The Year of…the Platform?
It might not be possible to accurately forecast the major theme of this New Year. I have been through several iterations already and while each has its own claim to fame we won’t know until it’s all over what was most important. That’s no surprise.
So as long as I am still in the mood to throw out ideas, here’s another one — might this become the year of the platform or platform computing? There are some good reasons to consider platform’s primacy in our thinking. First, most vendors have some version of a platform that includes a hardware or infrastructure layer, middleware, and applications. Most vendors have been at it for a while now so product sets are reasonably well configured and are in working order — no slide ware here.
Platform makes sense from both the vendor and customer perspective. For vendors, platform re-builds the walled gardens that were prevalent back when compilers and databases drove things. For customers, platforms and their ecosystem partners, offer a reasonably robust environment for doing most of their business processing and this places less emphasis on the wall and more on the garden.
Nonetheless, no two platforms are alike. Oracle touts its hardware and middleware whenever it can while Microsoft continues to insist on a world reliant on one or another version of Windows, and Salesforce peddles a version of nirvana that includes social, mobile, and multitenancy. There’s something for every taste.
Less talked about is the benefit that smaller companies and ISVs can get from a platform and its ecosystem. Platforms reduce an ISV’s need to do everything alone from building product to marketing and selling it and even to integrating it with other kindred applications. There’s never been a better time to be an ISV, especially if you pick your partner carefully. Here are some questions that anyone should keep in mind when selecting the right partner.
- How relevant is the supplier in my chosen market? If you want to supply a front office or CRM application, how is the platform vendor oriented to that market and does it matter? Should you build your solution on a platform that’s oriented toward ERP for example? A lot depends on your application and how you plan to sell it so you have to think hard about this.
- At the same time, what is the vendor’s reputation for supporting ISV’s? The answers can be all over the map. Some vendors set up reseller programs and hold everyone at arms length so as not to ruffle any feathers. Other vendors only accept a limited number of partners but then really push for them. Still other vendors take on anyone without regard to their ability to play in the big leagues. A good ecosystem leader should have programs and services in place that help you prosper without taking responsibility for your success.
- How do you plan to go to market? Don’t fall into the trap of thinking you simply need great technology and that you’ll be able to tap into the vendor’s sales team. They have enough to do making quota and many see partners as added drag in bringing deals to closure. So develop a concrete and clear go to market strategy. When you get some help it will seem like a luxury.
- What about their program will off-load some of your overhead and is it a good fit? If you’re technical and plan to do all the development and maintenance, you’ll want to ensure the vendor has a robust technical platform but at the same time, you might not be the world’s next great marketer. What help does the vendor offer you? The answer might drive the decision.
- How does the venture capital community see your prospective partner? Ideally your partner will have some alumni who have hit the ball out of the park and their investors will be eager to do it all over again. The VC-OEM complex is very valuable and you should inspect this facet with care.
- How do you fit with the OEM’s other partners? If you plan to offer a solution for which there are already multiple similar products how are you going to stand out? Will it matter? Do you plan on going head to head with the others? Also, how does your proposed solution fit with other ecosystem solutions in larger business processes? For example, if you offer a configuration, pricing, and quotation solution, how do you fit with SFA products in the ecosystem?
- Lastly, there is the issue of integration. A good platform will have plenty of APIs and other ways to integrate your solution with other partners in the ecosystem and beyond. Ideally, if you build your solution on a platform you should be able to automatically share data and workflow metadata with those other apps.
Platforms make bringing your idea to market easier than ever. But you still have a responsibility to yourself to evaluate options because there are some very real differences. As my dad used to say, measure twice, cut once.
Almost Forgot
This month Beagle Research Group celebrates its tenth birthday. I founded the company on January 3, 2004 and have spent the last ten years doing whatever it is that I do. This isn’t my attempt to draw your attention (ok, maybe a little). But face facts, if you’re reading this you must be a rather hardcore CRM-er and so my real motive for writing about this anniversary at all is simply to say thanks to all of the people and vendors who’ve supported this little experiment in self-employment for over a decade now. To my mind there’s nothing finer than digging into a new business problem with a client and figuring it out.
