July, 2009

  • July 29, 2009

    • There’s a trial happening this week in a Rhode Island federal courtroom that would be comical if it wasn’t so sad.  The Recording Industry Association of America (RIAA) is suing a Boston University graduate student for copyright violations when he downloaded 30 songs from an illegal file-sharing site.

    No one disputes the ownership of the copyrights in this case but the case brought by the RIAA is a borderline psychotic episode in the formation and destruction of markets that happens in any economy.  The RIAA sees a simple copyright infringement but what’s really at stake is a business model that is on court mediated life-support.

    As most people who have not spent the last six months in Tibet know, the record industry’s business model of selling songs burned into CD’s has evaporated in the face of digital download from legal sites like iTunes and illegal sites too numerous to name.  The RIAA has chosen a legal route to protecting its intellectual property (IP) rather than innovating by embracing technology that would make it possible for customers to behave in a legal manner rather than as pirates.

    No amount of legal maneuvering will change the direction that the market is dragging the RIAA in.  Moreover, RIAA’s vindictive prosecution (What else can we call it?) of a penniless graduate student is most likely doing much to impoverish his parents.

    For what end?

    The marginal cost of producing a copy of a song in the digital era is, what?  Nil?  If so, can it really be said that even this illegal download harmed anyone?  I know the counter argument is that if everyone does it, all of a sudden there is no market, no incentive for artists to invest their time and talent in making music.  But I disagree.

    In “Free: The future of a Radical Price” Chris Anderson argues that producers of goods and services will increasingly adopt free as the base price to induce customers to purchase upgraded products and services.  Already in the music industry, some artists are giving away their songs to build customer lists that they can then market to.  The marketing takes many forms from selling tickets to play dates and events to soliciting ideas for new compositions.

    In the free approach, we see a network forming that consists of artists, consumers, venues, and possibly record labels though when the marginal cost of producing a copy of a song is nil it means the record companies have to figure out a new angle.

    That’s what the RIAA case is really about.  The RIAA is dead in the water, out of innovative ideas for engaging with its customers so now it is cannibalizing them and it is a disgusting sight.  Regardless of the outcome in court I hope the defense has the wits about them to sell the movie rights to this story.  Better still, if I was studying filmmaking right now I couldn’t find a better subject for a documentary.

    Published: 15 years ago


    I am hearing from vendors that their on-premise CRM sales in the early part of this year are pretty good.  No one has briefed me ahead of their earnings calls but the results from late last year and Q1 seem to be pretty good.

    I should probably wait until the numbers for the last quarter come out from the vendors but I’ve seen enough to call an obvious trend.  Despite the robust growth we see in SaaS software, the market in conventional on-premise CRM software is still very good — at least from the revenue perspective.  It’s not surprising — there are a lot of enterprises that are still wedded to the on-premise model.  On-demand’s growth is great but it comes off a smaller base.  There are multiple factors to consider here.

    First off, there is the issue of net new business and up-sell business such as a customer adding seats or adding modules.  That all counts but once a company elects to go with a particular kind of solution (on-premise or on-demand) it will be much less likely that the company will flip.  Not saying it doesn’t happen, it’s just not highly likely.

    Then, there is the software category to consider.  There is a great deal of demand in the call center for on-premise solutions but I think there is a division developing.  Small call centers might be more receptive to an on-demand solution.  For example, very large call centers — north of about 500 seats — can make a good case for an on-premise approach.  That many seats can be accommodated by a SaaS solution too and I expect that in the future we’ll see many more call centers going on-demand.

    Some of the big factors for on-demand call centers are the cost of real estate and the availability of workers within a geographic area.  I fully expect that as the economy recovers we will again see gas prices north of four bucks, which generally means that the ride to work is going to become more expensive.  Call centers hire people at the lower end of the pay scale and these people will feel the hit more acutely.  So my thought is that on-demand distributed call centers will be on the rise to accommodate the commute.  We could even see a surge in the number of agents working from home.

    But back to the staying power of on-premise CRM software.  Based on the numbers I have seen, the conventional vendors are still bringing in a lot of revenue.  What I am not seeing is apples to apples comparisons.  Too often we compare the revenue from deals for on-premise and on-demand as if they are qual.  After all revenue is revenue, right?  Not so fast.

