Zuora Emerges as a Key Platform Element
Platform may be the most important, least understood, and far from universal benefit of cloud computing. Too often we associate cloud with SaaS or even Infrastructure as a Service (IaaS), which is essentially a re-located conventional data center. But as a platform, cloud computing comes into its own and its purpose in modern business IT comes into sharp focus.
With the proliferation of product types, mostly social and mainly in the front office, we’ve had to re-examine how we integrate applications and, sad to say, common integration has to be demoted to the level of mere interface.
Today there are too many novel business processes that require too many best of breed applications for any single vendor to build, sell, and maintain. Also, the need for simpler integration is abundantly clear, and it is provided through the standards that a platform delivers. Integration today means process integration not simply bringing two apps together but bringing enough process support—including metadata—together to support a whole process without falling out into some spreadsheet dead end.
Spreadsheets are not simply a poor substitute for software, they represent a lot of user pain and toil as people try to grapple with what’s essentially a better file system for a manual process. Spreadsheets needlessly complicate jobs and business processes and leak data and eventually money, so they need to be avoided. But at one time spreadsheets were all we had and they became the better than nothing solution. Not today though, thanks to platform computing.
Also, the time when a software vendor could confidently tell its customers that they had to sole source or risk chaos has long passed. A platform provides the standardization necessary to enable the massive integration that modern business and its processes require.
The Salesforce.com platform, Force.com, is a case in point. According to a recent Forrester Wave report, more than 100,000 companies use this platform and about ten percent of them are large enterprises. Also, there are over three million apps built on Force.com by end customers as well as more than two thousand ISV developed applications for commercial sale.
Applications integrated by virtue of sharing the same platform ensure rapid deployment but platform driven integration also makes business processes more effective because all applications share process metadata more easily and because supporting apps such as social, mobile, workflow, and collaboration pieces are automatically available with no additional work. With a platform like Force.com, it suddenly becomes very easy to support advanced or novel business processes from beginning to end and back again because it has become almost trivial to bring together the necessary apps.
All of this explains the importance of the recent push by companies like Zuora, Apttus, ServiceMax, and many others to claim the high ground of being natively built Force.com applications. You can almost imagine a little logo saying “Salesforce Inside” because it’s that important. For instance, Salesforce’s conventional CRM plus its advanced social, mobile, workflow, collaboration, and other attributes combine with Zuora’s billing, payments, and financial solutions aimed at the subscription economy.
Integration through Force.com gives companies using Salesforce and Zuora the capability of selling, creating an order, and billing it from within a single contiguous application instance of Salesforce plus Zuora. It also gives them an approach for customer service that lets agents access financial records from within a single service console.
Many business processes are streamlined and made more reliable by this kind of integration and we can’t go through each but the point seems clear—integration at the platform level is enabling companies of all sizes to simplify their key business processes and make them more reliable and accurate in the bargain.
Finally, there’s strength in numbers. If you just take the 2,000+ ISV developed commercial applications now available on the AppExchange and consider how they may interact through the platform with Zuora and Salesforce, the number of possible hookups is huge.
It might be doubtful that all these combinations would be useful but the existence of subscription billing, payment and finance systems tailored to ISV apps in the heart of the AppExchange brings a much needed business function to this large and growing community.
The Class of ‘14
The story of this year’s Dreamforce might best be told through the partner community and AppExchange and that makes it a story about the platform. Appropriately enough, Salesforce teed up the platform topic in Chairman and CEO, Marc Benioff’s keynote and the press conference immediately following it on Tuesday in which he announced Salesforce 1.
Salesforce 1 is more than a rebranding exercise, though Salesforce is certainly adept at that. The new branding reflects a consolidation of important components that have become part of the platform organically but it also makes a statement about what Benioff and his company believe is the appropriate configuration for a modern IT tool worthy of the descriptor.
As the company has done many times before, it has again set the bar for the IT discussion for the year ahead. You might recall that last year Benioff announced the importance of the Marketing Cloud and along with some other important events that year like Marketo’s IPO, Oracle’s purchase of Eloqua and other properties, and Microsoft’s purchase of NetBreeze and Marketing Pilot, the market took the hint and went long on marketing. So look for the platform to be the hot topic in the next twelve months.
However, it should be said that platform is not the story; it is only the enabler of the story. As I mentioned at the start this is about partners building native applications on the platform or building complementary solutions that utilize the platform’s API set to make the differences between their solutions and Salesforce vanishingly small.
For Salesforce this is huge because healthy partners—i.e. companies that sell your platform along with their solutions—are just what the company needs as it works to secure a place in the Fortune 500. I have been writing about that inevitability for a while but the combination of Salesforce’s own growth plus that of its partners gives a boost to the effort that many other companies can’t match.