There’s also a growing community of like-minded people out there starting with Paul Greenberg but also including pals like Brent Leary and Esteban Kolsky, and many others that I will not name to protect the innocent. I see these people at conferences and events; we trade ideas, write reviews of each other’s books, and sometimes collaborate on research together. They make the experience more rewarding and a bit less solitary than working alone can be sometimes.
Let me also shout out the people who work in analyst relations and PR who must have majored in wrangling cats. They make my job much easier by arranging access to key CRM decision-makers, important events, and frequent briefings.
Finally, thanks to all of the editors who seek out my ideas and post my writing. I don’t make a great deal of money from these relationships but the exposure gained by posting my analyses on many subjects helps to keep me in business.
Ok, back to work.
World Tour
Some intellectual wag once described newspapers as the first draft of history with good and obvious reason. Now I have come to the conclusion that Dreamforce is the first draft of Salesforce.com’s annual plan. It has been obvious for several years but as the company has grown it has invested increasing resources into both the initial event and in the follow on activities in which Chairman and CEO Marc Benioff barnstorms the planet bringing his annual message. Perhaps the more current image should be a rock group publishing an album then going on tour. Whatever.
The 2014 World Tour started this week in New York (as usual) amid an arctic vortex of hyper cold that seemed to have almost no effect on participation. New Yorkers, and we Easterners in general, are a hardy bunch. The lone casualty of the event was the host who was sucking on lozenges in his speech though he was otherwise unaffected.
There was a lot to get through in the daylong event. At the same time the company published its Spring ’14 release notes, a tome of more than 300 pages which I am sure they did not get all the way through in PowerPoint and I will not attempt here.
The big points, I think, are these. The company’s strategy is to foster an attitude of developing apps first for the small screen and then extrapolating out to the larger devices. This idea, while not new, supports the notion of mobility and the move from business conducted at the desktop to doing business anywhere, anytime. Salesforce has the luxury of pursuing this approach because it took care of things like social orientation and marketing earlier so that it is now free to go after this next phase of computing.
To be clear, the company believes the next phase of computing involves the man-machine interface and Benioff’s vision is of a customer experience with software support for the products, services, devices, and people involved in both sides of the relationship. It is a tall order and while there are products and large enterprise customers embracing the outlines, it is still partly aspirational and it will take a few years to bring this brave new vision to Main Street.
To make this possible, though, Salesforce made significant enhancements to its burgeoning platform including increasing its API set by an order of magnitude. There are ten times the number of APIs now than there were a year ago which makes it possible for all of the company’s components and customers’ developed apps to all run like one big, well-oiled machine.
At a finer grained level, the company appears to be trying to bring the business public along to a new business model, one that includes people and their devices but which also requires a different orientation by vendors. Nobody told me this and I am reporting what I see. The old model starts with concepts of selling more, increasing profits, and all of the virtues that CRM has been peddling for a long time. But the reality of the marketplace is different and it is increasingly that direction that the company appears to be steering towards.
Old CRM assumes a limitless marketplace of new opportunities to be captured as fast as possible so that the seller can move onto the next one — call it a linear model. Traditional attributes of CRM that promise faster deals sell well in this environment. However, the marketplace reality is one of limits, the number of potential customers in any market is vast but it is limited and increasingly vendors are reaching the limits of growth in new accounts. They are realizing instead that selling more means selling again as in selling a new version to an existing customer — call that the lifecycle model.
The lifecycle model’s reality is driving the inclusion of things like social media into the CRM suite and it is driving the intense interest in marketing by all vendors. It has also been, I think, a driving force in the sudden interest in customer service as evidenced by the recent acquisitions of Parature by Microsoft and KANA by Verint.
It should be obvious but let me say it, you can’t sell the new gizmo to a customer who is disgruntled nor will that customer be likely to say nice things about you in the market, thus the new emphasis on customers and nurturing and the company buying frenzy.
