Posts Tagged ‘Salesforce’


Note to self: Write something nice about Microsoft Convergence 2012.  They did a great job in Houston and most importantly you can really see the CRM focus coming together with social, mobile, analytics, back office and a lot more.  It’s taken a long time because there are a lot of moving parts for Microsoft but Convergence was impressive.

To get a sense of all the wonderfulness surrounding Convergence you need only glance at some of the many observations made by the likes of Paul Greenberg, Brent Leary, Dennis Howlett, Josh Greenbaum and many others.  So Kudos to Microsoft.

My observations will be somewhat different.  While I also think Microsoft has made important strides and I applaud their CRM team, I want to focus on what’s around the bend.  First there’s the new CRM GM, Dennis Michalis who took over from Brad Wilson after Wilson turned Microsoft into a CRM power almost by sheer force of will.

Michalis is a find, the kind of acquisition that, if he was a stock, would have been overlooked by everyone but Warren Buffet.  From what I can tell, Michalis has spent most of his career in Europe or the Far East and did well in those market; however, he was somewhat off the radar when Microsoft saw his talent and scooped him up.  Michalis has been with the company only a few months so this year’s Convergence was still mostly the result of Wilson’s efforts.  Michalis will have to stand on some big shoulders to do better and I think he can.

For starters, he will need to flesh out the social, and to a lesser degree, mobile strategies and product lines to be truly competitive.  Microsoft is not a social powerhouse and trails in the mobility wars, at least on the mobile operating system side (and that’s a lot).  But they have a strategy to offer their CRM on multiple browsers and in fact, demoed a mobile application for the iPad, which was impressive.  Their analytics package for sales, form what I saw, is powerful and sports a nice and intuitive interface though overall the product still has a straight from the software lab look to it.

The company’s biggest advances were, in my opinion, not software related though — they more clearly relate to the company evolving from an ERP company to more of a CRM company.  This needs some explaining.

First, it was nice to see Kirill Tatarinov speak about the drivers that his organization takes into account when trying to figure out product direction.  He said they include economics, geopolitics, people and technology, and I think that’s hugely important, though I don’t think it has been the case in the past.

The business climate, the cost of fuel and raw materials, the stability of the local political regime including personal freedom and free markets, all go into what will drive demand as well as the nature and character of demand.  They drive what people will buy and the style of the technologies they will use in their personal and professional lives.  All this might seem to affect ERP more than CRM but I think the distribution of influence is roughly equal.

But those are high level ideas and truth be told, it’s an ongoing effort to get them down to street level and there are some key things that I think Microsoft can do better in that regard.  For starters, the company culture is one of a vendor selling through distribution to others who will produce a final full product.  In ERP they’ve been successful at imagining customer business practices and driving solutions to market in some key areas, especially manufacturing.  This hasn’t been the case, to the same degree in CRM and it needs to be.

Microsoft needs to do a better job now of connecting its many dots.  For example, it is still at the point where it is hitting checklist items like social — so that it can compete with the likes of Salesforce — but without offering a compelling story of how a business progresses because it adopts new technology.  Salesforce calls it the social enterprise and Microsoft has no counter.  It is still selling components, modules, and it needs to elevate its game.

Also, too frequently for my taste, Microsoft likes to show off customers who have heavily customized their CRM instance, especially non-profits.  It’s nice to see non-profits in the mix, but the focus needs to be on for profit business.  Also, this makes points for their XRM strategy which goes against Salesforce’s Force.com platform, but it is wide of the mark for a customer that wants out of the box functionality that works the way its business works and drives improvement.

Cloud computing is another area for tightening up.  Here Microsoft joins the rest of the market excepting Salesforce, in highlighting the benefits of a go-it-yourself, roll-your-own strategy of hybrid clouds in which customers get to decide where their data resides.  I don’t think this is the right strategy for any vendor and here’s why.  We see too many examples of companies who manage their own data being hacked and increasingly the hackers are not individuals with an ax to grind but nations like China stealing IP or radicals like Anonymous aiming for industrial scale mayhem.

