For some time now, it’s been my impression of the CRM market that all, or at least most, of the good ideas have been taken. It’s been a long time since we saw a new systemic solution that approaches front office business. It’s even been a long time since we saw a major innovation at the department level.
CRM itself was a systemic innovation in the last decade of the last century. Cloud-based CRM was the innovation of the new millennium and since then, marketing automation would count as a departmental innovation. You can also look at analytics as a systemic innovation because although it straddles departments, it has become a department itself.
This is not a bad thing, just the opposite. As CRM has been built-out it has opened new market niches which has maximized the number of solutions and, more importantly, it has made all of them affordable to just about any business. As I’ve said before, cloud computing is the commoditization of IT. It has made information processing both simple for a lay person to use and so affordable that all those who want it can have it.
CRM is far from done as an approach to business and as an economic driver, but we must acknowledge we’re at a turning point. Behind the scenes the major vendors, among whom are Salesforce, Oracle, and Microsoft, have gone a long way toward consolidating the industry by platform and from here that will be the dividing line.
So far this spring I’ve attended two conferences that illustrate my point, SuiteWorld and Financial Force’s analyst day. Each company has financials and ERP solutions that address the needs of small and medium and in some cases larger businesses. Each is deployed on a specific platform: NetSuite on its own which it announced is moving aggressively toward the Oracle Cloud Infrastructure, and Salesforce whose solution encompasses development platform and infrastructure.
While it’s quite possible that many customers will continue using hybrid solutions such as NetSuite for back office operations and Salesforce in the front office, it’s already easy to see that situation morphing. Oracle has for many years used the logic of running a suite of related software over an integrated solution made up of best of breed apps. It is continuing this logical progression with NetSuite both on its own and as a member of the Oracle family.
Salesforce is using a derivative of this logic too. While Salesforce is and will likely always be a front office company, its powerful platform and AppExchange gives partners the ability to build completely compatible applications that help customers achieve suite status. After all, that’s the logic of having a platform to start with. A platform supplies a consistent set of programming tools, interfaces, objects, data structures and more—standards—so that apps built on it can interoperate. It’s the same logic as building a hardware bus so that manufacturers can build to common standards. It’s popular because it works.
So, the play as I see it for any software companies not named Oracle, Salesforce or a small group of others, is to pick a platform, become intimately involved with it, and pursue the surrounding ecosystem as your market.
Some vendors have begun working with two or more platforms and that’s fine if they have the resources, but I see that as a short-term gambit designed to see which platform vendor is the best partner.
All of this is vitally important. As I mentioned last time, the meme making the rounds is that it’s easier to start than grow a company, especially in tech. I can see this and deciding on a platform and an ecosystem to work in is one of those things that can help reduce overhead and enable a business to better focus on the things that really matter for growth, like markets and customers.
My two bits
CRM has been a wild ride for two decades and the ride continues. At this stage it’s important not to get sucked in to the latest discussions of digital disruption, IoT, analytics or anything else that looks bright and shiny. They’re all important as secondary considerations but I think the most important thing, and in some ways the least glamorous, to concentrate on is what vendor and which platform you want to work with over the next decade and beyond.
Markets converge. Fifteen years ago, few vendors had complete CRM suites and now they all do. Today we’re looking at far more complex and sophisticated front office applications as vendors take on vertical market apps. These apps combine back office data, front office processes, intelligence and machine learning and highly specialized subsystems for everything from manufacturing to healthcare. In this new environment who has time for platform incompatibilities?
FinancialForce continues to impress having just announced a 60 percent jump in subscription revenues year over year. The largest cloud based ERP vendor on the Salesforce platform also just announced hiring industry veteran Joe Fuca as president of worldwide field operations. Finally, it signed its 1,000th customer in the last quarter. Let’s unpack this.
The great thing about being a subscription company is renewals. Once you have a customer and assuming you do everything right, they should renew, which translates into having a much easier time reaching revenue goals. For subscription companies to grow, they need to attract more business but they don’t have to start the year at zero, there’s revenue in contracts or in the bank that hasn’t been officially counted yet so the revenue challenge is in how to generate the incremental number and not, as conventional companies do, everything starting at zero.
But take nothing away from FinancialForce. They still need to make customers happy and keep them engaged. In a way, the sales effort is never over, it’s shouldered by the whole company that’s a key lesson every subscription company needs to embrace. So good for them with both the revenue growth and with landing their 1,000th customer.
These facts put into high relief, the maturation and broad acceptability of software as a service and cloud computing in general. It’s here, it works, there’s abundant proof. It only took 15 years to get here! With subscriptions in general and subscription ERP specifically performing well we can expect a continued rolling conversion of many on-premise ERP systems. Unlike the Manhattan project at the end of the last century when every company had to convert to four digit dates, this conversion is happening in a statelier manner. If you sell conventional ERP on-premise, you could be lulled into believing everything is fine but if you allow yourself that indulgence your frog will likely boil.
So long story short, FinancialForce’s news is on track. The combination of Fuca’s hiring and the company’s momentum should mean we can expect the 2000th customer announcement much faster than the first thousand.
Last point, FinancialForce executives tell me they’re dropping the dot com from their name. Not that long ago it seemed like every company was a dot com with a cocktail napkin business plan. Most didn’t last and the ones with real plans and discipline had much better outcomes. They’re just about all gone at this point and the successful ones like FinancialForce are scrapping the dot com relic of that boom era in favor of a cleaner and leaner aspect. This reminds me of when Apple dropped computer from its name. FinancialForce will have its growing pains but it will be a fun company to watch as cloud computing keeps getting bigger.