  When many people using many different vendors’ products do the same thing unprompted, it makes my inner researcher take notice.

    It appears to me that we, in the CRM business, have drunk a healthy dose of our home brew and it’s working.  The whole idea of CRM is not simply to manage transactions but to become integrated into our customers’ lives or at least that part of their lives that involves the use of our products and services.

    I know that on-demand vendors are, and need to be, ultra sensitive to the customer.  After all, a customer of an on-demand service has more than a theoretical potential to go elsewhere and with monthly billing that clarity is a part of life.

    The only point of this posting is the title, we get it—Customer Relationship Management—we really do.  It is being noticed and appreciated and, no doubt many of the CRM products and services that we sell are contributing to this finding. 

    This unscientific survey’s findings are a far cry from where we were just a few years ago with some companies even using CRM as a tool for deflecting customer input.  We are not perfect by a long shot but we are getting better and the customers notice and appreciate it. 

    Nice going.

     

    Published: 15 years ago


    Salesforce chairman and CEO, Marc Benioff, delivered the good news to eager investors and financial analysts yesterday in his quarterly earnings call after the market closed.  It was like a spring rain in a desert.  For the year just ended—its tenth—Salesforce.com generated just over one billion dollars in revenue, smashing its previous records and adding 3,600 net new customers.

    Ten years ago Benioff, Parker Harris and a small group of determined San Francisco technology mavens and executives founded the company on the premise that the world ought to move to on-demand computing.  While the idea was intuitively obvious to true believers, there was a great deal of doubt in the rest of the world.  Skeptics complained that no one would trust their data to the emerging Internet or that an application that ran in a browser could be very powerful.  Times change.

    I remember the first time two people from Salesforce—Clarence So and former CEO John Dillon—briefed me in February 2000 very clearly.  I had just started a job the prior month as a senior analyst at the old Aberdeen Group and for whatever reason I had decided to cover the emerging market of CRM and hosted delivery models. 

    My previous jobs had mostly been in software sales and the first time I saw the product I thought, this makes perfect sense and why wasn’t this available when I was selling?  It was such a clear idea, the kind of thing that I would later call a disruptive innovation.

    Today Salesforce is the CRM market leader—if not in absolute terms, then certainly in momentum and mojo.  They took on Siebel in what looked like a preposterous and Quixotic adventure and ended up eating Siebel’s lunch.  Whoa!

    The company has achieved a great deal in the last ten years, making on-demand or SaaS or whatever they decide to call it this week an increasingly conservative choice for new solutions.  Not just CRM but increasingly, HR and back office applications are being sourced on-demand today.

    No body starts a company and builds conventional applications any more either.  The economics don’t work.  And it is so obvious that a new generation of innovators is not only building their apps the on-demand way but they are building new business processes as well.  People like Salesforce alumnus Tien Tzou founded Zuora last year with a small cadre of friends.  Their vision?  To deliver an on-demand billing and payment system for on-demand companies.  It turns out that these companies have requirements that are not easily met by conventional billing systems.  So the innovation process has started anew.

    The business model took a lot of getting used to at a time when technology company revenue charts looked like blueprints for ski resorts.  In a world where technology costs were high and products went obsolete and then had to be replaced by subsequent larger investments, it was a challenge to convince financial analysts that this way was better.  Customers would respond to low TCO with loyalty.  In the end the company’s momentum and happy customer base gave the financial whiz kids the encouragement to back the company’s IPO.

    Steve Cakebread came on board as CFO to help the company in its successful pre-IPO courtship of the movers and shakers on Wall Street and just a few weeks ago Cakebread left the company, perhaps to start the long process over again this time as CFO of Xactly.  Cakebread’s contribution was graciously acknowledged by Benioff in yesterday’s call.

    There will be plenty of time later to discuss the company’s latest adventures in Cloud Computing, and to critique this or that.  Today, we can savor the moment when on-demand computing hit the billion-dollar mark.  Happy tenth birthday Salesforce.com.

     

    Published: 15 years ago


    In good economic times there is no better job than being a technology industry analyst.  I make the distinction between the industry and financial analyst trades for a reason.  The finance guys look primarily at a company’s or an industry’s revenues, profits and potential for future growth.  On the other hand, we in the technology side of the house, get to write about new toys.  The jobs might look the same to a casual observer but to my mind the first is very grown-up and kind of flat while the latter is full of the wonder of childhood.  Perhaps this distinction is just slightly hyperbolic but it gets me out of bed in the morning. 

