April, 2013

  • April 10, 2013

    • Sugar CRM took its annual customer and partner show on the road this week bringing what had been a Bay Area extravaganza to the Big Apple, the better to attract a sizable population of customers and partners from Europe and other points beyond North America.  It seems to have worked because even though New York is one of the most cosmopolitan of cities regardless, I hear a lot of European languages in the corridors and I met many people from countries across the Pacific.

    Sugar is a happening thing at least in part because, of all the CRM vendors, it has an innovative business model and a new assertiveness.  CEO Larry Augustin tells me the company is growing in the area that is most important to mature and maturing software companies — the enterprise.  According to numbers shared with me, Sugar is growing its enterprise customers at a rate quadrupling last year and I hope they keep it up.  Admittedly that’s easy to do if you start from a small base but, still, it shows growth and validates the strategy nevertheless.

    Sugar comes to New York off of some difficult transitions.  The marketing and sales groups have been largely restaffed recently and I met more than one person who has been in a job or with the company for only a few months.  But veteran, lead guitarist and Sugar returnee Martin Schneider anchors the group.  I don’t know Schneider’s official title but a good approximation might be keeper of the flame.  He came to Sugar about five years ago from the 451 Group, an analyst firm where he did some very good work.  He stayed at Sugar for those five years doing more good work but ultimately went back to 451 only to return a couple of months ago to help the company through its transition.

    It seems reasonable to say that Sugar needed a transition.  For while the company has been making good numbers with its fundamentally different business model that included open source, but I think there was a realization that open source messaging would need some tuning for the enterprise corporate world.  Also, the executive team was obviously looking for new members with the chops to play in the enterprise.

    While it’s true that open source has done very well for the industry in areas like the Linux operating system, Apache Server and MySQL database (the core of the LAMP stack along with the PHP and PERL programming languages), open source is also representative of fierce commoditization.  There’s little money to be made in operating systems, server software and databases today.  They’ve run their races and the market has chosen a small handful to make standards.  I know I’ll get mail on this but the issue isn’t how much money any of these items is generating today, Web servers are in the range of $2 billion, I think, but it’s how much the industries generated in dollar adjusted revenue in their hay days.  Commoditization drives a market into a singularity where one vendor does most of the business and others eventually fail.

    Yes, but what about Oracle, Microsoft and IBM in database?  True enough, but databases are so embedded that they’re part of the hardware sale.  Database might arguably be less far down the path that operating systems have already trod.  We could go on but my point is that CRM is not in the commodity column yet and probably won’t be for many years.  So Sugar’s initial thrust as an open source supplier was at best premature; it might have made sense if you didn’t see social coming.  But CRM continues to be a jump ball because of all the innovation it spawns.  SugarCon, to me, is a continuation of an effort to move the company from commodity supplier back to mainstream CRM supplier and it is largely successful.

    In his keynote, Augustin was careful to focus on three things about CRM that keep it from being a commodity with a theme that stressed “every customer, every user, every time.”  By this he meant making software that addresses the unique needs of users at all levels.  Fair enough, but the messaging felt too reminiscent of days past.

    I can’t help but note a small disconnect between the messaging and the reality of the software.  The demos show a competent and easy to use product set complete with activity streams and social and other inputs.  But the overall effect is one of automation rather than innovation and that has become my new yardstick and dividing line — more on that later.

    You have to walk before you run and I accept that there are a lot of companies out there still learning to walk.  By Sugar’s estimate, for every CRM user in existence today there are a whopping 25 who are not users or who are using some home grown system cobbled together from old databases and spreadsheets.  I might start calling them home-groan soon.

    The existence of so many uninitiated CRM-ers is plenty of reason to walk back any thought of CRM commoditization and to focus on helping those customers to walk the CRM walk.  That said however, I think the whole industry has a short fuse burning on getting over the automation-innovation divide.

