One More Time, with Feeling!
Oracle announced another software company purchase today. Its purchase of Responsys makes a few founders, VC’s, and assorted vested employees very happy for the holidays. Good for them. Really, I mean it. Good for anyone who has a liquidity event like this, regardless of time of year.
Now what?
Over the last decade Oracle has demonstrated its ability to imitate the business model of Computer Associates, which made an art of buying software companies and milking them for their support revenue. It did quite well in the process though buying old companies is a bit like buying a used car. There might be some good miles left in the old dog but you also have to embrace the risk of future unexpected breakdowns.
But that was Oracle-as-CA 1.0, when it bought Siebel, PeopleSoft, and all the other client-server applications companies. Responsys is far from an old company and if you look at the companies Oracle has bought recently, they are far from over the hill. They are emerging companies in an emerging market with plenty of tread left on the tires, to continue the metaphor.
This has led many people to issue warnings to other vendors in the space like Salesforce. For instance, Raghu Raghavan, founder and CEO of Act-On, and a co-founder of Responsys, has a post addressing the purchase that says in part, “Salesforce now has a formidable competitor for the Marketing Cloud that they have so expensively acquired. On the B2C side, Oracle/Responsys is (and always has been) clearly superior to Salesforce/Exact Target, and on the B2B side, Oracle/Eloqua easily trumps Salesforce/Pardot. Whoops!”
Well maybe. The thing about predictions, which I always put into a sports metaphor, is that while a team might look pretty awesome on paper, you still have to play the games. Nowhere was this clearer than with this year’s Red Sox. The team crashed and burned in September 2012 and no one expected much out of them this year but they went on to win the whole enchilada. Ditto the Yankees. Riddled with injuries and a certain albatross named A-Rod, they didn’t have a great year (for them) but they sure were entertaining in part because they kept finding a way to compete and win. I see Salesforce more like the Yankees. They’ve had some stellar seasons and they always find a way to win.
One thing Raghavan’s quote obviously doesn’t take into account is that the world has already moved beyond marketing automation as the shiny new object. It’s still way, way important but as recently as Dreamforce, Salesforce indicated that marketing is already in the rearview mirror just as surely as the current year is. That’s important too because, Salesforce has been calling the tune in CRM for many years now. First it was multitenancy and SaaS, then cloud, then social, then marketing, and now platform and becoming a customer company. This last advance is more than a slogan and it is the heart of why Oracle’s acquisition signals overreach and not shrewdness.
The fundamental assumption of the approach used by Oracle, and you might as well say Microsoft and SAP too, is that the market has not changed and will not change much. That vision is expressed in the vendor-consumer model and the product sale vs. subscription consumption model, take your pick. The reality is that vendor-consumer works well in new markets with new categories because it depends on land rush customer mentality. Seen many new categories lately? Hmmm?
Also, the subscription model is advancing on multiple fronts turning all kinds of products into services. More importantly, subscriptions are teaching consumers to be customers in a very different model where the customer forms half of a virtuous cycle of dependency that is antithetical to the vendor-consumer linear model. It’s a subscription culture today and culture is pervasive so regardless of whether you operate a subscription model or not, your customers are approaching you from that mind set. Approaching them from your old mindset might be hazardous to your business.
If Salesforce’s CEO and ringmaster, Marc Benioff, is right, then becoming a customer company is going to take more than the resources of a single company, it will require the efforts of a village, a community of loosely associated partners with solutions based on a common platform.
In the matchup between Oracle-as-CA 2.0 and Salesforce, I like Salesforce’s chances. I’ve said it before but it bears repeating, these guys have a Blue Ocean Strategy that isn’t predicated exclusively on which companies they buy and send into the breach.
They’re envisioning a future of business that they iterate towards and with every Dreamforce they get a little closer. But because the competition is stuck in an old model, Salesforce’s moves don’t entirely make sense and their boss can sometimes look like a simple huckster.
Who’s right? Which team will win it last game of the season? You have to put them on the field and let them play. So, game on, 2014, over and 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.
Enter Ahrendts
The Forbes website posted a very short story about Angela Ahrendts, exiting as the CEO of Burberry to head up Apple’s retail operations. If you thought Apple had broken a lot of ground in technology retailing already, hang on.
You might remember Ahrendts as the pretty, stylish, and all business-gravelly voiced guest on stage with Marc Benioff during recent Dreamforce extravaganzas. Her face was plastered on a wall of the Moscone Center too. Ahrendts took on Salesforce and its social approaches to all things related to customers and transformed Burberry stores around the world to the point that the iconic fashion brand also became the hip tech retailer inserting technology and information into the customer experience.
The result has been a shopping experience that puts the customer into a mindset that envisions the experience of ownership and that’s a long way from simply having a great shopping experience. Hey, if you’re shopping at Burberry’s you are going to spoil yourself so the shopping part of the experience hardly needs work.
So, Ahrendts will presumably bring her avant guard retailing savvy to Apple and perhaps help transform it further from purveyor of consumer technology to one that helps customers make a statement about themselves through their technology choices. Maybe she’ll even upgrade the geeky T-shirts the staff wear.
That’s a smart move for Apple. Given the recent activity in wearable technology such as the watch (for which Apple owns the trademark on iWatch) fashion might be the next tech battleground. The only question in my mind is what role Salesforce might play in this configuration.
Oracle OpenWorld Preview
They closed down Howard Street near the Moscone Center in San Francisco last night and it will remain closed for most of the week as Oracle brings its annual OpenWorld conference to the city. On the street the company is erecting a small village complete with some towering signs announcing all things Oracle.
It might look like vanity but as a practical matter Howard St. runs through the middle of the Moscone Center dividing it into two buildings connected by a tunnel. Under normal operating conditions the tunnel is adequate but with Oracle bringing 60,000 of its BFFs to the conference, the Moscone’s owners discovered long ago that they needed more bandwidth between their buildings, hence the village.