In this world, the strategy shouldn’t be building your own bomb shelter.  Microsoft and the other vendors have a credible case to make that they can and do perform a superior job of keeping data safe and that the time for going it alone is rapidly ending.  A more credible and strategic program might be for all vendors to say, “Hey, we’re the pros at this, let us handle it.”  If I ruled the world (hahaha!) that’s the tactic I would take.  It will take some years to accomplish this education but we need to start now.  And we need to quit deluding ourselves with a cowboy ethos that individuals can do a better job of data security than an organization dedicated to the task because the evidence shows this is just paranoia.

Ok, back to Convergence.  My last point — that Microsoft needs to do a better job connecting the dots has another element.  I am sorry to keep comparing Microsoft to Salesforce, because I think the two are more different than similar, but in the area of philanthropy I think Microsoft is trailing Salesforce when it could be leading.

You know that Salesforce has this 1:1:1 model in which it donates one percent of its equity, time and product to a 501 (3) (c) charity, the Salesforce Foundation.  At major events like Dreamforce, they have charitable activities in which customers can easily donate an hour of their time to do some public good.  All this activity is always tied back to the charity.

At Convergence Microsoft tried to do the same thing and the effort was inspiring but it wasn’t tied back to anything in particular.  Volunteers worked with Habitat for Humanity to renovate a house and when attendees filled out evaluation forms, Microsoft donated a dollar to a Houston charity, which was great.  But without some over-arching program I think Microsoft misses getting credit for its largess and also for its community outreach, which is important.

Last point.  Microsoft has not been a leader in any aspect of CRM.  It has taken a less risky fast-follower approach and it has breathed in other peoples’ exhaust as a result.  It’s time for the company to take a leadership position in something if it expects to reach the highest plateau in the business.  That plateau is unified communications (UCS).

Microsoft has Lync, a UCS that it offers and also uses in-house; Microsoft people tell me it works well.  UCS is, I think, potentially the next iteration of social networking.  It has enormous potential to save companies money and improve the links with customers.  To say the least, it would be smart of the company to step up its emphasis on UCS.  The window of opportunity is closing and I hope the company takes advantage of it.

If this sounds too critical, let me end on a more positive note.  Microsoft is a rising star in CRM and Convergence polished its reputation.  It has end-to-end technology from the back office to the front and from landlines to airwaves.  It is making headway in social, mobile and analytics — the next wave.  It has a good handle on at least some of the critical business processes that its customers depend on.  Like any software company, it will always be building out functionality, but its focus now must include, to a greater degree, all the many things that go into making a whole product in the social age.


Doubtless you have heard of the social enterprise by now.  It is Marc Benioff’s leading salient in a world he is convinced needs his solution to modern business.  But you also know that, like many other trends, this one is a work in progress.  For every Kimberly-Clark, Burberry’s and NBC Universal there are, what?  Banks!

No, not the banks that ran fast, free and loose with investor’s money or made up mortgage backed securities and cleverly also invented derivative insurance at the same time on the theory that every boat needs a lifeboat.  No, those were investment banks.  Regular old banks that do the mundane tasks of balancing the books, offering free checking, loans and credit cards are among the late adopters of the social enterprise or so says an article in today’s Ne York Times.

According to the Times article, most banks are slow on the uptake of social technologies.  While many have social outposts like Facebook pages these banks do a minimal job of patrolling social media for customer comments and other signals that something might need doing.  Experts quoted in the article used words like “hibernating,” and “amateurish,” to describe banks’ efforts along with, “displaying tokenism attitudes.”  Ouch!

Let’s call them “Social In Name Only” or SINOs after RINOs, a group of upstanding and principled people the Republican Party apparently no longer has room for.  I’d say that SINOs are different in many ways.  For starters, they haven’t abandoned anything or been abandoned by the society at large.  They simply are late to the party.

A better question to ask about SINOs is why they are late.  Is it that they are organized top down and the message simply has not gotten up to the head cheese?  Or is it possible the intense regulatory climate that they live in (which investment banking cousins somehow evaded) has not caught up with the social tsunami due to older customer demographics?  Or is it possible that a certain amount of risk aversion keeps banks from dealing with their customers on their own terms?  The article suggests that high net worth customers under 50 might be about to lead a charge to social.

I don’t know but I expect some combine of forces is at work.  I also smell a business opportunity and it’s bi-directional.  We can figure out the upside pretty easily — better customer outreach and interaction resulting in more banking activity.  But the bigger win for banks might actually be on the cost avoidance side.  If you’ve ever tried to understand a statement or get a question answered about that check you bounced you know that many banks are still mired in phone hell caused by call center business processes that were engineered during the very first Bush administration.