More subtlety this reality changes the fundamental relationship between vendor and customer, a change most easily seen in terminology. Throughout the presentations in New York, save one, the Salesforce presenters were on message referring to customers as customers and not as consumers. Using consumers references the linear business model steeped in the idea of limitless markets and supply chains working full tilt to deliver a steady stream of things that are lapped up just in time.
But the model and the focus that Salesforce is building products to support goes beyond the linear to the cyclical and it understands that customers — who are increasingly subscribers — let their demand ebb and flow. Vendors therefore must remain alert to the vagaries of customers’ demand by being vigilant and ready to nurture. Indeed the nurture cycle becomes the permanent condition in this model. That’s the real focus of embedding social media, analytics, and mobility.
This is not a done deal by any stretch and the company seemed to straddle its historic commitment to CRM while pointing out the future direction. It can and will only move as fast in the future direction as its customers appear ready to follow but it seems to be doing whatever it can to move the needle. In the one presentation where the speaker used consumer instead of customer, the message sounded slightly off to my ears. It was like the difference, if you speak Southern, of hearing “y’all” used in a plural context where everyone knows that “all y’all” is the proper syntax.
We aren’t at the point where the difference is glaring but I think 2014 might be the tipping point year for eliminating consumer from the discussion in favor of the word customer. All y’all should pay attention to that.
The Year Ahead
I’d like to say it’s going to be a good year in CRM and I firmly believe it, though I can’t offer a single all encompassing reason for my optimism though there are plenty of small things that begin to add up. In an earlier time the metaphor might have been “straws in the wind.” So what are they?
First, the economy is looking better but that’s faint praise. Things are not as bad as they were a few years ago, for instance the economy is adding in the neighborhood of 200,000 jobs monthly but I read an article the other day that said at this pace it will be another five years before we’re back to the employment level before the crash — in part because we need to absorb all the people who are entering the workforce. But as I like to say, black ink is better than red no matter how little there is.
More concretely, in our financialized economy, the markets are healthy and the broad CRM industry is doing its part to pump out new public companies. While all of them can’t be Salesforce caliber there have been many recent IPOs and the new year looks to have a few more teed up. That at least shows us that companies are evolving as they should and finding markets for their wares.
As usual, companies that are expanding the margin of our markets are the ones to keep an eye on. While I have seen my share of emerging CRM companies as an analyst and a judge in CRM Idol, the ones that are most interesting are those at the margins while the companies that try to reinvent the wheel don’t usually capture the imagination. Companies that I am watching for the year ahead include Xactly, InsideView, TreeHouse Interactive, Scout Analytics, Full Circle CRM, Lattice-Engines, HubSpot, Apttus, and Zuora. My good friend Paul Greenberg will publish a list of a bazillion companies he likes in his watch list. This is not intended to be all inclusive, just a smattering of companies I am well acquainted with.
All of these companies are expanding the margin of the market, expanding our horizons, and while only a few will have an IPO this year, the rest are worth keeping tabs on for sure. IPO candidates in my humble opinion include Xactly, Zuora, Apttus, and InsideView. Interestingly, none of these companies is what you would call a social company, which shows that there are more margins than just social. However, each is squarely positioned as a SaaS value proposition and that says the cloud is a live and well.
Xactly is reinventing compensation management, not just for sales where it got started but in every department of the enterprise. Zuora is making the subscription model mainstream by making accounting and finance in this new world easy. Apttus is a double or triple threat offering configuration, pricing, and quotation technology but they also have invented a way to be into and using Microsoft Office applications in conjunction with SaaS products like Salesforce. The result is a new kind of uber app. Lastly InsideView started as a sales intelligence tool but is expanding its footprint to provide sales and marketing teams with the data and insights they need to pursue opportunities.
I am warming up to TreeHouse because they have an interesting product line including partner relationship management (PRM) and marketing automation. PRM is one of those things that has come and gone more than once over the last twenty years, always with different players. I think this time might be significant as increasing numbers of vendors seek quality partner channels as a means of streamlining their operating costs.