This does not come cheap, shutting down part of a major street in the city costs upwards of $250,000 I have heard but that’s a small price for Oracle and the restaurants and hotels pick up significant trade so it’s all good. Howard is not even the only street getting a temporary makeover. Near the Hilton on O’Farrell they’ve covered over part of one side street for a Java sub-conference too.
All of these preparations are standard fare for Oracle as well as for Salesforce which will re-do some of this in November when the Benioff company brings its annual camp meeting to town. All in all, I am wondering why Moscone and Howard St. and environs has never been awarded the moniker of the “burned over district” to borrow from the region in upstate New York that saw the rise of repeated religious revivals in the early 19th century.
Revival might be a good theme to meditate on as OpenWorld gets going. According to an article in today’s New York Times, Oracle will use the conference to go “all in” (Who edited that story?) on cloud computing. The poor Times didn’t even catch its own irony in using the famous phrase that Steve Ballmer, soon to be CEO emeritus of Microsoft, used to launch his company toward the computing heavens a good decade after Salesforce.com had already established its permanent space station way up there.
No matter.
Over the last several years Oracle has used this event to position itself versus all things cloud at first denying its importance and gradually, as it developed products for the brave new world, to embrace it. Look this year for Oracle to try to own it in its own way.
That way will mean encouraging a gradual shift from on-premise computing to the cloud which will provide customers with a logical transition which any enterprise will need what with building and buying new systems and writing down the older stuff. It will also give the Ellison company a similar opportunity to transition its revenues from one and done deals to subscriptions that provide a steady trickle of revenue over time. For both it will provide the runway they need to begin to interact as vendor and subscriber rather than pusher and consumer. That’s not a criticism, it’s just a good metaphor.
I have not been briefed on any specifics of front office announcements, in part because I have been traveling a lot, so I don’t have insight into specifics that might be announced. A wild guess is that analytics and mobile solutions will be top of mind. Oracle’s in-memory database and humongous hardware for the purpose, Exadata, make this a sure bet. Social was last year so I think it will be secondary, though still very important in the scheme of things.
No matter what, I am already in San Francisco having attended a very well received Zuora user meeting, Subscribed, this week. I think there are things Oracle could learn from Zuora though it is hard to see how they could ever buy the company given its strong roots in the Salesforce platform and ecosystem. Still some big announcements are expected from the event.
Conspicuously missing is any reference to Marc Benioff and Salesforce.com. Having made news earlier in the summer that the two companies would be more cooperative in the future, and with Benioff having invited Ellison to Dreamforce, it is odd that Ellison has not reciprocated. Odder still is that Benioff had historically filled a speaking slot at OpenWorld until last year.
Ellison’s keynote kicks things off for the Oracle faithful on Sunday night opposite a football game. I will be reporting from the scene this week.
Microsoft Buys Nokia, Gets Elop Back
With a nod and a wink Microsoft announced it was buying most of Nokia today getting its own mobile phone platform to further its ambitions in that space. It also got ex-Microsoft executive, Stephen Elop back into the fold. Elop had left Microsoft to head up Nokia and when current CEO Steven Ballmer announced recently that he would retire, Elop was among the people cited as possible successors. At the time though, Elop’s tenure at Nokia looked to be a significant barrier. It’s amazing how many hurdles $7.2 billion can clear away.
So the question immediately becomes, does Elop want the job? Does the board want Elop or was the acquisition just more business as usual? Well, with or without Elop as the future Microsoft CEO, the deal makes sense. Microsoft’s Windows Mobile has not seen great adoption despite its really attractive and intuitive interface. Google’s Android leads the parade (it’s hard to argue with free) and Apple’s iOS is the defacto standard in the industry which makes it difficult for Microsoft to play catch-up, a game that’s not second nature to it to begin with.
So what’s the net?
Assume Elop is the future face of Microsoft keynotes. A blind horse knows the future of computing is in wireless, handheld devices and the cloud. But too much has been made in recent years of the device and not much consideration has been given to the huge changes ahead in the data center to make the magic in the device really work.
The device is the new 3270, smarter for sure and much smaller, but it’s a relatively dumb terminal at the end of an extensive network of satellites, storage, and brute force processing. Given this, success in the cloud will be governed by more than whose OS is in your hand. It will be about the back end. Larry Ellison understands this and his team is working overtime to build the plumbing for the new edifice. And there are loads of vendors like the Benioff Company that are staking a lot on the front office and the device while doing a fair bit in the back of the house too.
But Salesforce may be to the cloud what Apple was for a long time to the desktop. Elegant, forward thinking, entrepreneurial — pick a half dozen more nice adjectives here. This doesn’t mean Salesforce is destined to have a measly five percent share of the market, Benioff is too smart for that. But it does mean there is still an open niche in the cloud for a Microsoft-like competitor that understands the front and the back end of the transaction and that wears the mantle of trust so assiduously cultivated by IBM in the business world. It might as well be Microsoft.
So, given all that, I look at the Elop acquisition, er, I mean Nokia actually, and I think this could work. Elop’s understanding of Microsoft and his recent baptism in mobile might be a good combo in the new Microsoft chief.
There are other issues well beyond those, however. The new CEO at Microsoft will need to be a consensus maker and someone who can break down the fiefdoms that long time Microsoft executives have constructed. The company has to get lean and to check its multiple egos before it is ready to take on the changed market — from somewhere that’s not the bottom but certainly is not the top either. Also, it’s no guarantee that you can take the once great phone maker, Nokia, and the one time titan of the desktop and get anything more than mush when you put them together. Elop, or whoever gets the nod will need to be a leader of Bill Clinton proportions.
