What exactly is Cloud Computing? The question just doesn’t go away and as the year starts SugarCRM has just released a white paper — “The Sugar Open Cloud” —offering its definition and its argument for why its vision is superior. I am not sure about either.
Full disclosure: I like SugarCRM and have a lot of respect for what they are trying to do. The idea of open-source CRM is very appealing and can be very successful — like open-source operating systems (think Linux), open encyclopedias (like Wikipedia) and open source web servers like Apache. All of these open source products are very good in their own right and highly sought after. Let me give just one example of open-source success — Apache has 52% of the market for web server software.
In his new book, “Drive: The Surprising Truth About What Motivates Us,” Daniel Pink says that one of the key values to those who contribute to open-source technology is the sense of accomplishment that goes with participating in a project whose goal is the greater good, to solving a really tough problem. To this idea, I would also add customers leveraging products like Salesforce’s Service Cloud to provide accurate support aid to their fellows using social media, search, email and other modern technologies. They get no pay other than to stamp their name on a solution and that’s a surprisingly effective motivator.
The only issue I have with open source is the business model and how you make money with it. Well, how do you make money with it? It’s a question that has vexed me and probably a lot of B-school kids, professors and practitioners for a long time. The psychic rewards are good but they just aren’t enough.
It is with this frame of mind that I read the Sugar white paper. The paper says that we have entered the third phase of the evolution of whatever you wish to call SaaS. First there was the ASP model that crashed and burned for economic reasons — you couldn’t get enough client-server users onto a server to be cost effective. Then there was multi-tenant SaaS, which has had our attention for the first decade of the century. Now, according to Sugar, there’s “multi-instance distributed SaaS”.
According to the paper the multi-instance version is superior for many of the reasons we heard when multi-instance went by the name of “hybrid” such as you could deploy it in an on-demand way (single or multi-tenant) or in a traditional premise-based configuration. What’s different with multi-instance is the freedom to pick your infrastructure provider, and here the waters get murky.
Sugar claims its solution is superior because it enables users to choose which servers the applications run on such as Microsoft Azure or Amazon EC2. This is superior to vendor lock-in according to the paper which makes the incredible and self-contradicting claim, “In the first phases of SaaS (ASP and multi-tenant SaaS models) customers had no options around who hosted their business applications as the software vendor was the only service provider.”
Really? Two pages earlier the paper displays a table of data titled “The ASP Model” the bottom row lists Key Providers as Corio and USi. I was a CRM analyst (still am) when those companies roamed the earth and neither one was a software house. The big dog in that period was Siebel and they didn’t care who hosted their product.
Sugar makes the point that Cloud Computing is becoming an indeterminate term, meaning that the definition is set in Jell-o. That’s fair. The Cloud needs to have three parts — infrastructure as a service (IaaS), software (SaaS) and, now, a development platform (PaaS). Companies that want to offer infrastructure or software only or to cobble together best of breed Clouds are free to do so and I am sure you can get a lot of value that way, though you will need to invest more effort and cash to accomplish your own integration. But don’t worry, there’s an (Sugar Cloud Console) app. for that.
What concerns me about all this is what manages to not be said. Cloud Computing is largely an economic issue and a necessity at that. It’s about a great deal more than lowering the cost of computing so that a larger audience in emerging markets can access technology. And it is certainly about more than where data is stored. From what I have seen about hackers stealing sensitive data, corporate IT departments are the last place I feel comfortable storing my personal information.
Cloud Computing is not about the tired arguments about where data is stored or the “freedom” to move it from one vendor to another — that base has been covered. The Cloud is about ubiquity of computing access and that’s an economic driver. Historically, when computing power has become abundant and cheap innovations such as relational databases, the graphical user interface and the Internet have swallowed it up.
The new ubiquity spawned by Cloud Computing — all three components — is spawning new, fast and, above all, mobile business processes, not just applications. This may not seem like much but in a world that is growing increasingly “Hot, Flat, and Crowded” as Thomas Friedman would say, this is the bedrock of sustainability. In this context arguments about where data is stored and vendor lock-in seem trivial.
