April, 2015

  • April 30, 2015
  • Silicon Valley's first innovation lab

    Silicon Valley’s first innovation lab

    After a short and not terribly informative piece on Bloomberg saying that Salesforce had engaged with bankers to potentially evaluate takeover offers, the usual activities ensued. The company’s stock went for a small ride and pundits and prognosticators all began speculating about whom a logical suitor could be and even what the company would be worth on the block. This was not the first time.

    I was one of the speculators placing a metaphorical bet on IBM as the suitor followed by Oracle, HP, and Microsoft in no order. They could all use the shine that acquiring this gem would provide. But let me be clear—I don’t believe Salesforce would be acquired in its current state.

    The reason is simple—even if a buyer paid a premium on the company’s $50 billion market capitalization it would not be enough because Salesforce’s greatest asset is its future and you can’t put an accurate price on that. So far in its 15 plus year history the company has innovated and helped create markets in cloud computing, social media, CRM, modern platforms, wearable devices, web and mobile computing, and more. Salesforce might go by the ticker symbol CRM but its business is front office business innovation.

    All of this is exactly why Salesforce is such an attractive target and precisely why no one will buy them. Large companies, which are the only ones that can afford to be in the bidding, are not hotbeds of innovation. They hang back waiting for markets to prove themselves before swooping in to offer products and services for new niches. Cloud computing is a great example. There’s a famous YouTube video of Larry Ellison at the Churchill Club ridiculing cloud computing as a fad and so much hot air. This was before Larry got religion (and products). Less flamboyant stories can be told of IBM, HP, Microsoft, and SAP—they all waited to enter the market watching Salesforce to ensure it was safe.

    Now, of course, they all talk about cloud computing as if they invented it or at least as if they perfected it. Owning Salesforce would give one of their stories great credibility and then you could see a multiplier effect going out to the other innovative areas the company is involved in. But it could also signal the end of a good thing.

    I don’t see how you can bring Salesforce into one of those shops and expect it to thrive; the cultures are too different. Salesforce is laid back and takes prudent risks entering new markets as they are forming so as to acquire a first mover advantage. The others? Not so much.

    Aside from Apple, I don’t see other companies innovating the way Salesforce does to invent the future. That’s why Salesforce (and Apple) have such bright futures and why buying either company would be detrimental to the tech sector and the economy in general. It would slow or even curtail innovation.

    Some might say that if Salesforce ceased to be the innovation engine that it is, that some other emerging companies would have the chance to take its place, that the free market would do its thing and all would be well. I agree with that but hasten to add that it has taken Salesforce 15 years to get to this point and other companies might be able to evolve quicker to fit into one or more of Salesforce’s niches, but it would take time and there’s no guarantee that those other companies would follow the same trajectory.

    To make an analogy, if Thomas Edison got kicked in the head by a mule before he invented the incandescent lamp and the modern power grid, we’d likely still have them today along with sound recording and movies and many other things. But it’s hard to see that these inventions would have been as early and if that’s true, what would the last century have been like?

    This is all speculation but so is trying to figure out who might be able to afford to buy the company. I’d be surprised if enough shareholders would be prepared to sell and keep in mind that insiders still own a big block. They’re also rich already so it’s hard to see the benefit of selling now rather than letting things evolve as Salesforce’s other endeavors begin to show profits.

     

    Published: 9 years ago


    Salesforce CEO, Marc Benioff

    Salesforce CEO, Marc Benioff

    Today Bloomberg was atwitter with the rumor that Salesforce is in talks with bankers about possible tender offers from some big companies in the industry. Aside from wondering if there’s any validity to the speculation does it or would it make any sense?

    For starters, Salesforce has a market cap north of $50 billion and buyouts command a premium so we’re looking for someone with deep pockets. Regardless of pockets, Oracle, Microsoft, and SAP have their own cloud projects and while any of them could afford the deal, would they contemplate throwing away their other investments? Ordinarily I’d dismiss a sunk-cost argument as illogical but we’re talking about a lot of money.

