Posts Tagged ‘Benioff’

Salesforce’s Pragmatism

Posted: December 19, 2011 in CRM
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Marc Benioff, CEO of Salesforce.com, has often said that tactics drive strategy at his company.  That’s the opposite of what we think of regarding how decisions should be made especially in big companies.  The image is often of high-level decisions being refined into finer grained activities until you have tactics.  Much of this is encoded in the acronym GOSPA, which stands for goals, objectives, strategies, plans and actions.

So what’s going on when a high growth company like Salesforce decides to work backwards?  Some might say that whatever it is should be continued because it works and while that seems like an easy answer, it is quintessentially pragmatic and there is much to say in favor of pragmatism especially when it is diametrically opposed to dogma.  Nonetheless a little analysis wouldn’t hurt here.

This is all brought into high relief by last week’s announcement that Salesforce would buy a small human capital management (HCM) company, Rypple, and that Salesforce would next field a cluster of applications around HCM or HR which it named Successforce.

Critics immediately started by stating the obvious, that a single shot HCM application based on Facebook was not the rock on which to build a magnificent cloud based human capital application set.  They were right, too, but the situation was like a very good hockey ref trying to officiate a baseball game.  They missed the point by calling high sticking on the man in the batter’s box.

All of the major enterprise software vendors have at least one human capital or human resources offering.  SAP just bought SuccessFactors for $3.4 billion, Oracle has PeopleSoft solutions and Workday, headed by PeopleSoft’s founder, Dave Duffield, is also in the game.  The market is estimated at $6 billion annually, which represents a nice revenue stream for all vendors.

As the preeminent social software vendor, Salesforce bought Rypple, a social HCM solution and announced Successforce, at least in part as a means of showing that it intends to be a player in every niche that conventional software companies play in.  Salesforce could do no less because it has to show that all application areas both conventional and some not invented yet are addressable by a cloud and social solution.  This is a good and probably necessary strategy and though it may have been percolating along for some time, the tactical announcement may have been dictated by recent activity.  The announcement also takes some of the spotlight off of the SAP-SuccessFactors activity.

Starting with a social aspect of HCM makes a fair amount of sense because in one stroke it says Salesforce is in the market and no one need ask if Successforce will leverage social media to support business just as the other Clouds do.  Of course, the pressure is now on Salesforce to deliver broad HCM functionality, which may entail additional acquisitions or a rapid development process or both.  I have no idea what the company’s tactics will be but I am sure they will reflect some pragmatic thought on their part.


Every year around this time I write two columns one on the year that was and another on what I expect the new year to bring.  There is no methodology for this process and I believe this lack of method is important.  I take a blank screen and fill it up with what has been on my mind for the last year and what made it out through my posts.  Here are a few ideas that bubbled up.

Steve Jobs

We lost Steve this year and the outpouring in the media was inspiring.  For some reason, many people felt the need to try to reconcile Jobs’ fastidious and demanding personality with the beautiful products he inspired.  One who did not was Malcolm Gladwell who placed Jobs in a long continuum of people who did not invent original products but who tinkered with and improved them significantly.  The world needs all kinds.  That might have been true for the GUI but Jobs still gets high marks for things like iPod (an improvement on Walkman) and especially iPad, iTunes and the store for which there was little if any precursor.

A quote from a Time Magazine (July 10, 2011)review of GM executive Bob Lutz’s book from 2011 “Car Guys vs. Bean Counters” http://amzn.to/sZEwaq

makes an important point: “It’s interesting to note that the one area of the U.S. economy that’s adding jobs and increasing productivity and wealth is also the one that is the most relentlessly product- and consumer-focused: Silicon Valley.  The company off Highway 101 that best illustrates this point is, of course, Apple.  The only time Apple ever lost the plot was when it put the M.B.A.s in charge.  As long as college dropout Steve Jobs is in the driver’s seat, customers (and shareholders) are happy.”  Thanks, Steve.

Social, mobile and analytics plus cloud

On deck to assume the Jobs niche in the tech industry and beyond may be chairman and CEO of Salesforce.com, Marc Benioff.  To be clear, Benioff and Jobs are very different people in most respects but Benioff has the same blue ocean strategy that Jobs had and a knack for entertaining his customers.  Benioff also likes to invent things.  He has driven the rest of the industry to embrace social, mobile, analytics and cloud much faster than it would have left to its own devices.  This combination of attributes is really all any Martian would need to know to understand the market upon arriving here.  The drive to embrace these technologies first is what separates Salesforce from all other conventional CRM companies and is a big reason for the Silicon Valley quote above.