    The on-demand guys only report current revenue, not what’s coming in year two or three from the deal so their revenue looks smaller than a big licensing deal where all the cash comes in at the beginning.  If you compare the revenue numbers from each kind of vendor you might get the impression that the on-premise guys are light years ahead.  I am not saying that they are not light years ahead, but counting seats would be a truer measure of success when comparing on-premise and on-demand vendors.  Those people responsible to sizing markets would be wise to consider seats as well as revenue.

    If the call center is one of the strong points of premise-based CRM then sales and marketing might be the place where on-demand shines.  Again, there are a lot of organizations that use premise-based SFA but even vendors like Oracle, who offer both flavors, report strong results for their on-demand solutions especially where a customer might decide to run both.  For different reasons sales and marketing seem to be more at home on the Web.

    SFA has become a very mobile application with sales people using their BlackBerries, iPhones and other smart gadgetry to do their work.  Laptops and desktops are still in the mix but it makes the most sense to use an application that spans all the platforms.

    With some minor exceptions sales process and marketing applications seem to be the best of breed standouts.  Suite vendors do not seem to have figured out marketing to the degree that independents like Kadient, Manticore, Eloqua, Market2Lead, Omniture, iCentera, Savo Group and many others have.  The notable exception seems to be Oracle with its gadgets and widgets.

    So as the market sizing season begins and earnings are announced my single plea would be to get all of the reporting bodies to show us the seats.  I know Wall Street wants revenue but my view is that revenue is increasingly becoming a secondary indicator.

    Published: 15 years ago


    Microsoft’s difficulties with delivering software continue.  Internet Explorer version 8 (IE8) is the latest example.  An article on ZDNet today said the company plans to ship a patch to users.  I have to say that the company has usually taken a pro-customer and pro-CRM approach to dealing with customer problems.

    Last week I downloaded an update to MS Office for the Mac (version 12.20) only to discover that it would not open any of the new file formats like .pptx.  I found that incredible — their proprietary format and they can’t open it!  I had been working on a presentation in .pptx for several weeks and it was due the day the upgrade failed.

    Not to worry, I tried to down-rev the update by going back to an automatic back-up I keep on my Time Machine.  If you don’t know what a Time Machine is, you should.  In that one device there is a routere and a large server grade disk.  The Time Machine does automatic back-ups while I work with negligible overhead.

    I had never used the Time Machine for a restore before and didn’t know how to do the restore.  I called Microsoft and got several pieces of good news.  First, the support call was free because it involved a known problem that was Microsoft’s fault.  Second, the people in the call center are Mac experts and my agent was able to walk me through the process.

    That’s great as far as I am concerned.  What started as a great deal of agita for me ended with real satisfaction.  Nonetheless, it would be very nice if Microsoft could get out of the graceful recovery business and back into the business of making bulletproof software products.

    Published: 15 years ago


    The headline on the press release read: “NetSuite Offers Sage Partners Major Incentives to Begin Growing their Business on the NetSuite Cloud” and I figured, it must be summer.  For the last few years, Sage has announced an offer like this.  For the last couple of years it was a take away program for salesforce.com customers.

    I like NetSuite, they offer a good package of ERP and CRM software delivered as a SaaS service.  They’ve made a lot of smart moves in the last couple of years including their IPO (which was not just smart but brilliant) and an apparent decision to move up market from their original SMB focus.

    Going after larger companies made sense because I think NetSuite found out that their then target market didn’t have all of the resources — human and financial — needed to implement such an all-encompassing suite of software.  Though the product is good, any ERP implementation comes with a great deal of thought work that’s needed to rationalize business processes before automating them.  I think some small companies just choke on the effort.

    Now it looks like NetSuite is trying to go after the SMB space again, this time with a full court press on Sage’s partners.  Just as I like NetSuite I like Sage too.  As a company Sage certainly has product and partner issues, but any company does.  What’s interesting to me about the NetSuite PR is the hyperbole it exudes.

    Though the PR has several quotes from Sage partner take-aways the text is over the top.  One paragraph starts with, “NetSuite expects this program will find a warm reception in a Sage channel partner community wracked with fear, uncertainty and doubt about the future of on-premise applications…”

    Wracked with fear?  Really?

