May, 2009

  • May 27, 2009
  • A lot happened at Insights, the Sage partner meeting held in Nashville earlier this month, though not necessarily at the press release level.  I was there and got a sense of change happening.  It was the first anniversary of new CEO Sue Swenson coming on board and our first opportunity to see the imprint she is making on the company.  Last year Swenson had been with the company for only a matter of weeks and as CEO could only talk about the future.  With a year behind her some results are apparent but the expectation is that there is a lot of work ahead. 

    The big takeaway I got from attending Insights was of a slumbering giant was waking up.  I was a bit surprised but also happy to see Sage embracing social networking in ACT!.  Twitter and Facebook integration are on the agenda followed by other social media.  As social media continues to increase in popularity you can bet more CRM vendors will take it on.  My big question is how will Sage partners deal with it?

    One of Swenson’s early moves was to bring in a new CTO, Montasim Najeeb.  He’s taking a hard look at products, architectures and all the things that go into making whole products.  Importantly, he’s a technology guy with business street cred.  His resume reads like a mini-biography of Silicon Valley with senior positions in product and product strategy for such companies as Oracle, PeopleSoft and WebMD.

    One of Najeeb’s challenges, which I think he acknowledged in his keynote is reviewing at a product portfolio that grew by acquisition and now looks like the Noah’s Ark of accounting and front office software.  Noah had it easy by comparison — he could keep things apart.  But in this era, companies are looking for economies that come from consolidation and part of Najeeb’s job is to modernize products and rationalize the portfolio while balancing the needs of the partners who sell the products.  As G.H.W. Bush might have said it — Tough job. Gotta get it done.  Wouldn’t be prudent not to.

    Another new face in the executive ranks is Jodi Uecker-Rust President, Sage Business Solutions.  She was previously corporate vice president of Business Solutions with Microsoft and COO of Great Plains Software.  That’s a good background in this space.  Uecker-Rust has a lot on her plate and will be working closely with Najeeb, I think.

    The portfolio strategy left the company with many products that were and are architecturally distinct.  The overhead associated with managing so many code sets must be pretty big.  At some point, a prudent manager needs to take inventory and begin a consolidation process and that’s been over due at Sage.

    One reason consolidation has not taken place, I think, is the way Sage goes to market.  The company sells through a reseller channel.  The model has some definite strengths and Sage is not the only company in the market to employ it.  There’s no question though that an indirect channel adds complexity to decision-making.  You can’t change a product too much, regardless of how beneficial the change might be, if the partners are not behind you.  Not surprisingly, the company made multiple gestures of support to the partners and tried to reassure everyone that any changes moving forward would be net positive.

    All that being said, the CRM/front office applications seem to be in good shape.  Last year the company announced a multi-year plan (the 2010 strategy) to rationalize the CRM products, making ACT! work better with SalesLogix and incorporating new Web technologies.  So far all that seems on track.  I think there’s more work to be done relating to Web-based applications and no one debates that.

    The next one to three years will be important for Sage.  The company needs to make progress on some product upgrade and migration issues that, in truth, are over due.  The good news isn’t hard to find though.  Swenson appears to be making some good moves and tough calls and the partner channel is global and energized.

    Published: 14 years ago

    Today’s column is a little different from the usual fare.  We’re recognizing a handful of companies with our annual WizKids award for their innovations in front office computing.  The idea behind the award – and a report that goes with it – is that innovation is happening all the time and the best ideas can change our world.  We think the 2009 WizKids all have that capability.

    We’ve been lucky over the last five years because most of the companies we singled out for this recognition are still around and doing pretty well.  Many are established companies today but we recall when names like Eloqua, NetSuite and even were only household words at my house and those of a few other people who track emerging companies like Paul Greenberg. 

    You might take exception with the last — after all five years ago Salesforce was already a substantial company.  But in the time, that successful emergent company decided to double down on the on-demand idea with platform as a service and we took notice of that too.

