Posts Tagged ‘Salesforce’

Get a Horse

Posted: December 12, 2013 in CRM
Tags: , , , , ,

ImageI was literally gobsmacked and I had to re-read the post several times.  Gartner analyst Robert Desisto—who I don’t know at all—wrote a short post last week saying that today’s SaaS vendors, “will resist to the move to ‘pay as you go’ because it will have a very big impact on their business model predictability” and become “legacy dinosaurs” as his headline said.

But, but, but! I stammered to myself.  How can that be?  I have been researching and writing about this space for fourteen years.  I was the first analyst to cover Salesforce and a bunch of other early entrants, and one of the first people to have a practice dedicated to SaaS.  They all had pay as you go models, at least back then.  Did I miss something?

One of the real challenges of running a subscription business, and this includes SaaS companies as well as the Dollar Shave Club, ZipCar, and all the other companies that jumped on the bandwagon, is that you have very different revenue flows that must be accounted for.  Companies like Zuora have built big businesses and attracted hundreds of millions of dollars in venture funding to build billing, payment, finance and accounting systems that cater to this massive industry.  Now along comes Gartner with the clear implication that the pay as you go model is not in fact alive and well?  I didn’t get it.  Still don’t.

As a sanity check I contacted Tien Tzuo, CEO of Zuora, a subscription billing, payments and finance provider.  In his previous life Tzuo was CMO of Salesforce and at one point had the job of inventing a billing system for Salesforce that operated the way subscriptions run.  Here are some points from Tien.

  • Just because some SaaS companies do three-year contracts that doesn’t make them enterprise software dinosaurs.  Every successful SaaS company realizes that keeping churn low is a core part of the model, and every successful SaaS company realizes that long term contracts do not equate to low churn—the only thing that truly reduces churn is to have strong adoption and customer success.  That’s why SaaS vendors invest in customer success while on premise software companies do not
  • Many SaaS companies actually don’t offer three-year contracts.  At Zuora, we see lots of companies with month-to-month models.  CDNs, cloud companies, API companies, point-of-sale systems—these industries all skew towards month-to-month.  Radian6 also had a month-to-month model.  The post also says doing three-year contracts makes SaaS companies vulnerable to other startups who choose to offer month-to-month … but there’s nothing to stop the SaaS vendor from changing their billing policy whenever they want. (my note: provided they have a product like Zuora that makes this easy to do the billing and accounting).
  • Customers don’t have to accept three-year contracts.  It’s naive to say that it’s the SaaS vendor that forces it on them—many companies actually prefer long term contracts once they are committed to the SaaS vendor, as this gets them the best price as well as longer-term price protection.  This can be a win-win scenario.
  • This does create havoc on revenue recognition.  Monthly billing makes billing messy but revenue recognition easier.  Annual or multi-year billing makes billing easy but revenue recognition very hard.  There’s no free lunch.

It was such an odd thing to read.  It reminds me of some other chestnuts like, “If god wanted man to fly he would have given us wings,” or “We will never need telephones in England because we have such an abundant supply of messenger boys,” or “Someday every town will have a computer,” or my favorite, “640 KB is all the memory your computer will ever need.”  These are all such Luddite comments you just knew upon hearing them that they won’t stand the test of time.  Heck, this one didn’t survive a day before people started scratching their heads. 

Perhaps the last word on this comes from the most authoritative source—the marketplace.  On December 10, BrainSell, a Boston-based technology company announced it would offer an integrated solution of Intuit’s QuickBooks with bi-directional synch to Salesforce.  According to the press release, “What’s really great is that customers can get a Salesforce subscription from BrainSell with no contract, and the ability to pay month to month!”

http://www.itbusinessnet.com/article/Salesforcecom-Month-to-Month-Subscriptions-Now-Available-through-BrainSell-Boston-Based-Technology-Firm-2963070

 

 

Oracle Buys Eloqua

Posted: December 20, 2012 in CRM
Tags: , ,

That’s it?  Only $810.8 million?  Not even a whole billion?  I would have thought Eloqua would command a higher price, especially with a market cap in the $4-500 million range.  Lots of people are saying nice things about the deal but I ain’t buying it just yet.

They IPO’d in August at $11.50 per share and raised $90+ million and in the last year had revenues of about $85 million.  So from this perspective the strike price of $23.50 makes some sense.  However, marketing automation is heating up and it’s a good place to hang out a shingle these days so I would have expected more of a premium.

This leaves Marketo and a bunch of smaller companies in the space and curiously opens up the market quite a bit.  Eloqua is a good Salesforce partner but you have to wonder how much longer that will last given that Larry doesn’t even invite Marc to OpenWorld any more.

I think Eloqua’s Salesforce business goes in the tank immediately meaning that Oracle might have over paid given Eloqua’s revenue is somewhat dependent on good relations between the two companies’ sales forces.  So look for Marketo to get a lot more interest from Salesforce (as if they don’t have enough?).