Seems to me that your average bank could ramp up service AND cut costs significantly if it paid attention to social media and leveraged it like any other social enterprise would.  But then what would we call them?  Having just invented SINOs I am fatigued from my creative efforts and don’t want to think about it.  Look at how short the idea cycle has become.


Yammer announced an impressive $85 million financing last week.  You can get the details here http://mwne.ws/wp4GtZ .

You might already know that Yammer provides enterprise social networks, the kind of collaborative spaces that enable employees to “swarm” on issues to achieve resolution or deal with a customer issue for instance.  Yammer claims that more than 85% of the Fortune 500 use their products.  (The swarm idea comes from business writer Stephen Denning in The Leaders’ Guide to Radical Management).

If enterprise social networks sounds familiar it may be because Salesforce.com has put so much into it with its own product, Chatter, which has penetrated enterprises such as Dell, NBC, Comcast and Burberry’s.  Though off hand I don’t know what percent of the F500 use it the company talks about tens of thousands of customers though since Chatter is included the basic monthly service.

Suffice it to say that Salesforce has been carrying the water to educate the market so far — Yammer’s PR said they would launch their first ad campaign March 1, for instance.  But ads or not, these companies and some others are carrying an important new message to enterprises — get on the social express or you’ll be dog meat in a little while — or words like that.

Permit me to change course here.  So far the rollout of social media in the enterprise follows a normal hype cycle curve.  It’s the same idea that Geoffrey Moore documented in the 1990’s in the Crossing the Chasm series — everybody needs to buy the new gizmo to secure competitive advantage.  This is great because the companies that offer the new, new thing sell it like crazy for a few years.  Some of them burn out, sometimes in spectacular fashion, and a few limp across the first finish line (an IPO) and become real companies.

But this hype cycle is a bit different.  In fact many companies are finding the cycle has changed due to the pervasive nature of the freemium idea.  That’s where the vendor offers a subset of the functionality free in the hope of snagging a big sale down the road.  This is also called the puppy dog close because once your kid takes the puppy home it’s yours regardless of what they told you at the pet store — “Just bring it back tomorrow!”

But freemium has a different set of issues.  Some companies are just fine with the free version, some don’t use it and vendors discover that only a small portion of the initial users turn into paying customers.  That’s life.  With a freemium approach you don’t need an expensive sales team and marketing can be minimal because customers show themselves the value of the product, which might explain why most don’t turn into buyers.

Rather than the freemium approach, I offer a different way to appeal to companies to buy social wares.  I just finished the Steve Jobs bio and one of the things that struck me was how much Jobs wanted to leave a legacy, a company that would be great for a long time after him, like HP had been in his youth.

There may be many C-level officers who really only care about making money because cash is how they keep score.  But under the power suits I think you are more likely to also find a person who puts in many hours and for whom the enterprise is the achievement of a lifetime — dare I say a monument to the executive’s cunning and ability to lead?

If money was the only important thing I have to believe executives would not work as hard as they do.  Flying to China or Japan might sound exotic but it gets old.  Once you’re certain that the next generation or two of your kids will have a good life, your attention turns to the legacy, what you’ll leave behind for the next guy and the shareholders.

So here’s my proposition.  The vast majority of the new products coming onto the scene in any decade are things that make money, contain costs or, occasionally improve customer satisfaction.  But social is different.  It is no stretch of the imagination to say that social can do all three and even more important, it is giving companies the ability to change who and what they are.

When you get down to it, social’s core offer and benefit is that it enables you to make a great business by leapfrogging over old ideas, processes and procedures to make customers more satisfied which in turn leads to everything else like money.  By making information ubiquitous social (i.e. employee collaboration) ensures decisions can get made for the right reasons and in the right time frame and helps build a great business.  Building a great business, a great company — the legacy — is where it’s at.

So the big mystery to me is why the vendors in this fantastic market are selling their wares as technologies or services.  Sure, social technologies in all their forms are new and the market requires a certain amount of massaging to get early buyers.  But rather than selling social as an end in itself to mid-level managers, I think I’d be selling the legacy idea to the C-suite.  You don’t get to make a pitch like this every day and it would be a shame not to take advantage of the opportunity.