    Some pretty darned good companies never got a WizKids award.  The truth is that the judging is a little fickle and since we only recognize a handful of companies each year, it’s easy for a Zoho, a SugarCRM or a Neighborhood America be missed.  As we used to say in Boston baseball circles, there’s always next year.

    The WizKids report has tended to be thematic in the last few years, not because we start with a theme in mind but because a theme usually emerges from what looks good or cool.  For example, a few years ago I noticed the dwindling of conventional software companies as WizKids and I don’t think there have been any WizKids who have not been SaaS providers for a while now.

    That trend toward themes continues this year and the theme is all about making your company easy to do business with.  You know I have been on this operations kick for a while.  Operations might be the flip side of customer intimacy especially in a recession.  Finding ways to lower your costs and make it easy for your customers to do business with you may not sound very sexy but there is great opportunity in that pursuit. 

    Some of our best examples include Zuora for on-demand billing and payments, EchoSign for managing the contracts lifecycle and TimeTrade for making it easy for any business to schedule appointments for their customers.  We also like Right90 because they figured out how to make forecasting meaningful again and Xactly for making it easier for sales employees to work with their organizations and vice versa.  Unisfair and its ilk produce on-demand tradeshows and we think that idea has long legs.

    Finally, there’s Manticore Technology.  Very often we have a marketing automation company as a WizKids Award recipient.  Going back a few years, we see an upward trend from providing basic marketing capability to delivering optimum functionality to making marketing automation easy to deliver, configure and use — not to mention low cost.  Manticore represents this last aspect and is an example of why Sales 2.0 is heavily dependent on Marketing 2.0.

    Coming out of the last recession we saw new dependence on web based meetings and on-demand software delivery.  I think every recession generates some winners like that.  From this recession, it is becoming clear that social networking is becoming absorbed into the business software suite.  I also think solutions that enable higher levels of operational excellence within each vendor will be natural outgrowths of this downturn. 

    These solutions cut fat without damaging muscle — often a tall order — and they prepare us for an upturn that will be tepid.  There will be growth but it won’t be as robust as we had come to expect in the last few years and we will all need operational solutions that help us cope.  Fortunately the wheels of innovation continue to turn and we get what we need, just in time.

    Published: 14 years ago

    “If you can’t make money at it, you don’t have a business, you’ve got a hobby.”

    Words of wisdom from my dad.

    I was surprised by the mini-storm that blew up over Salesforce’s apparent decision to charge ISVs, SIs and other forms of developers for support using their development environment.  Two primary arguments have cropped up, one that support ought to be free and the other that it’s hard to make money if you can’t charge 22% for service.

    OK, let’s tease these things apart.  Free support is a good and noble idea and it is encompassed in the basic premise of on-demand or cloud computing or SaaS or whatever you choose to call it.  Subscribe to the application service and you have the right to call in as many times as you want to ask dumb and not-so dumb questions.  In Salesforce’s case, they won’t tell you how to sell but they will help you untangle the differences between leads, contacts and opportunities.  Then they will probably direct you to some of their basic level training.  That’s only fair.

    Salesforce, as we all know, also has this on-demand development environment and with it you can build any number of database applications and reports or integrate with whatever else there is in the universe.  At that level, you are playing with the innards and you are dealing with an application that the vendor — i.e. Salesforce — has no control over.  It’s like me putting a turbo on my Honda.  I am free to do that but, understandably, my dealer won’t be happy to see me and all warranties on the power train would, I am sure, be toast.  From then on, if I need to get anything fixed I will probably become a regular caller at Tom and Ray’s NPR show, “Car Talk”.

    It seems to me that charging for support when people are using the development environment to make new applications or even new functionality is like putting the turbo on my Honda and it is fair (though I might quibble with the pricing structure).  Supporting smart people building applications in this new environment requires smart people, gear and real estate on the other side.  That has to be paid for.

    Now, as far as pricing is concerned, I do believe they (Salesforce) need more than pricing for levels of service and response time.  They also need to build out a matrix for small, medium and big developer customers.  That’s only fair given that the more developers you have the more support you’ll need.  Spare me the argument that your developers are smarter than mine.  Sheesh!