There is a difference between a customer experience and a service product and it is worth noting the distinction. We seem to obsess about the former and almost ignore the latter and that’s too bad because I think there is money to be made in the difference.
The distinction reminds me of the big discussion that went on a few decades ago over quality. At the time imports from around the world, but principally Japan and Europe, were cleaning our clocks because they were perceived to be of higher quality than domestic brands.
In typical American fashion we mounted a comeback strategy to bring our quality up to world standards and for a while smart business discussions were all about quality. It reminds me of the last few years and the relentless emphasis we have placed on the customer experience. Let me say that emphasizing anything as fundamental as this can’t be bad, in moderation, but there’s more to consider.
My interest in the customer experience was provoked by a long series of calls between my wife and our mortgage company, a typical big bank. The problem was that the bank had failed to pay our property taxes though it was clearly their responsibility because they collect the money each month and hold it in escrow. The problem got worse as we waded into it. Not only did the bank not pay our tax bill but also they had inadvertently paid someone else’s with our money.
My wife had a series of calls with bank representatives who work in the call center. Each bank agent promised to fix the problem, each tried to reassure us and each was pleasant and professional told my wife to have a nice day at the end of the call. My wife ended each call thinking that the agents were “nice” and that the problem had been solved. Unfortunately, there was no follow up and here I will let you imagine the rest. After four “nice” conversations the problem is still there.
Now if this was a manufacturing problem I would say that the product is broken and that the bank has a quality problem. The typical response when quality became an important value in manufacturing was to improve final inspections and it worked. Certainly a lot of inferior product was kept from the customer but the manufacturer also ended up with a lot of products that needed fixing. Clearly something else had to be done and that led to the idea of designing quality in rather than inspecting for it.
I think our focus on customer experience is a lot like focusing on quality. Just as you can’t separate quality from the whole manufacturing process you can’t separate the customer experience from offering a high quality service product. My wife is more tolerant than I am and left each encounter (so far) encouraged that the situation would be rectified.
Intense focus on the customer experience has left us with a hollowed out service product, at least in this case but I will extrapolate here. It appears to me that the bank might be incenting people to be nice but also to pass the ball and not care too much if the ball falls on the ground and dribbles away.
This experience vividly shows me and I hope others that there are two parts to customer service — the customer experience for sure, but also delivering a quality service that goes well beyond being nice or professional or any other qualifier that to attribute to the people involved except one. You still have to get the job done, and CRM needs to ensure that aspect as much as it addresses the experience.
Market analysis firm IDC figures the market for service and support software will reach $4.2 billion before the end of the first Obama administration. That’s reason enough for software vendors to want to be all over the market like a cheap suit, like white on rice, like a junkyard dog. But as the market moves from on premise to on-demand you can expect the revenue potential to go way down. That’s the beauty of on-demand computing — score one for the customer.
But whether it’s a billion or four, it’s still real money and enough to motivate lots of people’s behaviors so it was no surprise that both Salesforce.com and Oracle shored up their service and support offerings this week. What was fascinating to me is that despite all the secrecy surrounding each company’s announcement, which I witnessed first hand, the two CRM titans managed to make similar announcements within a day of each other.
I attribute the coincidence to the simple logic of the situation. Each company has built out very good offerings in sales and marketing and each is making its attempts in social media so it was time that each gave some attention to service and support.
To be rigorously fair, each company has devoted significant time and attention to the subject and each made announcements about intention and direction earlier this year or very late last year so it is no surprise that they decided to redeem their pledges and September is a great time to do just that. So what’s what and what different? Well…
Oracle announced integration between Oracle CRM On Demand and InQuira’s Web self-service applications. The integration lets customers go seamlessly from self-service to live agent-assisted service, according to the press release. This is a big deal because it enables customers to escalate their service requests and provide the service agent with a warm case full of basic information about the customer and the problem. This completes a trip started with integration between Inquira and Oracle’s on-premise service and support systems.