This acquisition clears the field for Salesforce and I could easily see Marc buying Marketo just to make sure he has something in the corral.  If that doesn’t happen, then every SAP and IBM in the world will want Marketo and soon.  Marketo would be a good fit for Salesforce, better than Eloqua in some respects, given the social direction of the Marketing Cloud.

At this stage Oracle is amassing an impressive string of software solutions that it is attempting to forge into some kind of suite.  But maybe not.  This reminds me that the last couple of years worth of Oracle acquisitions in the front office market resemble another spate of acquisitions the company embarked on in 2004-2005.  It ended up buying such names as PeopleSoft and Siebel and each of those companies had bought up many other companies like J.D. Edwards and Upshot to name just two.   I think of that as the Great Consolidation.  Lately things are looking similar.

Seven or eight years ago Oracle was chided for becoming the new Computer Associates and it was widely expected to cease all development and enhancement of the products and just collect the maintenance revenue stream.  That didn’t happen, the company pledged to keep the brands going and today they are.  It also promised to build powerful software that would link everything together in one big, happy mass.  The project was supposed to take 3 years but it reached double that before Oracle threw up its hands and declared victory in a parallel universe.

Fusion is still evolving and the separate applications are, well, separate.  But the focus now seems to be on bringing together RightNow, Siebel, ATG, Eloqua, and the other recently acquired systems under the Fusion umbrella.  Maybe it will work, I dunno.

For now, Oracle may have stolen first base buying Eloqua.  The marketing market is still hot, Salesforce is committed to big time social marketing, Marketo might be a target purchase for them but that’s not certain.  Sooner or later Oracle needs to put some stories together about how its new applications all work together otherwise the CA rumors will start all over.


You might be tempted to consider social marketing just another idea in an endless stream of things dreamed up by the software industry (and pundits like me!) to generate more business.  Well, you’d be right about some of that but I’d like to argue that the idea is more than hype and is, in fact, in synch with the times.

Conceptually, marketing and sales have not changed for a very long time.  It’s all about finding someone with a problem to solve and budget for the purpose.  It doesn’t matter if the situation is business to business or business to an end consumer, it’s all about finding a need and filling it.  I can agree with that but at the same time I know that if this is as far as you take it you’ll starve.

Look at what’s going on in the marketplace.

Things are getting incrementally better nearly four years after the bottom fell out of the economy but CFOs still watch budgets like hawks.  Demand is still squishy everywhere and the gross domestic product of the U.S. — and the whole planet for that matter — hasn’t grown in five years.

Moreover, new product category introduction is low, and this is very important.  When a category is new everyone, at least in theory, needs it and sales people do great business.  Marketers’ jobs are streamlined too.  They need to focus on building brands and communicating the basic features and benefits of what they have.  Products are also relatively simple.  They typically come in one flavor and function as general purpose cousins of what they will eventually become as the market grows and differentiation sets in.

If you take an objective look at most of the marketplace today that’s about where we are.  Established markets are already crammed with products that may not be the latest and greatest but they work and customers need compelling reasons for buying what’s newest.

You might say, what about products like the iPhone or the iPad?  Every time Apple comes out with a new version the market goes wild and buys the new product even though the old ones still do their jobs.  That’s all true but the phone industry has a different cadence run by the planned obsolescence embedded in the service contract.

After two years, you get a new phone and a new contract.  If you don’t you stay on your old plan paying the same rate.  Effectively, you pay the same rate to use a new phone or to stay with the old one, so it’s no surprise that iPhones sell briskly and no surprise that the company sells an increasing record number of new phones with each introduction.  Every two years there are more “old” iPhones than ever and more people ready to change.  But this is a digression.

In today’s markets, where there is no forced obsolescence, we need other reasons to buy new and there are smaller numbers of new buyers entering the markets for the first time.  Smart vendors have realized that this means taking a different approach to sales and marketing.  Rather than the selling-to-anyone strategy of early markets, smart vendors today recognize that they have to model who their customers are as well as model the sales cycle.  For many this means using social tools but it also requires a different set of techniques with the tools themselves.

In one approach, marketers simply substitute outbound social media for things like email and direct mail.  This gets them into social but not very effectively since their technique is still decidedly old school but with new technology.  In my research, more vendors find themselves right here at a transition point somewhere between conventional marketing and social marketing.

The other approach, which I think is closer to “real” social marketing, marketers make great efforts to capture customer data so that they can filter it for telltale signs of interest.  The same approach also works for service organizations seeking signs of customer dissatisfaction.  That’s all good but it is also limited.  If a vendor relies on keyword filtering or hashtags it will miss many instances that need a little nuance in the filtering.