Here’s a quick shout out to Jobscience, one of my clients, for winning a Salesforce.com AppExchange Best of ’11 Award for Human Resources and Recruiting.  What’s especially sweet about this award is that it is crowd sourced form Salesforce customers.  That’s right.  The people who buy and use the stuff said this is the best on the AppExchange.

As you know there’s been a goodly amount of M&A activity in HR lately with Oracle buying Taleo and SAP buying Success Factors.  That’s because HR is an important new frontier for companies who are often competing on the talent they attract as much as they are competing with other forms of capital like VC money and IP.

At least out in the Valley, there are more job openings than there are people to fill them.  The talent drought has made recruiting and holding on to people a more serious thing.  And with this comes the realization that old style HR systems that are attached to the ERP side of the house have a distinct disadvantage.

In his biography, Steve Jobs talked about the importance of hiring the right people and it has made a strong impression on me.  He said,

“…I realized that A players like to work with A players, they just didn’t like working with C players.  At Pixar, it was a whole company of A players.  When I got back to Apple, that’s what I decided to try to do.  You need to have a collaborative hiring process [my emphasis added].  When we hire someone, even if they’re going to be in marketing, I will have them talk to the design folks and the engineers.

In this environment, with a plethora of unqualified applicants trying for advanced jobs and a regulatory environment that sees to it that everyone gets a fair shot, the pressure on companies to conduct those collaborative hiring processes quickly so that they can put out offers ahead of the competition is intense.  Jobscience takes a front office approach to the HR challenge and the people who know best, have said that it’s got the right stuff.

Equally important, Salesforce didn’t have to spend a billion bucks to get Jobscience.  This is just another example of the power of real cloud computing.


You may remember the subscription economy from previous posts.  It’s one way to make sense of cloud computing and the many new and very different ways of doing business on the Internet.  We’re most familiar with software as a service and how different it is from conventional licenses; so familiar in fact that I don’t need to describe it for you here.

But subscriptions as a way of doing business are just about everywhere; they’re not just in tech anymore.  For instance, if you want you can get your clothing as a subscription, and not only that but men (who as a group are notoriously lazy shoppers) have sites dedicated just to them.  You know the trend has arrived when something like men’s clothing is available as a subscription.

Nonetheless, we’ve more or less glossed over everything below the waterline in this new approach to business.  It’s taken over ten years to get the idea of the subscription economy into our noggins but we’ve barely started internalizing what it takes to support it and report on it as a business.

This all came into sharp focus for me last week when I reviewed Salesforce.com’s Q4 and annual earnings call with Tien Tzou, CEO of Zuora, a company that specializes in what’s below the subscriptions waterline.  Tzuo is also an alumnus of Salesforce having been its CMO and chief strategy officer before starting Zuora.

As you know, subscriptions operate through customer payments on a periodic basis.  The industry became known by its per seat per month pricing but that doesn’t happen much these days because monthly billing got to be a challenge with big deals.  Today customers sign contracts for a fixed length of time and vendors invoice periodically.  A typical example might be a three-year contract with annual or quarterly billing.  Here’s where it gets interesting.

The financial analysts and other Wall Street types—whom I have absolutely nothing in common with—are very accustomed to companies selling products rather than subscriptions and collecting the money net 30 or whatever and moving on to the next opportunity.  Subscriptions have a mixed bag of revenue recognition ideas that challenge the status quo (which has very well defined ways of recognizing revenue) significantly.  Product companies don’t have much when it comes to reliably forecasting future revenue streams but subscription companies are just bristling with information.

Take the Salesforce revenue numbers from last week’s earnings call as an example, and here is where I am indebted to Tzuo for his insights:

  • Quarterly Revenue of $632 Million, up 38% Year-Over-Year
  • Full Year Revenue of $2.27 Billion, up 37% Year-Over-Year
  • Deferred Revenue of $1.38 Billion, up 48% Year-Over-Year
  • Unbilled Deferred Revenue of $2.2 Billion, up from $1.5 Billion Year-Over-Year

If you are reading this (thank you very much) you have at least an intuitive understanding of revenue but deferred and deferred and unbilled revenue deserve explanation because who really cares about unbilled deferred revenue—isn’t that complete vapor?

