I was at a user meeting with NetSuite in Boston earlier this week. The company has bought two companies since going public — OpenAir and QuickArrow — both of which support the professional services market. Companies sell things as well as services and CRM has been applied most successfully to the former. Companies that sell services have been left to their own devices to figure out how to automate and manage sales and delivery and their situation resembles that of the thing-sellers pre-SFA.
NetSuite’s idea is an integrated solution combining ERP and services oriented planning and sales modules going by the name of SRP — services resource planning — and the idea has legs.
As you can imagine there are some significant differences between selling things and selling projects. Most importantly, services companies have bigger issues with fixed overhead because you have to have smart people on staff if you expect to sell their time. Economists might say that supply is inelastic or certainly less elastic for the services guys than for the companies that can throttle up or down the manufacturing process.
All this got me thinking not about the two different types of selling but about the two different styles of building a company exhibited by Salesforce.com and NetSuite. Both companies have purchased other companies when it made sense as a way to build out their offerings. But each company also has a multi-tenant architecture and a cloud platform, which makes it easy for third parties to build or modify applications. Nonetheless, if I had to describe each company’s strategy I would say that NetSuite is more likely to buy than make compared to Salesforce — if you include the partners.
Salesforce appears to have decided on an approach that encourages a partner community to build native applications while NetSuite seems to encourage partners to deploy and modify its core solutions though not necessarily build wholly new ones.
Now, this is a rough approximation and it looks more black and white than it is — there is a lot of grey area in all this. But it drives an interesting question that I believe can’t be answered, at least not now. Which approach is better? Should the primary vendor be the only one involved in new product development or should the platform vendor simply let a thousand flowers bloom? Certainly the existence of the platform makes the second option possible.
Part of the answer can be found in how each vendor views itself. Salesforce is obviously looking for a big new market to penetrate that’s bigger than CRM and it has selected application development tools for the enterprise and smaller organizations. NetSuite might have a serviceable platform but for the time being it appears to be more interested in the market for integrated front and back office applications, which is more crowded.
I don’t have any good answers here or prognostications, just these observations. Salesforce has always been in the business of inventing the future and while they’ve been successful they have had their stumbles along the way too. Other companies have been content to stick to their knitting, but the future rarely keeps to a script. There are many markets just opening up, at least in part because there is reliable and low cost software available to support them and that says good things for both companies’ chances.
The big question to ponder is whether there is enough demand for in-house development to support Salesforce’s vision. It groups are notoriously backlogged and it is unclear to me if the backlog is a result of too much demand or inefficient tools. For decades we have argued that it is the tools and we’ve seen generation after generation of tools that promised to fix the problem.
Tools are important but if you read “The Black Swan,” which I recommend, you might get the notion that backlogs are inherent in what we do, in part because we do such a poor job of understanding and planning for future requirements. If so, one of the next logical acquisitions for either Salesforce or NetSuite should be a company that focuses on improving forecasting and planning methods. Does such an animal even exist?