    IBM could do the deal too and they need a future. Right now they’re buying back stock to keep their share price up and because they don’t have much else to spend their war chest on. Salesforce would be good for soaking up some of their cash. Ditto the others on the list.

    Salesforce has a commanding lead in business software because while others were too timid to go after things like cloud, social, mobile, and IoT, Salesforce jumped in and made markets. Their future is full of all the new markets they’re going after and it ain’t small.

    From that perspective, I wonder if the Justice Department would want to weigh in on an acquisition. Despite there being other vendors in the space, Salesforce occupies a unique place as the innovator. Can we really expect one of the possible suitors to be as aggressive with Salesforce and new markets as Benioff and company? Me thinks not.

    That said though nothing is forever and Salesforce has had a great run. Murphy’s Law would suggest that someone could come in and mess it up.

     

    Published: 9 years ago


    Screen-Shot-2015-04-07-at-11.36.16-AMMarketing continues to heat up as the next big thing in CRM. It’s so big in fact that I can see it splintering in multiple ways to accommodate all the permutations that are suddenly possible thanks to big data, analytics, and a determination to get beyond using marketing technology as a glorified accounting system designed to limit a business’s “losses” due to marketing.

    You can’t win by limiting your losses

    It’s an old truism that you can’t win any game by simply playing defense and waiting for the other guy to make a mistake; you have to play the game. But for a long time (now comfortably in the past) that was the attitude of the C-suite when it came to marketing. You really couldn’t blame them. The rest of the company spoke a language of opportunities, deals, and revenue while marketers talked about booth space, impressions, and collateral. These are all essential to getting deals but they are so far removed from the revenue discussion that they could make a CFO’s eyes glaze over and that’s a neat trick.

    Modern marketing solved the problem by adopting a new vocabulary and by translating soft ideas like impressions into hard numbers involving metrics. Today marketers can tell us how many touches it takes to make a deal, the cost per touch and the yields of various programs, so good for them.

    Horses for courses

    Marketing has become so specialized that there are now many different apps that do specific and limited things in the marketing cascade and it takes some discipline to get around the whole enchilada. At recent events by Oracle and Salesforce you could see a standard bifurcation between B2B and B2C marketing. Both companies have specific products for each and different rationales that accept the more group oriented thinking of a B2B purchase and the relatively more impulsive B2C variety.

    Marketo, whose user Summit happened in San Francisco last week, takes a B2H or business to human approach. I can’t say which is best because I am a big believer in horses for courses or the idea that some horses just like to run in the mud while others prefer a firm course on a sunny day. But Marketo backs up its B2H philosophy with plenty of emphasis on the imaginative aspects of marketing. It’s messaging last week was all about inspiring creative people to do their best work, which I found refreshing.

    That messaging comes with a bit of risk though since it appeals more to senior marketers with budgets rather than CFOs or CIOs many of whom still control marketing’s spending. Still, Marketo’s message is getting through if the size of the crowd is any indication. Summit took up all of Moscone West and puts the company in the odd position of needing more space next year but not as much as could be found around the corner in Moscone North or South. Did someone say Vegas? Yup. Next year Summit will move to the desert.

    What’s next in marketing

    Over lunch with investors we talked about the future of marketing in general and Marketo as well. My lunch mate suggested that Marketo must next develop a full CRM suite, which I disagree with and here’s why. We heard the same kind of predictions when Siebel and Salesforce became successful—many predicted they’d build ERP despite denials by Tom Siebel and Marc Benioff respectively. Neither built ERP because neither needed to and today I don’t think it’s wise for any current marketing company to build full CRM.

    For marketing vendors, CRM has come and gone and they’ve adapted by creating great integrations. The real opportunity, as it was for Siebel and Salesforce, is down stream. Siebel got acquired before it could execute on a downstream plan but Salesforce is a great example of a company that could and did fully articulate a downstream vision.