The nuance takes a lot of forms.  I once did a small project in which I searched for sentiment.  My criteria were simple.  In repeated Google searches I looked for two word combinations, a company name and the word ‘sucks’.  Now, I will admit this was crude but it was also extremely effective.  Suck may be the generic summation and judgment in our society for all that is wrong in any situation.  My searches always came up with hits — hundreds of thousands of them.

So, the experiment proved a point but it also proved to be a rather blunt instrument.  The search approach did nothing for a legitimate cry for help like Company + Product + Problem unless I made an explicit search.  But you can see where this is going.  If you had a way to do all kinds of searches at once you could turn up signs of people interested in a solution or a product category, people looking for help and people upset with something related to your business and much more.

To get there you need analytics and not just one kind but several.  Humans can determine the difference between someone with a real problem and somebody just being sarcastic.  Computers need to do multiple scans of the data using different software tuned to each to arrive at the same conclusion more or less.

In social marketing today there is a proliferation of software packages that help marketers to get close to understanding customers and markets in multiple dimensions.  There are tools for emotion analysis, natural language processing (NLP), predictive and trending analytics, affinity and segmentation and influence.

Last week at Cloudforce, New York, salesforce.com announced the Social Insights Partner Ecosystem, a partnership between third party analytics suppliers and its Radian6 division.  The announcement’s significance is that Radian6 users can now process their social data through as many filters as make sense for their situations.  This was an important introduction because it addresses the way we market (and sell) today and it’s different from the way it was several years ago.

Now let’s go back to our original discussion.  In a marketplace as constrained as today’s it’s critical for vendors to understand at a very fine grained level what customers are thinking.  Are the installed customers generally happy?  What are their simmering issues?  Might we want to proactively address those issues before we introduce the new version of the product that won’t be successful unless we have significant buy-in from the base?

What about the possibility of gaining net new customers from the competition?  How satisfied are our competitors’ customers?  What openings might there be?  How can we exploit them?

Don’t for get brand new customers.  What ideas are trending in the market that relate to our business?  Finally, are there new product ideas lurking in the data stream?

To me answering these questions is the key to successful social marketing because they are crucial to success in business today.  Salesforce’s announcement suggests to me that they continue searching out Blue Ocean opportunities — markets and niches that have either not been penetrated at all or that have only been lightly touched.  I expect that our dependence on social marketing will increase and that the approaches now being proposed through announcements like this will be critical to future success.


At Cloudforce, New York last Friday, we heard a smattering of things we also got at Dreamforce.  That was part of the plan because Salesforce bills its regional events as a chance to bring Dreamforce to the customer.  As proof I heard that Marc Benioff and crew are off to Japan this week to do it all again and there are various other trips like Europe that they also do.  That’s quite a travel schedule.

One of the less well-known parts of both events is the press conference held immediately after the keynote for members of the technology and financial analyst communities as well as the technology press.  It’s also the most intimate part of the whole conference, the time when we get one on one with Marc and the atmosphere more resembles a graduate seminar than anything else.

Of course, Benioff has to maintain a certain reserve given his status as the head of a publicly traded company.  Questions about future earnings are not encouraged and they can’t really be answered but people still like to ask.  It’s fun to watch the non-answers.

Two ideas struck my radar in the press conference — one, the idea that Windows is “over” but also, a more mature attitude by Benioff toward competition.  First Windows.

This wasn’t the first time I have heard Marc say that Windows is over but this time it had the ring of truth rather than being more like the hyperbole of a competitor.  Benioff thinks Windows is no longer necessary and when you say Windows you might also include OSX or any other operating system whose purpose is to provide a general purpose operating environment for applications.

You know this in your bones by now.  With applications and data becoming increasingly cloud resident, a much smaller and more secure operating system that supports a browser and not much more is about all you need.  Google Chrome is a kind of new era OS and the Chromebook a new device that leverages these ideas.  So the stage is apparently being set and Benioff thinks that Windows 8 will be an important inflection point in the history of the operating system.

You can already see problems with Windows revenues especially in the latest numbers the company reported last week.  The Windows Division’s revenue was down 33% year over year and the company’s net income was off 22% with revenue down eight points over the prior year.

Microsoft has become another example of what Clay Christensen described in The Innovator’s Dilemma of a company wedded to its golden goose unable to pivot to the new revenue generator in part because the new generator would force revenues down.  New things cost less and in the ever-ongoing product commoditization cycle less means less and you have to make it up on volume — that’s the cloud.

So, devices are what’s driving the market — the handheld a.k.a. phone and tablet, which come in multiple sizes for different applications.  Devices use stripped down operating systems like iOS, Android and Windows Mobile (and Chrome) and users spend much more time in a vendor’s site or app than ever making the general purpose OS less and less necessary.

Microsoft has more or less seen the same thing coming, which explains at least on one level, the company’s rush to the cloud.  You might even say similar things for Oracle and its latest release 12c.  It goes without saying that the UI and the data center are different places and operating systems will continue to be as important in the data center as the air you breathe, at least for now.  But Oracle is showing that it understands the new reality though it isn’t necessarily playing at the same level as Salesforce, which brings us to my second point.