Meanwhile on Wednesday, Salesforce redeemed a promise it made when it announced the acquisition of InStranet. Salesforce said that it has successfully ported the technology to its cloud platform so that its customers can now use all of the cloud platform functionality such as user interface development and customization tools as well as workflow and approvals and its knowledge publishing capability.
To me Oracle’s announcement is more about service – and I think it’s important to tease apart service and support here. Service being an issue that a customer has that can only be dealt with by the vendor and support falling into the category of how to use/fix a product. Each is important and this in no way elevates one over the other, it’s just my observation.
Ok, the Oracle scheme takes a customer with a service issue from a self-service modality to an interaction with a live agent while preserving the thread of the interaction. No more, “Can you give me your account number again?” and hopefully faster more accurate service.
The Salesforce announcement says that customers with how to use/fix issues can access the wisdom of peer users. This is a good thing and a little brave on the part of companies who use it because it says a lot about the faith they place in their customers and ultimately the confidence they have in their own processes and procedures. Using social media like Facebook, the Salesforce solution helps companies to gather input from customers and organize it through stack ranking and other crowd sourcing techniques to bubble up answers to customer problems.
Vendors like the Salesforce solution because it has a very low cost profile and customers should like it because it gives them the answers they need much faster. Vendors should like the Oracle approach for very similar reasons.
Frankly it’s nice to see such heavy investment in customer service and support and the resulting benefits. I think these announcements say a lot about the relative importance of keeping existing customers happy in today’s economy vs. the never-ending quest for new customers. It speaks to the growing maturity of the CRM market and the growing clout that customers have. Good for us.
On another note, Oracle is running a string of successes in CRM. They’ve made some good numbers recently and they are generating some interesting products. It has been a few years since Salesforce has been challenged to the degree that Oracle now challenges it. Nonetheless, in two consecutive weeks with big announcements (last week was contact manager) Salesforce is the common denominator. Simply put these guys are investing heavily in R&D and they have the goods to show for it and I would give the edge for raw sex-appeal to Salesforce.
But two weeks is just a snapshot. Oracle Open World is coming in October, and Dreamforce is in November. Expect some fireworks.
Back in 2004 I wrote a white paper titled “The New Garage” which forecasted the evolution of Cloud Computing. The ideas in the paper were derived from basic economics. I thought that the cost of software, maintenance and service were so out of line that it was only a matter of time before the paradigm shifted and a new one — Cloud Computing — took its place. I am not responsible for the name and I don’t even think I offered one.
The concept of a new garage is that innovation had gotten away from innovators and entrepreneurs typically spent a lot of time raising money rather than building products. To raise money, these people often had to give away a significant chunk of their idea which resulted in a disincentive, in my mind. Better, I thought, if entrepreneurs could go back to the garage to build whatever new gizmo they could.
To do all that entrepreneurs would need vastly less expensive infrastructures from servers and real estate to systems that ran their businesses. Software and services delivered from the Cloud would enable that, I thought, and the result would be increased innovation not only here but around the world. It looks like it’s working.
One of the less well known parts of The New Garage is the idea that when the need for SI services goes down as it inevitably has done, services companies would need new ways to deploy their people. My thought was that this would mean more hands on help running the business using the software available on the Web rather than so much work installing operating systems, databases and all the rest.
With that in mind I was happy to see a press release this week from Market2Lead a Cloud-based marketing automation company based in Santa Clara, CA. The company launched marketing operations services, an offering that will among other things run campaigns for newsletters, manage invitations and registrations for seminars and events and the like.
To be sure this is not the high level strategy work, it’s more grunt work execution but it comes at a very good time. Corporate marketing departments may be somewhat depleted by the recession and before hiring people they may elect to take on a service provider like Market2Lead in an arrangement that provides a known service for a quantified cost.
I expect the idea will catch on and with it comes a down side. Companies might be a bit more reluctant to hire marketing people in the future even in a good economy and perhaps that means more people working for themselves as consultants, often in situations that may not provide benefits like health insurance or vacations. Of course that also means an opportunity for entrepreneurs who might see a chance to build an agency. That’s where we get into unknown unknowns — the consequences you can’t predict which are the ultimate drivers of economic activity.
Good luck with all of that.