As Tien Tzuo said to me, think of it this way.  You do a deal with a company in which you agree to supply your service for three years for $36k or one thousand dollars per month and you agree to invoice once annually, in advance, for $12k.  At the very beginning then you have $24k in unbilled deferred revenue and, since you bill in advance, you also have $11k in deferred revenue and $1k in real live revenue which you can recognize.

This $1k is also known as MRR or monthly recurring revenue.  Theoretically, if you add up all the MRRs on the books you can get very close to the forecast for the quarter.  But there’s also an upside possibility that you’ll sell something else.  If you do and you invoice for it, you’ll add to that pile of money.  Unfortunately, there is also a possibility that some of your MRR will go away either because the customer quit or because they didn’t renew or whatever.  We know this as churn so you really need to discount the MRR by the churn rate to get a better sense.  Life would be simpler if we could all agree on using a metric called the annual recurring revenue but, curiously, ARR doesn’t exist yet.

So, all this has the potential to drive Wall Street types nuts.  They’re good with the $1k in MRR and they can tolerate the $11k in deferred revenue because it’s in hand, and the $24k in unbilled deferred revenue is sort of OK (but not really) because there’s a contract in place that defines the annual billings.  But this does have one effect that many financial types like—it smoothes out the revenue stream for months in advance.  Bookings might fluctuate but the monthly revenue stream should be rather predictable.

Nevertheless, it’s bookings that have recently made some people skittish.  Sales has always been a lumpy affair.  Some months many deals get booked and other months not so much.  Early on the software industry trained its customers to wait until the end of the quarter to make purchases because that’s when they had leverage.  Finance guys didn’t like this but they got used to it.

Today, the quarterly incentive is largely gone due to monthly recurring revenue but people still obsess over bookings.  What if bookings go down for a few months?  The logical answer is that future revenue would eventually feel it but it’s equally true that bookings could recover before real revenue took a hit in which case the fluctuation in bookings would not be seen.  Call it seasonality.

Let’s summarize all this.  Salesforce has $1.38 billion in deferred revenue, which I presume will be realized in the next 12 months.  During that time they are advising us that the company will have revenues of between $2.92 and $2.95 billion.  This means that they have about 47 percent of next year in the bank.  They also have $2.2 billion under contract to be invoiced (unbilled and deferred) and some of this invoicing will be done at some point beyond the next year.  In the last quarter Salesforce had $632 million in revenue which grew at 38% year over year.  At some point in the next twelve months Salesforce could have a quarter in which it books revenue of $750 million which would give it a forward looking run rate of $3 billion.

It’s still an uphill battle explaining revenue recognition and the difference between conventional companies and subscription companies but at least there’s a lot of black ink to do it with.


Salesforce announced it was holding off on the grand corporate office park it had been envisioning at Mission Bay in San Francisco.  It was a wise move by a company that should be focused on growth.

In reading the Steve Jobs biography I was amused to see that he loved design so much that when he was given unfettered control he built some really, really nice corporate offices.  Sometimes it all worked out fine, as it did at Pixar, and sometimes it simply burned through cash as it did at NExT.

Salesforce might have been wise to hold off on the massive building project for at least a couple of reasons.  Cash leads the list of course.  The company already spent over $100 million purchasing the 14 acre plot and not a shovelful of earth was moved.  Building the place was only going to turn the land into a money pit, so I applaud the decision.

But the other reason is more dog food related.  Salesforce is pioneering the social enterprise, a strategy driven by its software that unites people in a company regardless of location, to improve corporate performance and customer delight.  So, you could easily say that Salesforce is its own test tube.  It is innovating on itself and expecting to share its findings with its social enterprise brethren.  How better to do this than by making do linking multiple floors and locations around San Francisco?

It might not be ideal and it might not be fun (building things is great fun) but the company ought to be focused on cracking the Fortune 500 at this point—they’re so close—and a major building project might be defocusing.

Back to the skunk works.


There’s been a lot of activity on the Web and in our industry in the last week and I thought it might be fun to try and tie at least some of it together.  Much of it in one way or another involves Facebook—or FB as the proposed ticker symbol suggests.

Part of an email from John Borkowski of WebiMax reads:

“Kenneth Wisnefski, online marketing expert, and founder / CEO of WebiMax, suggests Facebook will not be worth the investment.  “In the first few days of trading, I expect the stock price will soar due to social-media hungry investors,” states Wisnefski.  (We saw this with LinkedIn’s IPO).  “However, once the market absorbs the emotions and begins to invest based-on fundamentals, it is clear Facebook will not be a solid investment.”