I also saw a more mature attitude about competition than I could see just a few years ago and I think that was at least in part because Benioff knows he’s winning.  He made the comment that the competition used to say they had a better approach than Salesforce, as in Larry Ellison’s words that cloud computing was all vapor.  Competitors used to say that cloud or SaaS was dangerous to your business, that it was not secure or any of a hundred other things designed to spread FUD (fear, uncertainty and doubt).  But that’s ancient history.

Now, Benioff noted, all the competition is saying, “They have what Salesforce has”, which is typically a variant of cloud computing designed to provide infrastructure as a service (IaaS) and thus keep customers locked in.  Nevertheless, in other words, the dynamic has shifted and the competition has learned that is has to play a new game.

Finally, one more impression.  It seems that Salesforce has now articulated three distinct ways of socializing the enterprise and they’ve done a good job of showing how their products apply in each case.  The three cases involve socializing the vendor-customer interface, socializing the employer-employee interface and socializing the man-machine interface.

The vendor-customer interface is the oldest challenge and the place where Salesforce and CRM got started.  The employer-employee interface is a bit newer and it is still being fleshed out but Salesforce and its partner ecosystem with companies like Jobscience, are populating the market with credible solutions.  The man machine interface is both the newest and possibly the thing most dreamed about for the longest time.

Much of the advancement is coming by way of Chatter, which is advancing on all fronts.  With its suite of socialized business solutions Salesforce is now able to approach its customers on multiple levels.  Socializing the enterprise will be a slow process and there is no telling which socializing approach will first appeal to customers.  For example, GE and Coke are apparently starting with the man-machine interface but it will be logical to expect success to breed success.  Success in one area like the man machine interface will give a company confidence to try something in another area like the vendor-customer interface and in so doing a company will socialize itself.  Most importantly, and this should really be in ALL capital letters, the economy will be socialized as well.

I am fond of studying macroeconomics and looking at long-term economic cycles called K-waves after the Russian economist Kondratiev.  From Wikipedia we get this on the Kondratiev cycle:

Kondratiev’s economic cycle theory held that there were long cycles of about fifty years. In the beginning of the cycle economies produce high cost capital goods and infrastructure investments creating new employment and income and a demand for consumer goods. However, after a few decades the expected return on investment falls below the interest rate and people refuse to invest, even as overcapacity in capital goods gives rise to massive layoffs, reducing the demand for consumer goods. Unemployment and a long economic crisis ensue as economies contract.

If that sounds at all familiar you understand my interest.  So my big question as I continue to watch and report on the evolution of the Social Economy is simply to try and understand if social is the new K-wave or at least part of it.  It’s not the only contender and things like raw materials and resource management and alternative energy development seem to be more germane as fundamental K-wave candidates.  But social will at least be an important substrate for the next K-wave linking together people and, increasingly, devices and that’s why I go to events and try to listen carefully at press conferences.


I honestly thought I was going to have to wait longer to hear anyone from Oracle talk about seriously focusing the company’s hardware and software lines on the Cloud.  True, they’ve been saying cloud-like things for a couple of years but the pronouncements were features and functions that added something to the cloud discussion without going “all in” as some others in the industry have said.  But last night CEO Larry Ellison did what I’d forecasted last week in a way that is uniquely Oracle but nevertheless a good, defensible (and somewhat debatable) position.

Here’s what I said last week in my forecast,

It seems this family of hardware (Exa-hardware) is built and optimized for very big jobs involving terabytes of data and gazillions of users.  That’s exactly the kind of stuff the growing cloud computing movement might gobble up.  Currently data centers are masses of commodity servers in racks running feverishly but without a layer of sophisticated management that would optimize their utilization and reduce costs…

And,

The next logical step would be to endorse the Exa-hardware as a sustainability tool for a power hungry planet.  I’m looking for some sustainability messaging from Oracle and it could even happen…

And,

Sustainability is not alien to ideas like mobility, cloud, social and analytics, you can’t separate them.  I think if Oracle wants to maintain its leadership position with many of the largest companies in the world, it needs to put a stake in the ground and become a thought leader here…

So last night, Ellison took aim at the cloud and announced Oracle 12c a database for the cloud that supports multitenancy, if you want it, and he announced the Oracle Private Cloud running on Exa-hardware and delivered as a tight bundle to customers who want to get to the cloud, simplify their lives, and not fret about managing all that stuff.  He also announced Exadata 3, which can hold up to 26 TB of data – “All your databases.” The cool thing about Exadata 3 is that the 26 TB is all silicone based memory, it doesn’t count the spindles that are rapidly becoming secondary in a high performance enterprise environment.