Cloud computing

We’ve been hearing about cloud computing for many years already and interestingly 2011 was a year of a dramatic demonstration of its power in reverse.  Target Stores pulled its web site from the cloud into the premises in time to launch a huge marketing campaign featuring Missoni brand clothing.  The campaign was so successful that it clobbered the site and crushed the ambitions of any other IT leaders who might still think on-prem will be a workable strategy as we go “all in” on social, mobile and analytics.  Right?

Curation

The Missoni fiasco gave me a chance to showcase curation software from Storify.  Curation products enable anyone to find and bring together relevant content from the web to produce a one of a kind package of related information that is greater than the sum of parts.  Curation plucks gems from the torrent of things rushing by in the digital river (pun!) and it will be an important part of how we use the web in the future.

The Subscription economy

With cloud computing more valuable than ever we see a new idea taking shape called the subscription economy.  You probably recognize it and consider it old by some measures.  But the interesting thing about the subscription economy is that so far it has been at best held together with bailing wire and spit.  Old style ERP systems have been a major impediment to subscriptions and many of us never realized it.  I quoted others talking about how ERP has held back business innovation but also about Zuora and others who are pushing the envelope with billing and payment systems that enable subscriptions like never before.  Zuora announced its series D round of $36 million recently and I look for them to be a major IPO in the next 24 months.

Blue ocean strategy

In a press conference early in 2011, Benioff said he had no interest in developing an ERP system to complement his company’s growing front office footprint.  Without using the words blue or ocean in the same sentence he let us know that there is too much untapped potential in the front office, often in the form of applications of social concepts and business processes that have still not been invented or fleshed out.  By the end of this year that approach seems to have put Salesforce into a category of its own as most of the ERP players I watch seem to be focused on re-selling their legacy bases.

Oracle and Salesforce

One such ERP company is Oracle, a self described fast follower, that has nonetheless made big investments in the front office.  In 2011 Oracle acquired ecommerce provider ATG for one billion bucks and followed up about six months later with a $1.5 billion acquisition of RightNow.  We’ll miss RightNow but Oracle seems to have blue ocean plans of its own regarding retail in the future.  Watch this space.

Dreamforce and OpenWorld

We got an eyeful of how competitive the atmosphere is in San Francisco and Silicon Valley when Larry Ellison disinvited Marc Benioff to speak at OpenWorld.  At first it looked like a bizarre move by Ellison but later it looked liked improvisational comedy by a couple of masters.  It was certainly entertaining.  Ellison used the opportunity to announce his own cloud computing and social strategies though true to form I was not shown much product or given a date for general availability for some parts of the product line.

CRM Idol

Speaking of entertainment, Paul Greenberg got the industry organized around the Idol theme in the first annual CRM Idol competition, which I was part of.  The concept is still rough around the edges — one wonders how entertaining business ought to be — but it brought the industry together across most of the world’s landmasses and fun was had by all.  We discovered some very interesting companies and at least one, Assistly, was bought before the competition even finished.  I think Idol has legs if we can get a better set of pre-conditions in place to screen out some companies that are clearly not competitive.  Just sayn.

What’s going to get the economy moving again?

Over the summer there was fear of a double dip as the economy seemed to slow but that scare seems to have passed and the tepid recovery continues with job growth in the last 21 months and counting.  Not enough jobs to erase a big unemployment number mind you, but progress, slow and steady.

Marketo CEO Phil Fernandez offered his own prescription for recovery saying that the revenue performance management (RPM) methodology that he and others (Eloqua, Cloud9) are promoting could generate as much as $2.5 trillion in new revenue globally.  Maybe he’s right, but…

It’s all about energy

In May I was in Chicago to give a talk and noticed the prices for gas were almost hitting the five-dollar mark.  The cost of energy, transportation and raw materials all derived from petroleum, hold the key to recovery (and, yes, European bankers and politicians).  There’s no longer any slack in the petroleum production system and when demand spikes so do prices and when that happens, the economy cools.  We’re in for some uneven performance as long as that is true.