“Wisnefski refers to Facebook’s few revenue streams.  Given the fact that 85% of their revenue is dependent on ads, the company is not diversified enough to generate income from additional streams.  EMarketer reported that Facebook’s ad sales grew 104% in 2011, but are only expected to climb 58% in 2012, and 21% in 2013.  The diminishing growth stems from intense competition from Google and Bing and suggests advertising on Facebook may be – simply put – a fad.

Facebook a fad?  You mean like CocaCola and cheeseburgers?  I wrote back:

“Thanks for this information.  There’s a lot to agree with but I am not sure I agree with your conclusions.  In any investment scenario you have to consider the time horizon.  FB will be an interesting flip for those lucky enough to buy at the offering price and if history is a guide it will settle down as more value conscious investors refuse to pay the premium and pick it up after it settles.

“Longer term you are right, the company has a structural issue with its markets but the thing your analysis omits is the potential the company has for growing new markets as well as for capturing share of what’s there already.  It’s risky in investments to take into account futures that are not even or barely imagined but I suspect that someone buying FB after the hoopla and who holds the stock for a number of years will discover they’ve bought the next Apple and they will be amply rewarded.

Reasonable people can disagree.  They should too because I am not licensed to give financial advice—keep that in mind.

Salesforce announced desk.com, a rewrite of Assistly on Force.com, which the company bought in September.  Desk.com is Salesforce’s entry into SMB support.  It’s quite a trick and I like the idea, especially the innovative pricing model, which is custom tuned to SMBs.  For more of my analysis, you can go here.

Then there’s the broader world, there always is.

In Friday’s New York Times (I should say that I will always be a Red Sox fan, but the Times rocks) there was a lead article that brought social media into the public square for the second time in a couple of weeks.  The breast cancer advocacy organization (I guess that’s really anti-breast cancer if you want to get technical) Susan G. Komen for the Cure foundation announced it was no longer funding breast exams through Planned Parenthood.

A viral digital uproar ensued.

Apparently the Komen people were getting nervous about being singled out for supporting Planned Parenthood by Republican presidential candidates and their mysterious Super PACs that Mitt Romney seems to think are people too.  There’s precedent for this case of jitters.  Look what happened to the community-organizing group, Acorn, in the last election when it was linked to that radical socialist Barak Obama.

But four years is a long time in politics and it is practically a geological era in tech.  Four years later we have FB, Twitter, LinkedIn as mature products and as I wrote recently, ordinary people are regaining a sense of the commons and commonwealth as a result.  The people have their soapbox now.  It’s electronic, digital, mobile and global.

And speaking of global, back in the Middle East Iran actually tried to rebrand Arab Spring for its own purposes.  In a ham-handed effort reported in the Times, “More than a thousand young activists were flown here earlier this week (at government expense) for a conference on “the Islamic Awakening,” Tehran’s effort to rebrand the popular Arab uprisings of the past year.

Didn’t work.  Not even close.  Thumbs were typing and unless the clerics in Teheran wise up they could be next.

Finally, by now the Super Bowl is old news but as I write it, everything is in the future.  One thing that’s not in the future and which is again brought to us by a combo of social media and YouTube are the Super Bowl ads, which started leaking out weeks ago.  Another article from the Times  discusses them and more importantly, references many a big agency that brought them to life.  It seems you can’t swing a proverbial dead cat without finding some social media expert these days.

Good on them all.  What did we do before social media?  It’s now embedded in our lives with no sign of going back.  It’s certainly made our lives richer and more productive and it’s brought us together on important issues.  But now we need to stay vigilant to prevent it from being completely co-opted.  The attempt to rebrand Arab Spring might have been ham-handed but it could happen anywhere.  And as far as the FB IPO naysayers are concerned, we’ll have to wait and see.  But I’ll sleep well.


Earlier this week Lithium Technologies announced completion of its D round of financing valued at $53.4 million.  You can read the press release to get the details but the big question I have is what’s going on in the industry?

Lithium is not the only company in the last six months to pull in sizable sums from the investment community.  Without doing much research I can name several others that have raised tens of millions of dollars in later rounds including Zuora, Marketo and Aria and there are others out there.