He made some traditional arguments about the cloud being more efficient and economic and at some points came close to claiming credit for inventing it.  Truth is he did have a hand in inventing modern cloud computing as a very early investor in Salesforce and NetSuite and as the Zen master for Benioff and Nelson.  But his skin in the game had been relatively minimal.

Now, while there is plenty to like from a sustainability perspective, it should be acknowledged that what got announced is a bunch of half steps designed to get enterprise data centers into the cloud without much disruption.  I think this means that Oracle, for the moment (which will be about a decade) will not be aggressively selling the virtualization that comes with multitenancy and as a result there will still be a great deal of wasted power and underutilization in some cloud data centers.

But in a decade we could see a switch flip and everyone will get religion about power consumption and pollution and the switch to virtualization will happen very quickly because some very large companies will have been prepositioned for the change.

Actually a decade might be a long time and 6 or 7 years might be more like it simply because Oracle has many competitors going to the cloud, most notably Salesforce, and that will accelerate the timetable.

The next step, which has to come this week, will be for the company to shift gears to software – cloud based software – that makes the cloud even more attractive.  Look for this to happen especially in the CX Summit or whatever they are calling it, on Wednesday.  That will be the day that Anthony Lye talks a lot about how the companies he bought last year – like RightNow and ATG and others – are making the Oracle cloud a serious competitor.

Achilles’ heel is still Fusion.  What’s up with Fusion?

Finally, many, if not most of the big cloud computing companies are running fault tolerant data centers using conventional racks of blade servers and disks.  That’s giving us 3 to 4 9’s of reliability but I think before we can hope to get to the 7 to 9 9’s that will make cloud truly ubiquitous and universal utility grade computing we’re going to need some re-architecting.  Regardless of what you might think of Oracle’s approach to the cloud, the hardware is an appealing approach for that alone.

Oracle likes to message that 20 out of 20 of the top banks/pharmaceutical companies/whatever, use Oracle and it wouldn’t surprise me if they’re going for 10 of the 10 biggest cloud companies.  That will take some work and given the multiple levels of competitiveness and lack of love between the players, that might take even more than a decade to happen.


Dreamforce hasn’t even happened yet and I am already wishing it was about double the time it’s set up for.  I’m arriving in San Francisco on Monday, two days before Marc Benioff’s keynote kicks everything off and I am already running late.

As has become customary, many Salesforce partners are holding user group meetings just before Dreamforce to keep their customers’ expenses down and have maximum impact on them.  This is an unintended by-product and benefit of being in the ecosystem.  To that end I’m attending Subscribed, the user meeting of Zuora, which would be worth the trip all on its own.

I have no more time for meetings and some of those on the calendar are looking dicey.  There are too many parties, dinners and coffees to possibly make all of them and there is a full calendar of really good keynotes and other meetings for analysts to attend sponsored by Salesforce.  Give me two more days!

Salesforce will be briefing me under NDA about the big news that will come out of the show so I can’t help you with anything semi-official other than to direct you to a piece by Chris Kanaracus in NetworkWorld.

According to statements made by CEO Marc Benioff, at TechCrunch on Tuesday, we can look for important announcements about a new service that’s like Dropbox, an identity management system, more information on the company’s integration with Workday and the company’s new Marketing Cloud.

That sounds like a full plate but curiously it doesn’t seem like enough.  Back in 2004, Benioff had a George W. Bush impersonator walk on stage and disrupt the proceedings with a short speech to “this Fundraiser,  Thanks Marc.”  But that was because Dreamforce was held on election day if you can believe it.

This year I don’t look for the same kind of stunts because this year there is too much information to get across.  Consider my schedule for Thursday — Sales Cloud Keynote, Work.com Keynote, Service Cloud Keynote, Chatter Keynote, Platform Keynote, Data.com Keynote, Marketing Keynote, SMB Keynote.  And that’s just the MORNING!  You don’t have a keynote without making an announcement of some kind so that’s why I think Benioff’s remarks at TechCrunch were useful but they’re just a teaser.

We could easily have two more days of this because unlike other shows where I could totally miss some ERP or other sessions that are not in my wheelhouse, everything at Dreamforce is relevant and important to cover.  So it might sound strange with Dreamforce still in the future but I already want more, maybe not more information but more time to absorb it.


Salesforce.com announced it was buying Buddy Media for nearly $700 million on Monday.  In any discussion that’s a lot of money, maybe more than Salesforce has yet spent on any acquisition.  What’s going on?  As you might expect, I see economics playing an important role here and I think there are two issues to consider and they may even boil down to one — the cost of acquiring a customer.

In an economy that’s treading water and where the primary customer demand is low price, you can’t afford to spend a lot to acquire a customer because there’s no room in the margin for the cost of acquisition.  You can say the same for servicing a customer and most vendors figured that out a few years ago, which accounts for much of the multi-channel excitement we’ve been treated to.  Yep, rule one is leave room for profit and that means using technology to streamline everything else.