    I have to say I used to wonder about Sage too and about when they’d get their SaaS act together.  They’ve been late to the party, but not AWOL, they have products, especially in the CRM world.  Lately, though, I’ve concluded that Sage might know something about the space that I’ve been missing.  It’s a rather conservative market from the perspective of new product adoption.

    The obvious success of SaaS in CRM may be enough to move the ERP partners but maybe not.  Undoubtedly some will move, the PR is proof of that.  But building a successful partner program is something that takes a great deal of investment in time and money.  And although NetSuite has been in the partner business for some time already, I think they’ll have to execute very well to make in-roads here.  It’s a conservative market and it’s summer.  In a recession.

    As the Zen master says in an old joke, “We’ll see.”

    Published: 15 years ago


    This spring and early summer have been fertile times for social media and CRM.  The traveling shows, Sales 2.0 and Enterprise 2.0, made stops here and each had some interesting ideas on offer.

    For sheer completeness I tip my hat to Enterprise 2.0.  If you are wondering what the Enterprise 2.0 fuss is about it’s considerable and it relates directly to social media and ultimately to CRM.  Netting it out is difficult but here’s an attempt.

    As corporations flatten out some of their decision making authority goes down closer to the customer and some of it evaporates to be reconstituted on the customer side.  Rather than a traditional command and control or hierarchical organization structure we end up with something more like a network.  Social CRM is the front office analog.  Social CRM aims to have more direct conversations with customers rather than attempting to tell them what to do.  You could get all of this from a wonderful book, “The Cluetrain Manifesto” published in 1999.

    As is typical of big concepts, it took about ten years for the seminal ideas in “Cluetrain” to percolate to the market.  But now that the ideas are here they are leveraging things like twitter and Facebook and other sites to remake the corporate landscape.  Beyond that they have the potential to remake our lives too.

    With all of this as background, I have been thinking about the implications for CRM for a long time.  What might seem intuitively obvious may not be and there are many ideas lurking that have not bubbled up yet.  For example, you might think it’s a slam dunk that social networking would make for a great conventional marketing tool but there I think you’d be wrong.  Some people are advocating for social media as if it was e-mail on steroids.  Sure, you can reach a heck of a lot of people for zilch with social media but there’s reach and then there’s reach.

    In truth social media is about intimacy built on trust which is why spam doesn’t work with e-mail and why trying it with social media will be a colossal flop.  But social media is good for marketing and sales if you — the marketer and the seller — can build trust over time and become what I refer to as thought leaders.

    In a revision of Andy Warhol’s famous dictum that in the future everyone will be famous for fifteen minutes, someone (wish I knew who) recently said that with social media everyone will be famous to fifteen people.  That’s pretty clever and it goes to the heart of thought leadership.  Think of your Facebook friends and your twitter contacts and there are probably more than fifteen people on your list but  the number is small by cosmic proportions and that’s the point.  You are, to one degree or another, already famous to a tight circle of people, some of whom you know well and others you hardly know at all.  But they respect you and your opinions to some degree and that’s probably much more than they know or respect some corporation or politician.  You can use this in business with social media.

    The challenge for sales and marketing is to learn how to tap into these circles of trust without violating anything or anyone.  We know this intuitively and it’s why spamming won’t happen in social media — it will not be tolerated.  With that in mind the new model for selling is leveraging social media to disseminate thought leadership.

    We already know that people think about and discuss purchases with their friends and acquaintances long before they enter a sales process and the trick will be for sales people to be seen as truthful sources of authoritative information in their own territories.  Thought leaders, in other words.  That’s not easy but it can be done, but it can’t be done using old methods.

    How often do you get links to things on the Internet and what are those links for?  There are many links for articles but increasingly those links lead to other media like pictures and video.  I think that is a big hint.  The modern sales glossies, white papers, brochures and Powerpoint slides are all of another time — the era of hierarchical command and control.  The era of broadcast advertising.

    My hypothesis is that much more of this material will find its way into low cost and easily produced video and ultimately I would not be surprised if it also included music.  Your favorite TV shows have theme songs so I don’t think this idea is that far fetched.  (I also have two kids in music school who will need jobs someday.)

    Taken as a whole I think this gets us to the idea of selling thought leadership.  You can’t expect to sell anything until you have convinced the customer of the correctness of your line of thought.  Today too many vendors are letting random chance do the educating.  That’s going to change.

    Published: 15 years ago