Books I have read recently such as, “The End of Growth” by Richard Heinberg http://amzn.to/vYJesf  and “World on the Edge” by Lester R. Brown http://amzn.to/sv0pvy, tell the same story.  Nothing grows forever and on a finite planet there are finite resources, which ultimately places a cap on many things.  That doesn’t mean doom and gloom but it does mean we need to think about our next steps as a species.  Global warming isn’t going away on its own.

All the technologies we’ve been debuting in the last few years will be an important part of the next strategy, especially as we are required to pivot away from dead plants as our energy sources.  That’s one vantage point from which I will be evaluating our industry in the new year.  The business processes we use are directly related to the technologies we have to work with — the subscription economy is a case in point.  Along with helping us make money, our great new technologies must serve our need to get carbon and costs out of our business processes ASAP.

But for now let me simply say thanks for reading my column this year and for your many good observations and comments.  I hope you enjoy your year-end celebrations, however you do them.

Is Salesforce Slowing Down?

Posted: December 12, 2011 in CRM
Tags: , , , ,

I am not a financial analyst and I don’t even play one on TV.  Of course, judging by the last five years’ performance of those in the financial sector I’d say there is a serious dearth of such talent.  Of course, that doesn’t stop the sector from issuing reports and guidance about individual companies.  Heck, it’s their job.

I ran across a report today from Cowen Research about Salesforce that leaves me with lots of questions.  The report downgrades the stock based on potential future performance, which is fine as far as I am concerned.  No company and no company’s stock stays at the top all the time, that’s a given.  But I don’t understand the logic of the analysis.

The reasons for the downgrade are several but all stem from what the report sees as “…billings growth slowing faster than expectations.  In 3Q, CRM (Salesforce’s ticker symbol) missed billings expectations.  Mgmt repositioned other bookings related metrics as better metrics, yet is unwilling to provide regular details around these other metrics.”

I was at Cloudforce New York earlier this month when a financial analyst pointed this out during a press conference in a question for Marc Benioff, CEO of Salesforce.  If you are an industry analyst as opposed to the financial variety, what ensued was about 20 minutes of the most boring back and forth between the analyst and Benioff.  It reminded me of the Monty Python skit about the dead parrot. http://www.youtube.com/watch?v=e6Lq771TVm4

I am not sure anything material was accomplished other than for Benioff to reiterate his company’s guidance that it would have a run rate north of $3 billion in its next fiscal year.  I am working on memory here but I believe the issue was that the company issues revenue numbers as its primary guidance.  They could, but don’t, focus on gross sales because they are a SaaS company.  If for example, a customer signs a $20 million deal over five years that works out to a million dollars per quarter and that’s what they report on because that’s what’s current revenue.

So, no matter what the size of the deals Salesforce is signing, they only recognize a fraction of them each month or quarter.  This is effectively leaving money in the bank and the analysts have a problem with that.  This is a part of educating the financial markets about the subscription economy.  Subscriptions are so different from conventional product sales, and their revenues, that some analysts effectively try to put a square peg into a round hole when they are assessing a company.

Salesforce also recently announced that it will offer enterprise licenses to enable whole enterprises to take advantage of its sprawling product lines and the analysts have problems with that too.  Here in three parts is, in my opinion the most serious and erroneous part of, their analysis.  Let me take them sequentially.

1) Competition is catching up.  Oracle is defending the enterprise, Microsoft is gaining traction in the mid market, and SugarCRM is gaining ground at the low end.

This is true.  Everyone has a flavor of cloud computing today.  After more than a decade of having their brains bashed in by Benioff touting the benefits of SaaS and cloud, other vendors have put browser front ends on their products and shipped operations elsewhere (a.k.a. but not really, “The Cloud”).

But we all know that this minimal move does not accomplish the intent and that real cloud computing is also more sustainable because it makes far better use of storage and compute facilities, sharing gear where it makes sense.  Moving a data center to another location with dedicated servers and spindles is like moving your dirty coal fired powered power plant to another state and calling yourself an environmentalist.

Other vendors are catching up in CRM but most of them also have ERP customer bases that they are spending considerable effort defending as the industry enters a new replacement round.  Several competitors have also announced social media products and their versions of cloud computing.  Alas, announcement is not delivery but it does raise an important question:  if the market is so crowded why are so many vendors rushing into it?

2) Massive investments in Sales have over stimulated the market beyond its natural growth rate. Next year normalized sales productivity will decline, making growth even harder absent extremely aggressive investments in sales and marketing at the expense of margin.