The world we inhabit is increasingly energy constrained.  We’re not there yet but at some point north of $4 for regular the cost of visiting a customer will become prohibitive and the cost of visiting a store will be something you put off.  So what happens?  A company has to do everything it can to reduce and make constant its cost of customer acquisition and much of the heavy lifting will fall on technology’s broad shoulders.

That’s where this acquisition becomes important and it’s why, one way or another, the big front office software vendors are moving aggressively into marketing as in this case or into ecommerce as is the case with Oracle, NetSuite and others.

Let’s back up a moment to do some review.  At the start of the CRM era, selling and SFA were what we meant when we talked about CRM.  Eventually service and support became part of the mix and marketing followed but it played a decidedly minor role.  Sales and service applications could be complex but in one aspect they were well behaved.  They conformed to the standard of row and column database applications.

Marketing?  Not so much.  Marketing had programs and programs had attributes, which had results and consequences, some of which were calculations and scores.  Marketing was different enough that the big vendors were ok with leaving it alone, for a time.  Now time’s up.

Also, don’t forget that CRM evolved as one of many new market niches in a world where niches were seemingly being invented every week.  The great thing about niches is that they fill up and then the fortunate innovators move on to the next play.  But moving on means something very different today.  Rather than moving on to the next big system, many entrepreneurs have discovered that the available niches involve writing two-dollar products for handheld devices.

At two bucks you need to sell, sell, sell before anything gets interesting.  We’re talking retail here.  That’s the nature of today’s vendor customer relationship.  It’s retail, consumer packaged goods, where you need to know a heck of a lot about your customer if you expect to engage them and sell something because you won’t be there to encourage them when they make the purchase.  And because we’re talking about a sale that ranges from two bucks to maybe a couple hundred, the engagement model can’t be more than saying hi and thanks for the order, if that.

So in this world the CRM suite needs a makeover.  You need to get to know your customer through social channels and from aggregate attributes divined from analytics.  For the return trip customer representation is the UPS or FedEx person’s face.  In between, you need something cheap, fast and flexible to get your offers through social media like Facebook.  That’s what Buddy Media is about and much the same can be said of Virtue, which was bought by Oracle.

But wait, there’s more.  Business Insider had an interesting observation the other day in a piece titled, “Here’s the Weird Thing About the Buddy Media and Virtue Deals” .  According to the article what’s weird is “who didn’t do the buying: The big Madison Avenue ad agency holding companies like WPP, Omnicom, Interpublic Group and Publicis.”

The article might have a point but I think it was a good decision to stay out.  The time for media and advertising companies to take a bigger position in technology was about ten years ago or possibly more.  Now there’s too much mileage to make up for outsiders.

In a related field, I think newspapers, who could have sold through the Apple Store and billed with Zuora faced a similar situation and made the opposite decision.  I don’t have any fresh data on how the papers are doing but it can’t be a lot of fun developing and managing a subscription billing system while managing the conversion from presses and ink to electrons.

Now, I look for the big media and advertising companies to be some of Oracle and Salesforce’s biggest customers in a multi-tier offering in the cloud and without all the drama of building and maintaining software.  I think they got this one right.

So, meanwhile most of us can’t agree on Peak Oil, Global Warming or climate change but it’s nice to know that when there’s potential for profit, business won’t let politics get in the way.  Technology leaders have read the tea leaves and are well on their way to provisioning the software we’ll need when we’re driving less.


A door closed this quarter and another opened.  We’re now oriented on a new computing paradigm that will serve us for the rest of the decade.  There is now broad agreement on the big IT issues of our time and they can be summarized in the Four Big Buzzwords mobile, social, big data (and analytics) and real time.

We’ve been bantering these words around individually and in groups but in Q2 2012 most vendors came to a tacit agreement that these would be the issues around which marketing campaigns would orbit for the intermediate future.  Since Oracle’s CEO Larry Ellison is the original proponent of decadal cadence I will use his company as the measure of the short timeline that brought us to this moment.

April 2009.  Oracle buys Sun Microsystems.  The purchase of a failing Sun was seen as a retrograde effort.  The conventional software company buys a conventional hardware company and many of us expected them to fade into the sunset together.  It didn’t go that way.

September 2009.  In an interview at the Churchill Club Ellison said that cloud computing was a bunch of hot air.  Less sincere words have rarely left his mouth as subsequent events would prove.  No matter that by then, Ellison disciple Marc Benioff had already built a billion dollar business offering nothing but cloud computing as a delivery mechanism.  The prior decade bred an entire industry devoted to cloud computing and multi-tenancy but no matter.  Ellison had the database that drove these cloud companies and not much else.  He also had a huge installed base dedicated to conventional on-premise computing, so he was a late arriver intent on making up ground.  The first step might have been this bit of indirection.