    Finally, my friend Barney Beal wrote recently that “Oracle CEO Larry Ellison and many an SAP executive have long maintained that the SaaS business model can be very difficult to turn a profit with. One would imagine it’s especially difficult if you can’t charge those maintenance fees of 22% of net licensing…”

    That’s true as far as it goes but keep in mind that even though Salesforce is now a successful CRM provider, making a few bucks, the company is a neophyte in the application tools business.  It gets confusing because it’s all one company but if Salesforce CRM was a distinct entity from Salesforce the tools and hosting company, I think most people would not expect the nascent company to be profitable.  In company and category building eras, few companies make money though many are cash flow positive.  Oracle and SAP didn’t make a ton of money when they were new either.

    Last point, it’s especially hard for conventional software companies to make a profit in on-demand but there are different reasons for that which include fundamentally different business paradigms.  Conventional companies are bloated compared with the on-demand companies that I have seen.  Their structural costs are higher.  I find the whole idea that on-demand companies can’t be profitable to be nothing more than the wrong paradigms are being applied.

    So all of this brings be back to dear old dad — you have to make a profit.  I don’t have a problem with what Salesforce is doing as long as there is adequate value being exchanged.  Of course I am just an analyst in all this.  No customer likes a price increase or the imposition of a fee when something had been free and some feathers may need to be smoothed here.  Because the other thing you need to have to call yourself a business and not just a hobby is happy customers.

    Published: 14 years ago

    Facebook faces an interesting problem in how to deal with a small group of Holocaust deniers using the service to meet and share ideas.  Facebook is a private service so there should be little doubt the service could shut down the hate group if it chooses.  But a larger question of how such social networking sites should be policed is at stake.

    In the past Facebook stepped in to remove pictures of breast-feeding infants if the company thought too much breast was showing.  That episode provoked an outcry of a different sort.  But together with the Holocaust deniers it focuses us on this point – who gets to decide this stuff and how?

    How much latitude should there be on a social site and who gets to decide?  This is the definition of slippery slope because I think reasonable people might agree that motherhood is sacrosanct and hate speech should not be protected.  But what happens when the issues are less black and white and the choices not as clear?  Could Republicans demand Democrats be excluded from a discussion?

    The Holocaust issue is being chased by anti-hate groups right now that are petitioning Facebook to take down the offensive speech.  But is this a model that scales?  Again who gets to decide?  This looks like a mob, err, I mean, wisdom of crowds issue and that makes the slope slippery.

    This puts me in mind of the newspaper model.  There are lots of things that reasonable people disagree with in the newspapers yet we all acknowledge that journalists maintain a level of professionalism and fair-mindedness – most of the time – that serves to give them a pass when handling difficult issues.  More importantly, no one gets to spout a flat-earth theory in a paper without some diligent fact checking.  If the facts don’t check out, the story doesn’t go up.

    It strikes me that we need some form of journalistic standards even for private sites like Facebook.  But standards require editors and a whole infrastructure of people whose jobs and passion are to get the story right.  Are we all going to become journalists?  Take some kind of oath?  Just another example of life at the bleeding edge.

    Published: 14 years ago

    Malcolm Gladwell (Tipping Point, Blink, Outliers) has made a cottage industry of writing about how people think.  More to the point, how we think when in extreme situations, by which I mean times when we need to think outside of the box. 

    Gladwell does not always deal with life and death situations but more the situations that are out of the ordinary experience in life – the kinds of situations you find yourself in relatively infrequently.  I have come to know those situations by the feeling I get of having been lost at the same spot before.  What did I do then I wonder?  Sometimes the answer comes and sometimes I have to improvise.

    It’s like that in a recession, I think.  These times, mercifully, happen only occasionally and we forget what they are like in the long interims so that each recession is a new learning experience.  What did we do the last time?  Will it work again?

    The current issue (May 11) has a Gladwell article titled “How David Beats Goliath” and you can read it here.  Without saying as much, I think the article is tuned to this recession and to what we can do about it.  Not to give too much away, the article is about thinking outside of the box, about what successful underdogs do to triumph.