I am not sure what the natural growth rate for CRM is but I believe you can say the same for ERP, except in the once in a decade period when everyone wants to buy the new technology.  The market for enterprise software’s existing solutions is fairly saturated.  Heck, if you’ve looked at the GDP nationally or globally lately, you understand that growth is not exactly on the march anywhere.  That’s why innovation is key.

3) The company has lost focus. Management’s obsession with the new new thing has distracted it from crisp execution in its core market, SFA. The push behind Collaboration, PaaS and Social Media Monitoring have taken sales into different and unproven categories with different buyers.

A natural characteristic of markets is that growth slows over time as demand is satisfied.  That is why companies come out with new products and services.  It’s also why market lifecycles graph out as sigmoid curves instead of straight lines.  Given this truth, number 3 above is puzzling.

Salesforce has done an admirable job of refreshing and extending its product line into uncovered areas of the front office.  The company could have easily built an ERP system and jumped into an already crowded market for back office technology.  But it chose instead to build net new products in markets that are quickly evolving and where there is little organized competition.  This is sometimes referred to as a “blue ocean strategy” after a book by the same name.  The essence of the idea is that a successful company finds unoccupied niches and satisfies the needs of those niches.

By my analysis, in the software world that means identifying new approaches to business that will help organizations reduce the friction found in all business processes.  Business today is being buffeted by credit and other financial challenges as well as soaring resource costs lead by oil but also including many raw materials especially the so-called rare earth elements that are needed to make modern technology.  You don’t need to be a chemist to understand that rare earth easily translates into expensive.

So in all that should a company like Salesforce elect to penetrate ERP or decide to penetrate new markets in a blue ocean strategy?  Time’s up.

The financial analysts see it differently.  According to them Salesforce has lost its lead on the competition and then lost focus by going after new niches.  “Management’s obsession with the new new thing has distracted it from crisp execution in its core market, SFA. The push behind Collaboration, PaaS and Social Media Monitoring have taken sales into different and unproven categories with different buyers.

If you take this at face value, the only thing for a company to do is the stand still and let the competition devour it.  Many companies have taken just this advice and obligingly gone to hell in a handcart.

How can you first say, that massive investments in Sales have over stimulated the market beyond its natural growth rate and follow it up with management’s obsession with the new new thing has distracted it from crisp execution in its core market, SFA?

Finally, there’s this weird nonsequitur: “…we remind investors that the company’s platform was built over a decade ago and is likely in need of a rewrite at some point to take advantage of the latest technologies.”

Well, not exactly.  The application set was begun more than a decade ago and through its life Benioff has stated that they’ve rewritten the platform.  Salesforce has been rebuilding the platform to expose it to the outside world incorporating other languages (Java, all of Heroku, etc.) and ways of delivering content including websites and to add functionality, especially in the social media realm.  Who else is trying to do this?

Salesforce is far from a perfect company and it’s right for analysts to be watchful of any company so that they can advise clients on investment decisions.  But I’ve been watching this company for a long time and I don’t understand how some of it’s core strengths can be seen as weaknesses.


I was sitting in the “blogpound” at Cloudforce New York, the seating area where Salesforce.com considerately places press, analysts and bloggers along with tables, power and Wi-Fi, when it dawned on me.  Despite all the articles, blogs and books (and Paul Greenberg’s ceaseless public speaking) dedicated to the social media phenomenon in CRM, we may have been under reporting its importance all this time.

It’s hard to say or believe this, I admit, but look at some of the evidence.  We’ve all generally agreed that social represents a major disruption in business but somehow it seems even bigger than other disruptions.  While those other disruptions were legitimate, they left the business world more or less intact.  Client-server replaced mainframes and we got a few more application types (like CRM) but business went on.  The same can be said for the Internet revolution and even the mobility upswing.

These all made business move a bit faster but it was still business as usual.  Brian Solis published a very good book recently called “The End of Business As Usual”

In all those cases the same application types survived into the next generation to be built upon and extended.  But social represents a break that is not limited to computing or hardware alone.  Social is a bigger break because it goes to the heart of how a business operates, what it does and even what is considered its secret sauce.

It used to be that the secret sauce was a patented product or process that you built a business model around to protect.  That often meant controlling information flows between your company and your customer.  Your company was the sole source of the product or service as well as being the sole source of truth about it.  That’s been gone since the Internet boom started but companies have nonetheless been able to operate, though somewhat hobbled, in their old models.  But not much longer.