    Some vendors have clearly crossed that chasm but the majority has not.  You can see it in the demos of SFA that focus on the sales rep serendipitously having a big deal to close.  The reality is that sales reps have fifty or a hundred deals to close and the hard part isn’t getting to the close.  The hard part is finding the deals in all the sales data noise that need help in the first place.  They are the deals revealed by analytics as having stayed too long in stage three of a sales process or the ones that have raced through and tweeted about their imminent need.  It takes more than conventional CRM automation to find those deals and to take action on them.

    That is where I think CRM is today and where most vendors need to apply elbow grease.  Sugar’s special challenge (and you can say this about Sage too) is in communicating this to its partners.  The messaging I heard at SugarCon straddles both worlds as it must if they expect to educate the partners and bring them along.  So in many ways the most important messaging at this event is the future and most important constituents are the partners.  Time to saddle up and ride in a new direction.  It will be interesting to see how all this evolves.

     

    Published: 11 years ago


    On my way to Manhattan for SugarCon, the Sugar CRM user event and show.  Taking a long slow train ride with plenty of leg room, WiFi, and power for optimum balance of productivity and sleep.  Beautiful day out there, sunny and almost warm.  What a good idea for Sugar to leave San Francisco to bring its show to its customers on the east coast.  Still I like getting to San Francisco but will have the opportunity again when I head to Oracle Analyst day is a couple weeks.  Busy time of year.

    Looking forward to hearing Sugar’s evolving story.  As the major open source player  in CRM they have a unique approach to a market that’s only getting more complex where no one’s position is ever secure.  I will be posting from there.

    Published: 11 years ago


    I take a lot of briefings — more than one per day every one of the 250 or so work days in a year and it’s not unusual for me to not remember a company when they call up six months later asking for a quote for a press release.  Would you?  To be memorable the briefing has to have something that sticks in my brain and, hopefully, that something is a good thing or why bother.

    There is a science to briefing analysts and it involves repetition.  The more you are in our faces the stickier your messaging is.  Three or four times per year — if you have something to say — is a good metric.  Salesforce understands this and has always been one of the better companies at leveraging its relationships with analysts.  It works for them too because they get a lot of free publicity.  Lots of companies start the year off strong but fail to follow up in three or four months and many conclude erroneously that briefing analysts is a waste of time.

    Many of the briefings and phone conversations that I have had lately have involved big data and social media though not necessarily together.  In one of these briefings I had a revelation that I want to share.  Too often vendors use slides and demonstrations to show me how they manipulate data as if data manipulation was an end in itself, but it’s not.

    They might show how much data they can corral or how much data they can deliver to a user but the demos usually show more and more people manipulating data without results.  The demos remind me of feeding a one year old.  Just because you put food in front of them doesn’t necessarily mean the food will get inside where it can do some good.

    But data is only useful when it is consumed as information and the surest indicator of consumption success is if in retrospect a user can say, “This is the data that provided the information I needed.”  Very often that need is for decision making and if you think about it that little scenario has been the hallmark of the whole information age in which we live.  Turn data into information and use it to make better, faster and more numerous decisions.

    This all has a practical point.  In market research that Esteban Kolsky and I did late last year (and we’re going to repeat it this year too) we asked about hindrances to adoption of social media in business.  Know what?  Top of mind for most people were issues relating to use — How do we use this stuff?  What business processes should we be applying this to?  And very interestingly, the vendors at the time and even today don’t answer the question.  When they demo they provide scenarios that show data being shared but not necessarily being consumed by doing something valuable.

    Again, value is created when someone makes a decision based on the data that social and other technologies churn up.  This scenario tells me that full adoption of social and big data ideas won’t take place as long as CEOs see demos of employees manipulating social data but not landing the plane by making good decisions  because these scenarios are indistinguishable from watching employees “play” with social media.  They show people doing something that isn’t exactly work and not arriving at the decisions that would normally make it all worthwhile.  That doesn’t inspire a lot of CEO confidence.

    So the big take away?  Ironically, most social and data tools I see demoed — and I see a lot — have the capacity to demonstrate decision making but they don’t.  It’s a bug not in the product but in the marketing and it can be easily fixed.  Without that fix, though, I’m afraid that all the data! data! screaming we’re doing is just so much yadda, yadda.