OpenWorld 2009.  Oracle announced a new strategy and line of hardware starting with Exadata a huge database server with monster truck-like capabilities for serving data and crunching it into submission ten times faster than conventional technologies.  Exadata was followed by Exalogic, a compute server and Exalytics an analytics appliance.  There were other things too.  Before long little boys playing in sandboxes had traded their toy trucks, backhoes and other construction paraphernalia for Exatoys and Oracle had announced its engineered systems strategy.  Ok, I made that up just to see if you are still with me.

2011 Anthony Lye plus Oracle’s checkbook proved to be a potent combination as Lye developed a vision of Fusion driven applications and business processes of tomorrow.  Lye bought five companies proving that while you might not be able to buy love you can certainly buy R&D.  By the end of 2011 Lye had purchased ATG (ecommerce), RightNow (customer experience, service and support) Endeca (ecommerce and business intelligence), FatWire (web content and web experience management) and Inquira (service knowledge management software).  The combination, when knitted together positions Oracle as a contender in the Four Big Buzzword Categories.

But it wasn’t just Oracle that was making moves.  As early as late 2010 Microsoft and then others began preaching a gospel of multi-tier ERP, a strategy that would keep existing ERP systems and their pricy maintenance contracts in place while providing much of the new functionality required by the Four Big Buzzwords through a second tier of ERP from up and coming players like NetSuite and Zuora.

The approach ended a potentially disruptive moment for ERP vendors and their customers who were beginning to contemplate rip and replace on a scale not seen since four digit date formats were all the rage.  But beware ERP vendors, you are being surrounded and at some point you will be made irrelevant by the increasing functionality of the second tier and at some point there will be a bloodless coup d’état.

So what happened this quarter is that one ERP vendor after another admitted defeat of a sort.  No one any longer pooh-poohs cloud computing (even Ellison) or questions the validity of social technologies in business.  It’s all SOP today in what some are calling the post-digital era.  Post-digital doesn’t mean we’re beyond it, simply that it’s established fact and beyond debate just like evolution, global warming and a round earth are in most precincts today.  Yes, there are laggards who haven’t bought into the message yet but increasingly they are to be pitied, not argued with.

So, as they say in the reality shows, Who’s safe? And Who’s going home right now?

Well, as it happens very few need to go home provided they’re cloud oriented all ready and that they’re at least making noises about the other three Big Buzzwords.  Companies entering the market with anything that enhances the two-tier strategy will be welcome and some, like NetSuite, which has announced a defacto three-tier strategy should do fine.

In the years ahead look for the following ideas to gain primacy in business and enterprise computing as the post-digital era gains momentum.

Increasing use of the Four Big Buzzwords.  This will show up most obviously in mobility technologies but they will be supported by increasing use of centralized analytics crunching big data derived from social media.

Social will continue to be a big draw, not so much for what we know of social right now but for advances such as gamification that will become key drivers.

Multiple-tier solutions will continue to blur the distinction between on-premise, cloud and single vs. multi-tenant.

We will need to turn our attention to the internet of things later in the decade as machines increasingly talk to machines a la buy more milk, eggs and bread.

The key battleground will become platform and development tools.  Increasingly, the goal in business is to project agility through the capacity to change with customer demand.  Tools will be important but platform will be key.  Platform increasingly is the place where security, social, mobile and all the other Big Buzzwords have to be built in.  You can’t add any of them on after the fact.

Platform therefore is key and positions companies like Oracle (Fusion) and Salesforce (Force.com, Heroku, Sites.com, Database.com), NetSuite and others in the catbird seat.  Vendors with older platforms rejiggered for the cloud may not fare as well.

So there it is.  They’ve figured out what to do about cloud, as inelegant as it might seem, they’ve embraced the big Four Buzzwords and for the next several years, provided the economy holds up, we’ll see renewed competition as different vendors compete on slightly different permutations of a similar story.  We can already see Salesforce focusing on the social enterprise, Oracle the customer experience, NetSuite commerce, Microsoft catering to its large installed base with cloud versions of the things it used to sell in boxes.

SAP will do something but it’s still hard for me to figure out what.  They’re working with NetSuite according to Zach Nelson, CEO of NetSuite and Business by Design appears to be catching fire.  Never a strong marketing presence they need to get an elevator pitch for a small building.

Later in this cycle we’ll begin talking about video and voice embedded in the front office suite.  They’re about where social technologies were in 2006 and moving toward the center.


With the Facebook IPO just around the corner some people have started wondering if a “Facebook killer” might be lurking in the bushes and the new photo sharing website Pinterest has become the new darling.  Well, maybe.

I got a message from an industry watcher today, Kenneth Wisnefski, social media expert and founder / CEO of WebiMax, that said Pinterest was up and coming and a threat to Facebook’s IPO, but I disagree.  Here are some bullets from the email and my thoughts.