    CRM had significant opportunities lurking in then un-built functionality that simply needed articulation. Marketing was one such articulation but so have been social and mobile niches, which are still being built out. It took a blue ocean strategy (named after an important book with that title) to fully articulate the CRM vision but it was a better strategy than going after a crowded and already built out market like ERP.

    So, marketing today looks like the same kind of opportunity. Without the distractions of a full CRM product set you could walk Marketo’s show floor and see an impressive array of ecosystem partners with products like analytics (6Sense and Infer are two of my picks), data solutions (Ring Lead, Dun & Bradstreet), consulting (Pedowitz Group), and sales oriented solutions (LinkedIn, and many others) that extend Marketo’s reach and footprint without competing directly with it.

    Over time these ecosystem solutions will produce a critical mass of capability that will make marketing the new platform just in time to give SFA a run for its money as the top dog in CRM. I think marketing is a favorite to overtake SFA and it wouldn’t surprise me if at some point sales reports to marketing. The current state of tension between the two cannot be allowed to continue forever. Too much is being lost because of poor handoffs and incompatible objectives and we need a centralized authority over both. Efforts to create chief revenue officers move in the right direction but fail to include marketing as an equal.

    The positive vibe I’ve seen in all the marketing shows contrasts with the more forced march approach in selling, which may have peaked in its ability to drive greater results on its own. Amalgamating marketing and sales seems logical but we don’t need to start from scratch by rebuilding CRM to do it.

     

    Published: 9 years ago


    foreign-currencyI wonder if a watch could change the world. The introduction of Apple Watch could be such a game changer but not in the way you might expect. A straight line analysis of the Watch’s importance might tell us to expect greater efficiencies in business with all the reminders it can deliver but let’s face it, reminders come at us all the time on our computers and phones.

    Another device doing the same thing is not going to change the world by emulating older technology. That is the way of technology introductions though. First they do what older tools did, just better, faster, and cheaper but soon enough we all realize that old processes are not what the new device is for. Just as information is the addition of data to other data and information to produce some new insight, an accumulation of the newest technologies might offer a glimpse into the uncharted future.

    I am thinking of the combination of the Watch and Apple Pay or any other payment service that uses the hardware for instant payments. That’s not enough though, I am also thinking about the European continent and specifically the self-inflicted economic malaise brought on by the euro and austerity budgets. This is complicated and I will try to be brief.

    The euro is a currency without a nation, which has caused all sorts of problems. The greatest is that no user of the euro can do much to adjust naturally occurring differences from nation to nation such as GDP, inflation, productivity, and spending. This has placed a straight jacket on the member states of the European Union with some doing well, like Germany, while others suffer.

    Southern European countries like Italy, Spain, Portugal, and especially Greece are having to run severely austere budgets that are crippling their economies and hurting a lot of people. For sure there is no common agreement on the root causes of the problem but my lying eyes and Nobel laureate Paul Krugman both tell me that the European experiment is going at least sideways because we can’t figure out the euro.

    So what’s the Watch’s connection?

    Simply this. The common currency was established to create a common trading area across Europe to facilitate exchange and trade and bring the nations closer together. It has too, though but at the price of austerity, which might be too much to bear.

    But I suggest that a common currency to speed transactions by individuals and businesses is no longer needed. As the Euro has grown up, technology to effect transactions in any currency has matured to the point that today, you can pay in one currency such as the euro but still keep your wealth in another currency.

    We see this all the time. You use your credit cards in any country and the back end computing apparatus does the conversions for your monthly statement. The Watch and Apple Pay can do the same thing with the result that you could pay your international debts in euros but still maintain a domestic currency.

    Doing this would enable Eurozone countries to have their own currencies again and to let them float in the marketplace. Inflation is a big scary thing for many European countries like Germany and they’d want to hold it down. But countries like Greece, Italy, Spain and others could significantly benefit from having the ability to manage their own currencies again.