Dreamforce is being held in three buildings and there are campgrounds and exhibits in each building, moreover, partner companies have rented out entire restaurants in the neighborhood for meetings and demos. But it’s not simply a question of numbers though they give the argument critical mass to give you a sense of the size of the partner opportunity, here are some of my favs.
Apttus is known for its configuration, pricing, and quoting solution and more generally for its support of the order to cash process. You already know that quotes need to be meticulously drawn up but did you have any idea of the detail that goes into the process? Traditionally salespeople have used Microsoft Office to put the configuration together, do the math, and write the proposal. But they have used the Office elements without much synchronization with SFA. Apttus changed that by developing technology that enables Salesforce and Office to work closely together. They’ve also linked in DocuSign to deliver the proposal signature ready. Apttus has other technologies too but that’s enough to show their worth.
FinancialForce.com is a good example of front to back office process integration that is enabled when a single platform undergirds all applications. FinancialForce.com’s financial management suite includes accounting modules that every business needs including General Ledger, Accounts Payable, Accounts Receivable, Ordering and Billing, Reporting and Dashboards, and Cash Management. Additionally, FinancialForce.com offers a Professional Services Automation (PSA) application that enables sales and services teams to work in the same system, using the same information in a collaborative working environment, enabling processes to flow naturally from sales to services, with full visibility.
InsideView has built a business based on information capture and distribution to sales and marketing people who use it to fuel their business processes including account management. This intelligence gathering is, I think, a new kind of business process that supports other approaches based on social media. I also think this approach will be important in a future that puts increasing numbers of machines online.
ServiceMax is rethinking field service, and delivering cutting edge business solutions to help companies perfect service delivery, drive revenue and growth, and delight customers along the way. ServiceMax supports modern field service business processes with a native Force.com application that works with Salesforce Service Cloud and shares common objects and customer data.
Xactly started as a sales compensation management solution delivered through a SaaS model but the company has broadened and deepened its offering. Today it does that but it also is budding out into corporate governance and ensuring that not only sales people have plans and objectives. Xactly adds another dimension, governance, to Salesforce beyond what FinancialForce or Zuora offer and I think governance is the next big this for Salesforce to contemplate.
Speaking of Zuora, this company was one of the earliest movers in the subscription billing and payments market. Back when no one else saw the building problem of trying to bill and deliver at scale for subscriptions, Tien Tzuo started the company. Zuora has attracted a lot of imitators, which is good because it proves there is a market. Tzuo and his team has built a financial management system for subscription companies that also fits the subscription business neatly into traditional business. Like many other companies, Zuora had its own customer education event the day before Dreamforce started. With well over $130 million in venture funding, the company has to be getting ready for an IPO but on its terms because it’s also generating cash from what I can tell.
If you ask the CEOs of these companies about IPOs they will develop a strange far away look in their eyes and feign incomprehension of English or they’ll smile and say something noncommittal. Either way they all have venture capital and eager investors and I hear that the economy is improving. Certainly Wall Street seems healthy these days. But what do I know, I’m just one of those analysts who looks under the hood to see how the engine is running. What do I know about finance?
The State of Salesforce
Eric Berridge, Co-Founder and CEO, Bluewolf
I had an interesting conversation with Eric Berridge, CEO of Bluewolf, last week about a new report his company sponsored, The State of Salesforce. This is the second year that the company has done this. In conjunction with MIT’s Sloan School the researchers interviewed hundreds of Salesforce’s customers to learn about their attitudes, opinions, and future demand. Parenthetically, I think this is an unusual approach—publishing, not researching—by a partner and it certainly highlights the importance that Salesforce has gained in this ever-expanding ecosystem.
I am not going to go through all of the findings but I encourage you to download the report here for more details.
Nevertheless, I do wish to elaborate on one of the more provocative findings snugly placed in the middle of the document—“Communities are the new CRM.” That’s a big statement and one that needs to have its multiple threads teased apart, and there are many. First off, is this hyperbole or can we take it with a grain of realism? I’d carefully say it’s real but it also bears watching.
According to the survey, 9 percent of the customers interviewed are already invested in Salesforce communities while 21 percent say they are planning to purchase Salesforce Communities licenses in the next year. Given the success of other community companies like GetSatisfaction and Communispace I’d have to say that this is a reasonable amount of proof; however, there is a big difference between saying you are going to do something and actually doing it, so keep watching those numbers. If next year’s report has something close to this year’s 9 percent plus 15 to 20 percent new purchases then I’d say that we’re on a hockey stick.
Next, you have to ask what this new CRM does and if it is a replacement for old CRM or just a new wrapper. Here I am less sanguine though I also recognize that things don’t evolve along nice parallel lines. Community based CRM might be really good for some things like problem triage and resolution, disseminating marketing information and opinion formation, but at some point in most businesses somebody’s got to sell something because customers won’t always simply be buyers. Therefore the functions of marketing and sales as well as support will still be needed though perhaps in different amounts and possibly through different means or channels.