Cloudforce, New York, made it official.  With the rather low key introduction of the Social Marketing Cloud Salesforce has completed at least the rough outline of the social enterprise — a term used by CEO Marc Benioff lately and one that you’ll need to get used to.  Here are some reasons for my thinking this.

At the press conference just after his keynote, Benioff told us that the attendee list for the event had multiple instances of companies sending anywhere from 20 to 50 employees to the event.  You do that kind of thing when you are marshalling resources and implementing a plan.  In this case the plan is about how to pivot the business to become a social enterprise.

That’s not all.  There were significant early adopter examples on display at the event.  Angela Ahrendts, CEO of Burberry, has a vision of making her company a social enterprise and is using the Salesforce suite of solutions to get there.  She spoke live with Benioff during the keynote but perhaps more informative was a two-minute video in which she said — of becoming a social enterprise — “If you don’t do that I don’t know what your business model is in five years.”

There was also a conversation with the head of GE Capital that provided a similar moment.  But the show stealer was the video of Toyota’s CEO, Akio Toyoda, in Japanese with subtitles in which he said, “This has changed my life.”

So from all indications the early adopters are on board and they are influencing other early adopters and in the next year you can figure the early majority will come along.

This disruption will be incredibly fast as this sort of thing goes.  Unlike the decade long march from standalone computing to networks I think, given Ahrendts’ timeline, the next several years will see a great deal of activity as big and not so big companies scramble to get to the new, new thing.  There is a growing sense that there isn’t a lot of choice in the matter and when there isn’t a lot of choice there isn’t a lot of time either.

All this is good for the economy.  Every recession needs a new idea to drag it out of the trough and reignite growth.  The social enterprise is that thing and not simply for the obvious reasons that I’ve mentioned already.  Social enterprises should be able to operate far more efficiently using less inputs for the same or greater output.  That will be a critical driver in adoption as companies constrained by the ongoing credit crisis learn how to do more with less capital.

What’s most interesting to me is that Salesforce has found a way to preserve its differentiation in a marketplace that has exerted itself to catch up with its cloud computing innovations over the last decade.  All other CRM, and let’s say major software companies, have developed cloud offerings that mimic the basics that Salesforce pioneered — hosted applications operating in weightless browser interfaces.  Some have even made inroads in social computing.

But most have stopped short of multi-tenancy preserving the data center model by simply moving it to the sky.  Microsoft executives recently told me that keeping data separate was the only serious way to handle the stuff but they didn’t tell me why.  I wonder if it’s radioactive; perhaps it is or maybe it’s simply toxic to the old paradigm.

With its emphasis on the social enterprise, Salesforce preserves its blue ocean strategy as its competition is still locked in an old paradigm.  Benioff told us the company will do three billion dollars in revenue in its next fiscal year on its way to a goal of being the fastest to ten billion in history.  For reference, in 2011 Seaboard was number 500 on the Fortune 500 list with revenues of $4.385 billion.

You know what I’m talking about?


There was a guest post on the Forbes Magazine blog last month that I can’t get out of my head: “For Enterprise IT, Time to Move Beyond SAP.”

For the record, I am an ERP dilatant — I know about it but don’t follow it with the same passion that I follow CRM. And as far as SAP (NYSE: SAP) is concerned, I have rarely met a bunch of smarter business people who are also rather nice. I have no issues with either, but as an observer of macro trends, this was a surprising article for several reasons.

First, someone else wrote it. The headline sums up my observations about ERP, but until I read the post by Dave Yarnold, CEO of ServiceMax, I thought I was unique in that line of thought. Glad I am not.

Second, and more interesting, is Yarnold’s assertion that legacy ERP has been an impediment to business, at least in recent years. That really got me, because I thought that was my mantra.

Third, it points to the cloud and modern technologies as the emerging solution.

It all goes quickly to the business model of the 21st century: services on demand. Vendors — at least the smart ones — are looking for ways to convert their product-centric businesses to services for some very good reasons. When you sell a service, like software for example, we all know the customer is liberated from the need to purchase hardware, operating systems, middleware, database and applications. Customers are also liberated from the need to hire high-priced talent to administer and maintain all that technology.

I hate to sound happy about reducing demand for all those talented people in the middle of a recession (I know it ended a while ago, I’m just waiting to feel it). But that’s what businesses and economies do. If something can be shown to be extraneous to the business’ core mission, you must reduce or eliminate it or you will become uncompetitive as a result.