Not long ago it was common knowledge that SaaS or cloud companies needed less cash to get moving.  Gone were the days when a company like Salesforce.com had to spend upwards of $100 million to get people thinking about the cloud as a suitable alternative to business as usual.  But the latest news seems to be taking us back because today’s companies seem to be raising as much money as ever.

It’s true you don’t need to spend lots of moolah to define the cloud market these days but something else is demanding cash.  Companies are staying independent longer and the idea of going public is again on the minds of investors.  Over the last few years of recession and retrenchment, the IPO market was practically frozen and the only way to have a liquidity event was to sell your company to a bigger and more established company.

But also, earlier IPOs happened in relatively frothy environments in which categories and markets were still rather fluid and the companies that went public back then were less mature.  Today companies like Lithium, Marketo and Zuora are raising tens of millions of dollars to support activities like opening foreign markets with offices and staff and to flesh out product lines.  They may even be in the hunt for less mature companies that they can purchase—and all this before taking a nickel from the general public.

All this suggests that the IPOs, when they happen will be at much higher valuations and the shareholders will have reasonable expectations of profits from the newly minted public companies.

All of this may be a sign that investors, i.e. venture capitalists, are still somewhat gun shy of putting money into green startups preferring to invest in late stage companies with compelling stories and IPO event horizons that can be measured in months rather than years.  Many have investments on the books that go back to the Bush administration’s first term and their investors are understandably interested in liquidity also.

So Lithium’s news is as interesting for what it says about that company and its social CRM marketplace as it is for what it tells us about the investment market and where we are in it.


There was an interesting article in the January 2012 edition of Vanity Fair a magazine I’ve come to enjoy though for many years regarded as another of those things my wife would like more than me.  But VF carries an interesting blend of current events and politics as well as the glossy pictures and stories of pop culture icons that seem to be necessary to sell a magazine these days.

I say necessary but for the exception of the New Yorker.  How those people continuously pump out the level of quality journalism that they do, on a weekly basis, always amazes me.  Malcolm Gladwell and James Surowiecki write for the New Yorker even after several books each and strong public speaking careers.  That magazine has a formula that is no longer being emulated, I fear.

At any rate, the VF article is from the issue with Lady Gaga on the cover, and is titled “You Say You Want a Devolution?”  It’s about the apparent ossification of American culture over the last couple of decades or a bit more — roughly the span of time that I have tried to be an adult.  The article’s main point is that we’ve made precious little progress in style, design and culture in that time.  One hypothesis is that our creative juices have been consumed by the tech revolution.

Internet, WiFi, social media, video, audio, telephony all running through the gadget plus DVDs and a long list of other inventions that weren’t readily available or even invented two or three decades ago have consumed that part of our waking hours that other generations dedicated to style and culture.  For emphasis, the article asks us to ponder pictures of street scenes from various decades.  If you did this you could easily discern the difference between the 1960s and, say, the 40’s, but the 90’s and today?  Not so much.

Not long ago I suggested that straight-line extrapolation from the present to some point in the future is not very good but it is what we often settle for when forecasting.  VF seems to be telling us that lately the straight line is fine.  But here’s the kicker, straight lines work best within a paradigm.  If you can identify the paradigm then maybe you can reconnoiter and find your place a few pages forward.  If you are transitioning paradigms all bets are off.

I don’t think 2012 will be like what came before.  I think ’12 will be the beginning of a new paradigm and I have no data to support this idea other than the knowledge that paradigm shifts, like unexpected guests for the holidays, don’t warn you that they’re coming.

So, what’s in store for ’12?  Well, we’ve been in a quasi recession for almost four years, unemployment is stubbornly high and in case you’ve been napping all this time, ’12 is a leap year, I mean, an election year.  If there’s one thing that galvanizes politicos of all stripes it’s an election and while everyone in Washington might hate everyone else’s guts, there will be enough collaboration to cobble together enough votes to do something about the economy.  That means a few more jobs and more meaningful growth than has been the norm lately.  Perhaps there will even be an extra bowel of gruel for us ninety-niners.

So I look for a bounce in economic activity, that’s the easy part.  What’s harder is figuring out where the bounce happens.  I watch fuel prices and note the relationship between them and economic activity.  Low prices correlate with slack demand but goose the economy and watch the price of benchmark crudes like West Texas Intermediate and Brent go north.