    The nub of the idea is that underdogs think different, very much in keeping with Apple’s vaunted slogan. Thinking different enables us to change the rules which is especially useful for an underdog David playing by Goliath’s rules.

    We’re all underdogs in a recession but the thing we don’t have is an opponent that we can vanquish.  Nonetheless, there is still plenty of need to think different.  At these times, the old ways of doing things don’t work any more, they might work again but it’s a big leap to assume that all of them will.

    If past is prologue, one thing you can say for certain about a recession is that it is an opportunity for change — and products and services forged in a recession often have staying power once more normal activity resumes.  Consider the last recession.  Two things that I distinctly recall hitting critical mass in the years after the bubble burst were on-demand computing and Web based meeting services.

    Each of these had been around prior to the recession and each had attracted a small but dedicated following of early adopters.  They also attracted a group of skeptics.  Who would trust their data to the Internet?  What would customers think and say about a vendor who would rather talk and present on-line instead of making a formal sales call?  These were good questions and in a recovery when everything is running well, no one wants to run the experiment for fear that the new solutions would not work well and crater business.  In a recession, you have less to worry about which frees you to try.

    I can remember surveying the marketplace routinely every other quarter in those days.  Every survey I did always asked this question: “When you go to the market to evaluate CRM solutions will you at least look at an on-demand solution?”  The question wasn’t about whether or not someone would make a purchase because that kind of question can’t be asked with any certainty of getting a useful response.  But you can ask about intent and that was all I was looking for. 

    In survey after survey in the early part of this decade the answers to my question were remarkably consistent.  Somewhere in the low 40% range of people who were thinking about buying CRM software would evaluate on-demand solutions.  Then one day in 2003 everything changed.  Rather than the usual low 40% response to my question, the result came back in the low 80% range.  On-demand had reached its tipping point.

    This coincided with the low ebb of the recession, 2003 was a rotten year but from there things began to improve and with it on-demand solutions began to play a larger role in business computing.  I am sure the same thing happened in web-based meetings but I don’t have the data.

    In my research and experience it looks like social networking in business is the big takeaway from this recession and that makes a lot of sense to me.  Social networking is the best thing I have seen for enabling a company down to the individual sales representative, to keep selling its brand of thought leadership regardless of whether customers are buying anything else. 

    When you think about it, we all want to sell but if we can’t sell product, then we certainly want to be able to continue selling our ideas and ways of doing things.  A customer who is not buying anything but thought leadership at the moment is just a loyal customer short of funds.  But a customer who has given up on the thought leadership is one that is going away.

    Understanding these things is just as valuable in a recession as it is in a recovery and I think that vendors who figure this out now are the ones who will come out of the recession the strongest because they will know more than their competition about what customers need and want as well as their biases and beliefs. 

    So my advice, if you want it, about getting over this recession is to bone up on social networking and social media.  To help you I have designed a little workshop that you can take right now.  Here goes.

    1. Go here and sign up for Facebook.
    2. Go here and sign up for Twitter.
    3. What are the differences?  When is one a more appropriate vehicle than the other?
    4. Read the Gladwell article in the New Yorker on line.
    5. Get the the article’s url you’ll need it.
    6. Go here and make a tiny url. You need this so that you don’t waste characters in Twitter.
    7. Go back to Facebook and find your friends and customers.  Ask them to be friends with you. This will enable you to see each other’s profiles and leave messages.
    8. Go to Twitter and find the same people and start following them. They’ll probably start following you.
    9. Post a short message on twitter saying something like, “Hey, cool article by Gladwell. Think there’s useful stuff on recession fighting here.”  Remember you only have 140 characters including the turl.
    10. Finally learn the importance of # in Twitter.

    11.Repeat this every day growing your list of acquaintances and pumping out thought leadership.

    Lastly, check out this book: The Facebook Era.

    Now you are using social networking and don’t let anyone tell you it isn’t as valuable as a sales call.

    Published: 14 years ago