If there’s a theme for the last group — Scout Analytics, Full Circle CRM, Lattice-Engines, HubSpot — I’d say it’s analytics. You might not think of HubSpot as an analytics company, and I don’t think they are one. But analytics is a part off what they do when they provide inbound marketing solutions. Inbound, done right, can be a big boon to business.
The other three offer mainstream analysis, if not analytics. Full Circle focuses on marketing management which I have written about many times because I think the idea of understanding the data and the metadata of marketing programs can do much to make you look smart if you’re a marketer. Lattice loves to crunch data about marketing and the sales process and they do it well. I don’t know any sales manager who doesn’t want better knowledge about all of the processes his or her team is involved in and Lattice is one way to get it.
Lastly, Scout has more mainstream analytics but for subscription companies and they make a good partner for Zuora. Subscriptions generate mountains of customer use data that can be used to predict everything dear to a subscription company’s balance sheet — I mean heart. With Scout’s analysis of use data, companies can spot revenue opportunities as well as danger signs like potential churn. Any way you slice it, this makes knowledge and that translates into market power.
So that’s some of what I am looking at as we start the year. I think it will be a year of base hits with an occasional sprinkling of home runs. Many, though not all, of the companies in this article have raised significant cash over the last year indicating both that the VC markets believe in their stories. But this also means clocks are ticking, investors want to see some returns and IPOs or private sales are on deck. Either way this makes for an entertaining start to the year.
The Year of the Customer?
Recent announcements from Verint and Microsoft that they would acquire KANA and Parature respectively have a lot in common, and it isn’t customer service exactly, though that’s what it looks like to a casual observer.
These acquisitions seem counter-intuitive at this stage of an economic cycle — we’re in an upswing when the activity typically concerns sales and marketing, not conventional customer service. We got a good dose of that last year when the industry made a Bat-turn toward marketing. Huge sums were invested in marketing whether it was for IPOs like Marketo and Facebook, or straight acquisitions for companies like Eloqua.
You might have expected the trend to run for a while before customer service re-gained momentum. But this is not likely a harbinger of an economic collapse (I hope). What’s happening is the realization and acceptance that all things related to getting touchy-feely with the customer is/are the new sales. There are only so many customers out there and while their numbers are huge, they are finite and businesses everywhere are realizing that the route to growth is selling the next iteration of a product to a happy customer and not necessarily finding new customers.
In the research I conducted for my new book, which will be out later this year, it’s clear that there is a nasty and largely hidden conflict between vendors and their customers. You only need to do a few searches or visit customer sentiment sites to discover that the really big companies with hundreds of thousands or even millions of customers have relationship issues with their customers. That’s putting it mildly. There isn’t a company I’ve seen that doesn’t have detractors, lots of them too and things like Net Promoter Scores only put lipstick on some porkers.
This has all become hyper important because the customer lifecycle that is in the ascent involves two steps in its latter stages that many vendors are completely (and sadly) incapable of dealing with — bonding and advocacy. That means, the customer falls in love with a vendor and tells others, preferably in social media, about the vendor. When this doesn’t happen or when it happens in reverse as is happening today, vendors feel the wrath of an indifferent market; there’s nothing worse than being ignored.
The acquisitions seem aimed to shore up CRM approaches that are pre-social and heavily oriented toward 1990 s era selling and if that’s all they do, somebody over spent. The messages I get from the companies involved make it seem like the acquisitions will help vendors in the last mile of recommending the products to offer and strategies to use in active sales processes and they will. But their real benefit will come further upstream in developing the bonds with customers that lead to trust and make the next offer more plausible as well as fine tuning it.
I am also noticing a change in the lexicon with this. It has been a while already since I heard a vendor refer to a customer as a consumer and I hope this represents a solid trend. Using customer implies a relationship of equals in a process where as consumers conveys a certain condescension for the fools you shovel products at. In my humble whatever, I think someday soon calling a customer a consumer will sound as odd and insulting as calling a woman a girl.
Maybe this will be the year of the customer in CRM. What an irony.