Note: I am not advising you to buy or trade crude oil or to do anything else investment wise with this analysis.

But if crude does go north companies that want to catch the economic rise will need to be smart about keeping carbon out of their business processes.  That means conventional business — Dare we say business as usual? — breaks down and that is where the new paradigm comes in.  Smart companies will be cranking up all the front office tools and social ideas they’ve accumulated over the last five or ten years and realize that a lot of it fits together and changes life as they know it.

The fit drives more frictionless business that naturally reduces reliance on face-to-face meetings and all the travel and expense that goes along with it.  I am not simply saying that we’ll simply substitute a social encounter for the physical equivalent and be done, though we will.  But the actual need for some of those more elaborate interactions will simply evaporate as we use social and other technologies to know more in the first place.

Marc Benioff is fond of quoting some of his company’s data concerning Chatter, one of its social media tools, and I don’t remember the exact numbers but they include categories like reductions in email, meetings, phone calls and more and the reductions are significant.  The information people need and that they’ve historically received through these older sources has been rendered in a more available and efficient format through social media.  This has yielded a new term in the industry, the social enterprise, and it typifies the paradigm shift that I am talking about.

The social enterprise is not limited to a few startups at Routes 92 and 101 south of San Francisco.  We saw companies like GE Capital, Burberry and Toyota drinking the lemonade in 2011 and ’12 will be the year they start to show results.  2012 will also be the year that middle adopters and laggards in general wonder why they aren’t feeling the warmth of the recovery and this will be their answer and motivation.

We’re fond of saying that the economy turns about every ten years and we are also fond of remembering that the year of the network actually took a decade to be realized.  These are not contradictory.  Networking’s early adopters got value right away from their investments but the economy made a dramatic turn once networking got to critical mass and I think we’re in an analogous situation with social technologies.

We’ve been messing around with social for a long time but two important threads are being woven together.  Technological dispersal and personal understanding of the technologies is meeting economic demand for better, faster and cheaper ways to do business in an era of limits.  That is what’s driving the new paradigm.

We might have to wait a bit longer to get new hairstyles, music genres and fashions but I think the thing that’s driven us in the tech era (innovation) is a live and well and we’ll see plenty of it in the new year.  Who knows?  I could even be right.


The McKinsey Quarterly is pumping out some very useful and interesting and I might even say fascinating material on a variety of subjects.  I am trying to make them a habit and you should too.  My interest here is to share some ideas on growth, corporate growth, economic growth, the stuff that makes economies work.  But first I also have to caution that past is not prologue and I have lately read some influential books such as “The End of Growth” by Richard Heinberg that take the opposite tact.

Nonetheless, McKinsey is useful in helping us understand the recent past and in helping potentially settle a simmering disagreement that I have with Cowen Research over Salesforce.com’s recent acquisition tactics.  That’s a lot for one post and I am not sure I am up to it but WTF?  No body reads this anyhow.

Way back in April 2011, McKinsey published “The Granularity of Growth” a report on how companies pursue growth.  They found growth centered in three areas: “portfolio momentum, or the market growth of the segments in a company’s portfolio; M&A; and market share gains. The exercise showed us that companies outperforming their peers on two or three of these drivers grow faster and achieve better returns than those that outperform on just one.”

The research started in 2007 just before the meltdown and the April report update provides perspective on how companies have fared in the intervening turbulent times.  The most interesting findings involve companies of a certain size, with revenues in the low single digit billions.  Again quoting McKinsey, “companies from emerging markets are outgrowing competitors from developed ones at a startling pace. The third [finding] is that the smallest companies in our database, with revenues of less than $1 billion, are growing by increasing their market share to a much greater extent than larger companies are. For the latter, the role of share gain is marginal or even negative.”

What interests me in all this is that the company type discussed in the quotes is exactly the kind of company that Salesforce is.  And the tactics that Salesforce has pursued are those described by McKinsey, plus or minus.

When you compare this with Cowen’s recent critique of Salesforce’s strategy (er, ah, tactics) especially over the last few months—its entire lifetime really—you see that the company has pursued what in retrospect looks like an optimal approach.  True, the approach may not resonate with what the financial analysts believe is optimal but last time I looked very few of those guys were headed for Cooperstown, if you know what I mean.  Moreover, this shows how much the financial community still needs to learn about the subscription before it can make more meaningful contributions to the economic discussion.