It’s not just software that comes as a service either. Some of my favorite examples are the companies that were profiled in The New Yorker about a year ago that provide wardrobe as a service. If you like Gucci bags or designer clothes but can’t afford to own, these companies will provide articles of clothing as a subscription.

But let’s get back to the impediment for a moment. According to Yarnold, who was speaking about a colleague, “He’s an IT veteran who has been running SAP software since the ’90s, who came to the realization that the efficiencies it afforded them have completely eliminated the creativity, growth and innovative thinking the company once prided itself on.”

That’s bad enough, but Yarnold goes on, “Companies had to conform their business processes to the way SAP’s rigid software ran. Much of the uniqueness that enabled companies to differentiate themselves was squeezed out in the name of SAP. I can’t even guess at the number of meetings I’ve had with senior company leaders over the years where creative new business ideas were shelved because ‘it didn’t fit into SAP.’ Is it possible that this long-term adherence to the SAP way has in some way been at the root of the lack of creativity, competitiveness or the loss of manufacturing jobs we now bemoan in our economy?”

I wouldn’t go that far — you can’t lay everything at the feet of SAP, and this analysis does not take into account life before SAP. Companies bought it because it solved a business problem (let’s call it “legacy ERP” because there are other vendors in the space, like Oracle).

Legacy ERP, like all products you can mention, was designed and built for a particular place in time, specific business needs and processes tied to manufacturing. If legacy ERP no longer meets the need, it’s because business changed. We’re a services economy today, and about 70 percent of GDP is tied to services, not manufacturing. Companies like Zuora go even further and have called the present model “the subscription economy.”

Subscriptions enable businesses to change more rapidly, and the above-mentioned “creative new business ideas were shelved because ‘it didn’t fit into SAP'” are a reality.

The subscription economy is real. In this world companies like Workday and Zuora have taken prominent positions, and the marketplace is taking note. This morning, Zuora announced its Series D financing as well as increasing its footprint in Europe. The company raised US$36 million in new funding, including money from Dave Duffield, founder and coCEO of Workday, and Marc Benioff, chairman and CEO of Salesforce.com (NYSE: CRM). Also, in the first three quarters of this year in which Zuora had a presence in Europe, the company announced that it has $2.5 billion in contracted revenue from its early customers.

Legacy ERP might still control the market, and it may take a long time for the upstarts to gain significant share. A comparison with Salesforce is instructive. Salesforce was a key reason Siebel topped out as a $2 billion company, though it was many years before Salesforce gained the same revenue level. In the same way, the presence of Zuora, Workday and companies like them indicates the high water mark for legacy ERP.

Legacy ERP is ill-suited to the demands of the subscription economy, and it is comparatively expensive. As the ERP replacement cycle gains steam, no vendor, incumbent or otherwise, should take its position in an account for granted.

Mark Twain once quipped, “Everyone complains about the weather, but no one does anything about it.” We could say much the same about legacy ERP, but now it appears that there are credible alternatives coming on line.


At his second and final keynote address to the 2011 Oracle OpenWorld user meeting, Larry Ellison finally gave the rabid software oriented audience something to savor.

Throughout the week the Oracle CEO and his minions had spent large amounts of time telling us about hardware or some other aspect of the business leaving me and my software analyst and blogger friends champing at the bit.  That changed in Ellison’s second keynote when he announced the Oracle Cloud, the Oracle Social Network for business and the arrival of Fusion applications.  There may have been other introductions but honestly I was scheduled to be on a panel at 5 PM and for all I know Larry is still talking.

Ellison’s keynote did not come without drama.  A long-running argument between Ellison and former Oracle vice president Marc Benioff, CEO of Salesforce.com, nearly blew a fuse when Oracle cancelled Benioff’s keynote forcing him to scramble to find other accommodations to address Oracle Nation.  It was great political theater when Salesforce hired the St. Regis hotel and set up campaign style picketers with signs and slogans — “The cloud must go on” — out on the street.

Much of the drama could have been avoided if only Oracle had introduced its software trove earlier in the week.  The idea of both Benioff and Ellison speaking about opposing views of cloud computing at the same conference and on the same day proved too much even for San Francisco.  Instead, earlier in the week, Ellison laboriously discussed his company’s line of high performance computer gear aimed at the high end of the market, which many of us in the analyst community greeted with a so-what attitude.