    I am an industry analyst and I enjoy learning, and ultimately writing, about new technologies and how they affect our working lives.  When the economy sours the finance guys have about as much work, maybe more, as ever trying to figure out pennies per share and the like.  But the technology analysts have less to do—fewer companies want to know about the future of technology and many more want a quick fix for the thing that is eating their lunch.

    In times like these you see layoffs at industry analyst firms and over the last six months we’ve seen a procession of restructurings and right sizings—weasel words for the reality—at several analyst firms.  Yankee restructured in August, Gartner is shedding 117 positions and AMR is lopping off ten percent according to industry sources.

    In the last recession I was a vice president at Aberdeen Group and I recall that as we descended into the bad times there were layoffs and salary cuts just like we’re seeing today.  On top of that we had taken in some venture capital when times were good and the VC’s were very interested in maintaining the value of their investment.  When layoffs weren’t enough, the founders discovered that their equity had evaporated, or nearly so, and the investors brought in new management.  That’s just business, stuff happens.

    Eventually there was a recovery and the economy went back to more or less what it had been doing.  Companies like Aberdeen survived but not before a total turnover of the staff.

    Now we are at it again.  Companies don’t want to know much about new and wonderful technologies because they are too busy bailing.  I know this will pass and I hope that all the analysts affected will land on their feet.  I don’t have any particular advice if you are an out of work analyst but if you like this gig, keep in touch.  Read, Google, Twitter, hit Facebook and the other sites.  There are small companies still bubbling up new ideas and it’s still fun to talk to them.  If there’s any solace in this market, I think that’s it.

    Published: 15 years ago


     

    Oracle continued its fast-following ways last week when it introduced additional functionality for Oracle On-Demand Release 16.  The statement completed a two part announcement begun the week before and brings to eight the number of new on-demand CRM applications from the company.

    The products announced last week include Oracle Self-Service E-Billing On Demand, Oracle Sales Library, Oracle CRM On Demand Deal Management, Oracle CRM On Demand Enterprise Disaster Recovery and Oracle AIA integration from Oracle CRM On Demand to JD Edwards Enterprise One.  All of these introductions are quite useful and together they say a lot about the company’s direction and approach to the market.

    Oracle is aiming at the enterprise on-demand space.  If you ask Anthony Lye, senior vice president and all around CRM maven why he’s targeting that space you will get the same answer a reporter once got by asking a famous bank robber why he robbed banks.  That’s where the money is.

    Oracle is one of a small list of companies that can readily command the enterprise market’s attention.  Many of these applications make sense in any setting but they are especially suited to the enterprise.  The best example I see is Deal Management.  I have seen the demo and just the thought behind the application is impressive. 

    We all know that many big deals are deals in the true sense—list prices are often not accurately reflected in the final price.  For example, at some point in a big deal the difference of a few units either way will not affect the vendor’s revenue structure as much as not getting the deal.  In other words, there is a balancing point between price and perceived value and a vendor has to be smart enough to spot the balance without giving away the store.

    It sounds easier than it is especially in an enterprise situation where vendor and customer may have a long history.  The customer’s price tolerance, budget, current installed product base, recent purchases and a lot more go into pricing the deal.  Knowing when to lower a price and when to hold firm are important to the seller and historically, the decision has been more art than science.  Deal Management provides a workspace, graphics and some fancy math in the background to help vendors sort it all out.

    If all the additions to the on-demand CRM suite were as unique and clever I would have less to write about.  The disaster recovery and integration products introduced last week get a pass both because they are good and because they are the kinds of products that a vendor like Oracle ought to be involved in providing to customers.  Other products, like the Sales Library, are a different story.

    Oracle has a storied reputation for building products more than partnering.  To be sure, the company has a partner program with many participants.  But while it touts fourteen Inner Circle partners (most are also in Salesforce.com’s AppExchange), Salesforce.com publicizes a partner community that is pushing one thousand. 

    Oracle’s total partner network includes 19,000 companies but that begs the definition since it includes ISVs, system integrators and resellers.  I suspect that the number of vendors that can add value to Oracle CRM On-Demand is larger than fourteen but probably less than 19,000.

    Oracle’s next step in its effort to be the fast following on-demand CRM alternative ought to be opening up a bit more to the independent partner community.  What they’ll discover is that the independents are far ahead in thinking up clever new applications.  Some meld together baseline CRM with social networking sites and others have identified whole new business processes.  They might also find that independents who specialize may offer something better than the Oracle branded function.