    Published: 11 years ago


    Gamification is one of the hottest ideas in business today.  But what do we know about it, really?  Are many companies onboard with adopting it?  Is it still an early adopter solution?  What are companies saying and what are managers thinking about technology that makes some aspects of work game-like?

    We have questions and perhaps you have answers.  Won’t you please kindly share your ideas with us by responding to our research initiative here?  There are 18 questions we’d like to ask you and while there’s nothing game-like in the survey, we engineered it to be easy to answer and quick to finish.  We’ll share some of the results in a future white paper that you can download for free.

    Ok?

    Thanks!

    Denis

     

    Published: 11 years ago


    Marketing is taking CRM by storm; while we’ve all been fixated on social media, many companies — both vendors and end customers — have been acting more broadly by acquiring and extending marketing solutions.

    At the recent Microsoft Convergence 2013 held in New Orleans in March, the company put a lot of emphasis on marketing.  Microsoft presented sessions on Marketing Pilot, a recently acquired and renovated marketing campaign company, and at the show announced its acquisition of Netbreeze a marketing analytics company.

    Also, at the end of last year Oracle bought Eloqua and Salesforce has introduced its third cloud dedicated to, what else? Marketing.  There are other examples too of free standing marketing companies like HubSpot and Marketo or companies like InsideView, a marketing intelligence company, growing like weeds.  So what’s going on?

    It would be a natural conclusion to say that marketing had been the final CRM frontier and that companies had reached stable points in their sales and service solution rollouts so they simply embarked on marketing.  But that’s rather simplistic and it violates a cardinal rule of business — spend money to make money or to save it, but don’t spend just to spend.

    To appreciate what’s going on you have to step back and take a more nuanced view of the market place and the economy at large.  When the economy tanked nearly five years ago it took with it a lot of jobs and capital, which resulted in slackening demand and that slack is still with us.  Advances in technology are eating up even white collar jobs today and all of this has a depressing effect on demand.

    Also, interest rates continue to test the zero lower bound as Paul Krugman might say, in part because corporations are flush with cash and because consumer borrowing is still lackluster.  There isn’t enough demand for capital so rates luff like a sail in a headwind.  Not enough people have jobs and banks, especially today, won’t lend to people who don’t have the means to repay the way they did in, say, 2005.

    So, this is a long-winded way of saying that demand is slack, that customers are the rate limiting reactant in the economic formula.  When demand is slack, companies without a clue hire more sales people, savvy companies step up their marketing games to help identify likely customers without spending the expensive resources involved in putting a sales person on the road.  And all of that is a long-winded way of saying that marketing is hitting its stride because demand is slack.

    You could argue that in other times and circumstances, for instance when there is no demand such as at the beginning of a new market, a niche or a category, it makes sense to do missionary selling and marketing is a bare bones affair dedicated to generating PR and brochures.  But this is not then.

    Today, most markets are not new.  Customers have already bought version one or two and are smart about what the next edition ought to deliver.  They’re also happy to not spend their money if they can’t get the deal they want.  Oh, and by the way, there’s a lot of competition today so forget about those 65% gross margins that version one delivered, that’s not on the table.  Smaller margins have little room for expensive and risky approaches to the market.

    For all these reasons, and some others, marketing has become the hottest ticket in town and most of the CRM vendors have demonstrated an understanding of this reality and they are acting accordingly.  Consequently, marketing vendors are having a field day.

    This won’t last forever, nothing does, at some point the wheel will turn and there will be whole new fields to conquer with some new idea and the need for the elaborate, scientific and statistically based marketing that we are now constructing, will fade away.  We’ll probably hear some company talk about expensive and over engineered marketing approaches in favor of sleek new ideas about the relative importance of sales over marketing, like they just invented the wheel.

    But for now, demand is down, margins are under pressure and competition is tough, tough, tough.  And marketers are getting their day in the sun.

    Published: 11 years ago