One possibility that seems to be forming from this idea is that traditional selling will become a rare event replaced by rational people making purchase decisions on a continuous basis. This would make the rational market theorists happy and why not. The poster child of that movement, Eugene Fama of the University of Chicago just won the Nobel in Economics for just that kind of theorizing. Unfortunately, for fans of rational markets, Fama shared the prize with two others, one, Robert Schiller of Yale, takes a mostly distaff view of rational markets.
True, the work cited by the Nobel Prize committee focuses on markets for stocks and other financial assets, not sales of goods and services but a reasonable person would argue that rationality is rationality regardless of the market—if it really exists at all.
Personally, I have never known a sales manager who operated rationally. He or she always wanted not only all of the business on the forecast but they also wanted more than their fair share. So it’s hard for me to see how rational markets prevail in the real world and because of this, it is also hard to see life without SFA in the future world of “new” CRM.
At the same time though, community would be a logical next step in the commoditization process of front office functions. This goes all the way back to retail sales clerks actually waiting on you, which many retailers have eliminated in favor of low prices and self-service. Community brings self-service to fruition on the Internet while re-establishing, after a fashion, the face-to-face community of so many local markets that once stretched no further than your hometown and its merchants.
But perhaps I am being too literal on this point and the real information contained in the report is simply that we are in a transition state, which for my money is the only constant in life. We transitioned from spreadsheets to client-server CRM, then went to the cloud, and now, if Blue Wolf is right, it appears we are moving the whole shooting match (or most of it) to the community.
What this tells me for sure is that today, and especially tomorrow, the customer owns the customer experience AKA the vendor-customer relationship and that vendors who fail to grasp the change will someday look like dinosaurs that had just seen a bright spark of light in the sky. The world is rational most of the time, except on those special occasions when it isn’t. Then watch out.
Dreamforecast
For many years I have written a piece that attempts to forecast the major themes of Dreamforce. I believe I am not always right but the exercise is fun and helps me orient toward what should be happening industry-wide even if it’s not. This year is no exception. With no briefing yet from the company, I am unfettered about what I can speculate on. Had I already been briefed I would be prevented by an NDA and common sense from doing this.
The dominant theme I have witnessed this fall from most of the other front office vendors has regarded marketing. As I have written before, most of the big guys–Salesforce included—have bought and integrated some very nice marketing solutions into their CRM suites. In the process, marketing, which was once the most qualitative and least quantitative of the CRM disciplines, has now become the most quantitative while retaining its qualitative distinction.
It’s possible that in future years we might see marketing fragmenting into two arenas for qualitative and quantitative output. We have a somewhat similar division today between corporate and product marketing but the segmentation I see coming would be between quantitative practice and creative output and the current division includes some of each in each part so there’s some refactoring to be considered. But enough, that’s a subject for another piece. Dreamforce.
So, marketing is top of mind therefore I don’t look for Salesforce to make it the centerpiece of their show. You have to remember that Salesforce made a big deal of the Marketing Cloud last year, after all, so don’t depend on them doing it again. They seem to take a perverse organizational pleasure in throwing down the glove each year so that other vendors can do their fast follower things. It’s like Lucy and Charlie Brown and the football—it doesn’t get old.
So if not marketing, then what? Platform. Around the middle of this year there were a couple of announcements that provide insight. Both Oracle and Workday made joint announcements with Salesforce that their platforms would interoperate and I conclude from this that platform will be the main attraction.
It makes good sense to me because I think platform-level integration is rapidly replacing application level integration. When integration meant two apps sharing some data, integration at that level of granularity made perfect sense. But today integration means constructing end-to-end business process support often using multiple apps that share more than basic data. In fact what’s basic data for one pair of apps might only be process metadata for another pair of apps further down the line.
This need for process integration puts a great deal of pressure on integration schemes. Increasingly vendors are building apps on top of over-arching platforms that bake a great deal of process support that is native to them into the apps. For Salesforce and its Force.com platform, this means workflow, collaboration, social media support, marketing and analytics, and mobility support that enables developers to specify an app once and target generate a runtime for multiple devices. As I say all this gets baked in simply by building on the Force.com platform and apps built to the platform standards are pre-integrated adding a powerful business incentive.
Here are some impressive stats to back up my opinion. There are now more than 2,000 ISV developed apps in the AppExchange, most are built on top of Force.com and are pre-integrated by virtue of their adherence to Force.com standards. There are also more than 100,000 companies using Force.com to build apps and, according to a recent Forrester Wave Report, about 10,000 of them are major enterprises. Finally, there are three million apps already developed and in use on the Force.com platform.