    While it’s true that countries would be exposed to currency risk from other countries’ inflation, it would be limited to new purchases; old debts in euros would be unaffected and debtor nations would be on the hook to pay back the euros they borrowed by buying euros with their less valuable sovereign currencies. Thus a more natural control apparatus emerges.

    It sounds complicated but the point is that we have the ability to reintroduce some of the benefits of national currencies while still preserving the euro and its trading area. Skeptics will say that paying for gum and a newspaper with something like Apple Pay isn’t going to solve the problem of business-to-business commerce but I disagree. Currency transformations already happen in those larger deals.

    For instance, a French company buying British goods still has to convert euros to British Pounds at some point. That mechanism is alive and well. Introducing personal technology and services that enable individuals to manage their spending and conversions would provide the necessary stimulus to get many economies moving again. Of course the rub is that they’d need more hardware and software than many people currently have. But as a wise woman once told me, that would be a high-class problem.

     

    Published: 9 years ago


    Sage logoI have been expecting this announcement for a long time but it still came as a surprise when Keith Block, vice chairman Salesforce, made an off the cuff remark in Boston at the Salesforce World Tour event last week. In February Sage and Salesforce announced that they’d work together with Sage moving some of its undisclosed ERP applications to the Salesforce Cloud. But the word didn’t seem to spread and it remained off my radar for nearly two months.

    No matter. Sage has been a mainstay of the SMB market for business apps for a long time. With global reach and customers that push the envelope for what an SMB is, the company enjoyed great success in prior decades. But lately, the company’s legacy has been a drag. The apps have needed refreshing for a while with some of them still operating on flat file system back-ends rather than relational databases.

    The major culprit, from my perspective, has always been the Sage resellers. The partners have built great businesses on delivering services for customizing and training for Sage products and were reluctant to change their cash cow businesses. A succession of weak CEOs didn’t help much either. Several thought they could ignore the problem of modernization or cajole partners into adapting with the backfiring result that the forward thinkers abandoned ship leaving the more conservative partners with increasing influence.

    This is my analysis and you should look for confirmation but my point is that we have arrived at a time when Sage is getting off the dime by getting onto the Salesforce1 Platform and with it joining the ecosystem. This is great news but it also has its own issues for competitiveness.

    Although Salesforce CEO and co-founder Marc Benioff long ago disavowed any interest in building an ERP product, the availability of the platform has been more than inducement enough to get others to do so. Companies like FinancialForce, Intact, and Kenandy and others all have products on the AppExchange that will compete in one way or another with anything that Sage brings to the party. Also, there’s no shortage of non-Salesforce oriented ERP in the cloud happy to do battle with NetSuite being the 800-pound gorilla.

    But Sage still has a big user community around the world, products that reach smaller users than those that other ERP/accounting vendors target, not to mention a partner base that can still deliver so it will be Sage’s relationships, I think, that either make or break this move. Also, being able to show up with the world’s number one CRM in tow and a slew of modern business apps to boot, should make a powerful combination. Just ask the other ERP players.

    It is still unclear which Sage products will be converted or which ones first. I hope that the company will see this as an opportunity to move everything so that for the first time, the product lines that grew by acquisition, will have a common platform.

    This is a big test both for Salesforce and for Sage. For Salesforce it’s a great way to grow share and gain influence in more parts of the world. For Sage, it represents a chance at redemption and a new start as a more integrated software company with deep expertise in the back office and multiple verticals such as real estate.

    In my mind this doesn’t leave much room for a Sage CRM product though. They had three CRM solutions at one point including ACT! And SalesLogix that they sold off. Sage is now left with a cloud product that by all accounts is good but Sage has always been a company by and for accountants and front office automation was never something the company put its back into. I can name other vendors that were in the same situation but who for multiple reasons became CRM oriented enough to talk the talk, so can you.

    Sage Summit happens this summer and it should offer some very interesting keynotes. Will a Salesforce executive attend to welcome the company to the cloud? To be continued.

    Published: 9 years ago