The question of why Oracle held its fire for so long is curious and will be the subject of many post mortems.  When I try to puzzle through this turn of events I have to conclude that if they had announced the cloud and social network earlier in the week, they would have been forced to answer questions and provide demonstrations.  As it is, we all go home armed with knowledge of these products only through a demo that Larry did on stage but none of the reassurance that they are real.  It would not be the first time that Oracle announced something early.

I am therefore forced to conclude that at least the cloud and social network that were announced are not really ready for prime time.  I am sure the products exist in some form but I am not sure what state they are in.  I will believe it all when I can play with it and report to you.

With the assumption that the software products are real we need to ask what impact they will have on the industry.  The short answer is that these products will be enough to freeze many decision processes until Oracle can get around to delivering a true 1.0 version for general availability.

In conception, the Oracle Cloud and Social Network sound good and they will appeal to a big audience of Oracle customers.  But they are not fundamentally different — and one needs to question if they are better — than what’s already on the market.

For example, nearly every vendor except Salesforce, offers customers the choice of where to operate its software — in the data center, in a third party hosting environment or in an Oracle sponsored facility.  Also, these customers have the choice of running in a single tenant or multi-tenant configuration.  So all the bases are in theory covered.

But this only adds fuel to an already smoldering argument of whether it is better to simply move applications from an old paradigm to a new hosting environment or if it might be necessary to take a fresh look at these applications in the context of mobile and social demands and changing business requirements.  Failing to do all that might result in well functioning applications that have diminishing relation to reality.

As Benioff has made clear for the last decade and did again at his press conference, most of those choices fit an old paradigm at a time when the paradigm is changing and the multi-tenant solution is the way of the future.  Interestingly, Ellison derided multi-tenancy as something that is 13 or so years old but ignored the idea that the conventional IT that his solutions provide for are much older still.  Moving your data center off site, which is a function of the Oracle Cloud, is not exactly state of the art.

Ellison was careful to point out the places where his cloud, for instance, was superior to Salesforce.  Oracle Cloud offers users the ability to use applications on premise or on-demand and to move applications from one to another without losses.  Oracle also works hard to assure the market that its solutions are standards based using standard middleware and programming languages.  In fact Ellison was happy to discuss the whole application stack in that context.

Big IT shops will be comforted by this knowledge but increasingly, they are seeking ways to streamline their operations and reduce the amount of labor they invest in their applications.  A discussion of how to avoid middleware all together might have been more welcome.

The new IT paradigm promoted by Salesforce and a growing army of followers is social, mobile, cloud and multi-tenant.  The new Oracle products embrace all of this but still leave it to the customer to determine when to adopt these ideas.  That is a good approach for a company like Oracle.  Ellison has a huge installed base of some 380,000 customers and they will not be converted in a short time.  So hybrids and halfway measures are the strategy and in this Oracle has played its hand well.  But it is not alone — Microsoft, SAP and many other software houses that were the leaders in the last decade have the same tricky path to traverse and the same basic approach.

What happens next will be interesting.  With these announcements Oracle has come close to parity with its competition but it is last in the race and its solutions mimic the competition without breaking much new ground, if any.  What the company does next will be vital.  Will it continue to follow the pack as a not to fast follower or will it innovate around all of the ideas bubbling up today including mobile, social and, of course, cloud?

There is enough in the announced products to enable customers to get going with cloud computing and in applying social concepts to business and there is plenty to support those who break out in a rash whenever they hear words like Salesforce.com, cloud or social.  That is right where Oracle needs to be at the moment assuming the products they announced, but curiously did not let us see or try out, really exist.

Benioff Speaks

Posted: October 5, 2011 in CRM
Tags: , , , ,

When his part was over Marc Benioff could look back on a keynote that was fresh and interesting for OpenWorld but without a great deal of the controversy that had been expected.  There are definite differences between Benioff and Larry Ellison and their respective companies. Benioff preaches openness, cloud, social, mobile and other modern technologies that will constitute the infrastructure of the future.  “We’re not here to sell another mainframe,” he said at his impromptu keynote.

Ellison on the other hand, has a huge legacy installed base to convert and his options may be more limited than Benioff. IT doesn’t help that Salesforce has been executing on its vision for several years while Oracle is in some ways just getting out of the starting gate.  Ellison will speak today at 2:45 PM PDT and will no doubt have some answers to Benioff’s speech.  Stay tuned.