Here’s a hypothetical example of what all this platform integration could mean in the real world. A subscription company using Salesforce SFA and Apttus CPQ (configure, price, quote) can complete a deal, send the order configuration back through Salesforce to process the order in Kenandy ERP, and it might bill for the subscription through Zuora’s subscription billing, payments, and finance product. If the company also sells products in the conventional manner, Zuora can also provide financial support for a subscription sub-ledger for a conventional ERP system.
That’s a simple example too; it goes on and on. It makes no mention of the myriad support options—ServiceMax for field service automation for instance—and market and sentiment analysis tools available on the platform also.
So I think platform will be a (the) major theme of Dreamforce. I could be wrong of course but the platform has come a long way in just a few years. Once the home of a thousand widgets, Force.com is now the redoubt of many robust apps that can run with or without the core CRM. To continue propelling Salesforce’s growth I think a very easy approach runs through getting more partners and ISVs involved in selling the service that undergirds their solutions. In a couple of weeks we’ll see what my two cents is really worth.
Twitter’s IPO
The headline in today’s New York Times is to the point and dripping with déjà vu—“Twitter’s Market Valuation Suggests Wall St. Sees Huge Growth Potential.“ For those who’ve been around a while or who just remember the Facebook implosion there’s a sense of here we go again in the news. You will recall that Facebook had a staggering IPO that raised billions and gave the company billions more in valuation but then the stock promptly tanked unable to generate revenues and profits commensurate with the valuation.
I am not so sanguine about Twitter’s chances. Could we be heading for a repeat with Twitter or possibly something worse? I am not a financial guy and I don’t dispense financial advice so don’t sue me, but the stock looks like a kite on a windy day. It will come back to earth when the wind eases or your mother calls you home for dinner.
Beyond Twitter there’s a bigger thing happening. Google and all of the job sites and Craig’s List-like sites erupted on the scene during the first Internet Era and gobbled up the job listings and display ads that had been the life blood of the print industry for many years. The result has been a nuclear winter in print and journalism to the point that we are seeing magazines and newspapers shutting down or going electronic to save costs and stay afloat.
If you go further back, TV’s emergence in the 1950’s reduced radio’s impact for similar reasons. The entertainment experience was better or at least different and with the audience went ad revenue so that some of the biggest stars of radio had to transition to TV with their shows intact. Early quiz shows and even Groucho were things you could close your eyes to and not miss anything. Before TV, radio was the mass medium everybody talked about around the water cooler and though the era was also one of the movie industry’s golden ages, movies didn’t sell ads so the movies are a different discussion.
What all of this shows is the transition of media going hand in hand with the migration of ad revenue. Today we’re witnessing a great migration and transition from broadcast media to social media but I wonder how long it will last. Print dominated for centuries, Radio, barely fifty years before collapsing into a semi-homogenized stew of music.
TV has had about a fifty-year run too and it is collapsing into reality-and-sitcom-mediocrity or fleeing into the margins of low budget high concept cable. TV’s collapse is partly its own making as a shrinking revenue pie is being shared by hundreds of cable channels where there had once been only three networks. TV was surprising in another way because the technology-cost of production curve has favored lower cost technologies that reached the same or greater sized audiences.
Bucking the trend TV shows are expensive to make, hence the latter day reliance on “reality” themes that employ average people, little script writing or directing, and much more editing and post-production, which is computer-cheap to do these days. TV was saved from the tyranny of the technology-cost of production curve by the cost per impression curve which was an artifact of a population boom.
But the technology-cost of production curve came roaring back with social media and the advertising it hopes to generate and in some cases already is generating. This explains the popularity of Google, and now Facebook and Twitter advertising models. Social beats everything on the cost per impression curve because the technology is ubiquitous and nearly free and the content is free and often compelling. Everyman is a producer and consumer and the advertisers need only stand back and regard the analytics.
However the thing nobody talks about which therefore worries me is audience or market saturation. We already routinely filter out TV ads in numerous ways, so how long before we do the same with content linked ads? Can’t be done? Ha! Get creative. Or consider this: the Internet stream is still free and analytics are getting better and better so how long before conventional advertising, regardless of form, is completely bypassed by vendors?
A vendor buys an ad because it needs to reach an audience that it can’t reach in any other way or as inexpensively. But in a big data utopia it’s possible to know enough about the entire market to simply segment it and take a direct approach. That’s why I am not so sanguine about the Twitter IPO. Sure, there’s time for the social vendors to make some big bucks but in the longer term I think I can already see their demise. It was written in print, and broadcast on radio, and then TV and Cable.
Social networks won’t go away just as print, radio, and TV have not, but it’s a matter of time before some enterprising people figure out how to do social marketing or something like it better, faster, and cheaper. Then the cycle will start anew.