  • I expect Facebook’s stock price will soar in the beginning of the trading session, however once investors look closely at their fundamentals they will realize that Facebook really lacks a solid revenue stream (90% of revenue stems from advertising).
  • Facebook’s dependency on advertising revenue in addition to their vulnerability from smaller social media firms, like Pinterest, decreases my confidence in their long-term sustainable growth that we once expected.
  • Pinterest’s ease of use makes it more attractive to small businesses and we have already seen small business marketers shift toward using Pinterest and divert away from Facebook.  If this is sustained, consumers may gravitate toward Pinterest versus Facebook.

Well, then, here’s what I think.

  1. Advertising is not necessarily a bad business model.  It’s done good things for the likes of Google but as more companies enter the space and become good at the model, the demand for ads will prove to be less elastic than the supply and we will see tightening in the market and a decrease in profitability for the model.  Nonetheless, Facebook is early to the party and I believe their SEC filings make the point that they want to diversify so calling the business model a liability at this point is overblown.
  2. “Vulnerability from smaller social media firms”?  This sounds like somebody is trying to repeal the law of gravity.  It doesn’t work this way.  Certainly markets are open to disruption and certainly small companies disrupt bigger ones.  But for disruption to occur the disrupter has to demonstrate superior attributes in a market slightly adjacent to the disruptee.  Salesforce disrupted Siebel not in CRM but in the delivery mechanism.  I don’t see a sustainable difference between Pinterest and Facebook, especially since Facebook bought Instagram.  I think Pinterest will be a niche player in photo sharing.
  3. Pinterest might have the ease of use thing down simply because there is less of it than there is of Facebook.  When Salesforce started out with just four tabs they claimed ease of use and simplicity.  But that doesn’t say anything about the richness of the product or the experience.
  4. There is also the issue of switching costs which most people take into account when they consider going with a rival.  Facebook is a network and according to Metcalf’s law, networks are valuable because they have lots of connections.  A new network by definition has fewer connections than an established one, which makes switching more problematic.  Switching here gets you less not more and for the vast majority, Facebook’s network is a walled garden.

As I look at Pinterest I see a consumer site for sharing photos whereas Facebook has developed from those roots to a budding platform for doing real business and for hosting applications.  This platform is what enables Facebook to look toward other revenue forms and what makes it a better business solution.  So while Pinterest might very well be better than Facebook in some ways, to say it is superior or that it is a disrupter is to overstate the case.  It is a mistake to think that better technology wins the day.

Time after time we see that the company in first and with greater marketing resources is the winner.  If you doubt this, check out “The 22 Immutable Laws of Marketing” by Trout and Reiss.  It was published in 1994 and while it shows some wear and tear, it still gets this idea right.


I was surprised by the Salesforce.com announcement coming out of the company’s road show, Cloudforce Washington this week.  In the nation’s capital the company announced Government Cloud, which is just what you’d think it is if you’d been following Salesforce at all.

Beginning this summer, the company plans to deploy a secure and separate infrastructure to support cloud based applications for state and federal governments.  It will also open a new application store in the cloud just for government apps vendors and their Force.com wares — AppExchange for Government.

The announcement came and went on an average news day while I was in San Francisco attending SugarCon, the SugarCRM user meeting.  That surprised me because the implication, if I am understanding the announcement correctly, is that for the very first time, Salesforce is cleaving its service into two parts more or less.  Potentially that means separate and equal secure servers and a separate image of the software.

If that’s true it represents a milestone of sorts for the company and the technology.  While I have no doubts that the company will maintain its software so that there is no difference between the government and commercial systems, it appears that the development of separate infrastructure was needed to prove to the potential customers that security is paramount.

Again, if true, this would seem to open the door to additional future instances of separate infrastructure for Salesforce and at that point I don’t know what the difference is between a private and public cloud (Ok, I do know but, you know what I mean).  The government is, according to the same article, getting ready to award a contract for government wide email and other office services and Google and Microsoft are in contention.

So it appears that the market for cloud services is heating up and the ultimate prize of thousands of seats is causing some jockeying for position among the big vendors.  This would seem to mark turning point in how we define cloud services and is no doubt brought about by the plethora of offerings that promote multitenancy as an option.  Nonetheless, you can still call me skeptical of any solution that simply lets a company move all of its bad habits to the cloud.  “Your mess, elsewhere for less,” isn’t what I signed up for.  But that’s just me.

On another note, with government jumping into cloud computing, it makes me wonder if the market for Oracle Exa-stuff got a shot of adrenalin this week.  If government is going to play in the cloud you can bet on a couple of things.  First, with lots of users there will be lots of data and second, lots of users will require big husky servers with fault tolerant capabilities.  All this suggests the latest high end computing gear and companies like Oracle bubble up in this discussion.

So I want more information.  I am flying home as I post this and it will be high on a crammed agenda tomorrow.  I wonder why there’s been so little reaction.