    I think the future of our business is with the small companies innovating around big new ideas.  Keeping those companies in a vendor’s orbit will require significant platform capabilities. So far Salesfsorce.com seems to have that market to its self.  To be more correct many companies that are non-traditional software vendors dominate the platform market.  In addition to Salesforce.com platform those vendors include Google, Amazon and Facebook.  If Oracle wants to be a fast follower it will have to tell a better story about platforms.  

    Published: 15 years ago


    The recession is ahead of our thinking about how to sell around it.  Our first response is a tried and true strategy that is not right for all occasions.  People will disagree with me but so far we’ve seen a steady stream of one idea — staying close to the customer and attending to the customer experience.

    There is nothing wrong with this customer-centricity and a lot to be admired.  Attending to the customer experience is part of a customer intimacy strategy and we should always stay close to our customers.  But customer intimacy is not the only tool in the box.  It should be one of many that we use like a symphony conductor bringing in the strings and fading the percussion when the score demands it.

    Customer intimacy is a great tool especially when customers have cash and need to choose between alternatives.  People buy from people and they buy from the people they know.  Today, customers don’t have much cash; the credit markets have been shredded and even worthy borrowers have a hard time getting the capital they need to do business. 

    The credit crunch affects us all because the economy is really one big cascade mechanism.  My profits become your revenue in an unbroken chain that keeps people employed and products flying off the shelves.  Absent credit and cash the mechanism seizes up and all the customer intimacy in the world isn’t worth the proverbial bucket of warm spit. 

    What to do? 

    I think of a spectrum with customer intimacy on one end and operational excellence on the other and CRM has a role to play all the way down the line.  Right now we are stuck in the middle of the spectrum still favoring the intimacy end but it’s time to think different. 

    Selling is always about innovation; not just your innovative product but innovative approaches that help us stand out against the competition.  Change the rules of the game is how one sales manager once put it to me.  Don’t settle into the same niche as every other sales person or you will end up column fodder in some evaluation spreadsheet and there’s no reward for second place.

    It is time to think about innovating around operations, if you haven’t already.  We have a thirteen trillion dollar economy and the experts say the GDP will shrink by a trillion bucks this year.  But that still means roughly twelve trillion dollars worth of good and services will be bought and sold.  In other words people and companies are still buying, just not as much.  They will buy from you if you have the offers, packaging and processes that fit their current needs and that all relies on operations.

    An operational excellence strategy is available to almost every business and although it represents a kind of innovation, it requires no major investments and it involves no long lead times.  Want to improve operations?  Great, it’s all about mental innovation.  Operational improvements can come from such over looked sources as employee input to enhance internal processes and outside vendors who can provide automation to streamline labor-intensive activities. 

    Good operational ideas can especially come from customers, admittedly an idea rooted in intimacy.  If you listen hard they might tell you that, yes, they have need but no they don’t have money—we’re used to hearing that.  But if you listen even harder you might discover that customers have enough to buy in different configurations with different price points and different payment terms—things they might not think are possible so they might not ask.  These nuggets provide the information you need to adjust operations.

    So maybe you change packaging, deliver more product but less frequently, put more or less in the package depending on the need.  Pay by the drink rather than by the bottle.  Or maybe you reduce the contracts process to bare essentials with a contracts management system delivered on-demand.

    Things change in recessions and sometimes the changes are permanent.  On-demand technology was a big winner in the last recession.  In 2003, a bad year, I recall surveying the market and being surprised at the willingness of CRM buyers to evaluate on-demand CRM on an equal footing with on-premise solutions.  It had not always been that way.  In six months the numbers went from 52% in favor of evaluating to 85% in favor.  The tide turned and it never went back.

    On-demand has many advantages but the key in this case was the operational benefit of delivering software services on a pay as you go basis.  Think about this.  In 2003 on-premise CRM vendors stayed close to their customers, despite the fact that the customers had no money to spend on CRM.  On-demand vendors sold to relative strangers over the Internet and phone—not terribly intimate.  But while on-premise vendors were holding their customers hands, on-demand vendors were taking the business.  On-demand vendors sold an operationally superior product in an operationally superior way.

    So don’t shy away from customer-centricity in these times—you are the only one who knows if your business needs this approach.  At the same time, be aware of your other weapons and remember that this is a great time to upset the established order.  If you don’t upset the apple cart, who will?  

    Published: 15 years ago