Beagle Research Group

On the other hand

It’s worth taking another look at the Siebel-Oracle merger from a different angle.  Too often we make a snap judgment in this kind of situation and it becomes fixed in the mind never to be seriously reexamined.  Rather than that, I did a thought experiment the other day starting with the presumption that Larry Ellison has a grand strategy and that the strategy will work.  It goes like this.

I think we can dispense with questions of whether or not Larry Ellison is pretty smart and knows what he’s doing.  In his long and rather colorful career he has gone from being a startup to dominating an industry he helped create.  Many people may not like some of the methods he used on the way up the hill, but that only puts him in company with Ford, J.P. Morgan, Carnegie, Vanderbilt and a long list of others.  People generally don’t like the disruptor very much until he’s dead, then we largely remember him for his philanthropy — ironic if you understand the Greek origin of the word.

The Goal

Oracle wants to be number one in business applications beating out SAP in the process.  How does it get there?  They can, and have, bought a lot of last generation software companies with large installed customer bases but even an optimist would not call a company of cobbled together applications dominant.  To get to the number one position, Oracle has to find a way to leapfrog whoever is in the top spot now and the way to do that is through innovation.

I have previously criticized Oracle for buying customers (through company acquisitions) rather than innovating new products and winning new customers the old fashioned way and I think it’s a valid point.  In the long run no company can survive simply by consolidating the competition and it certainly cannot become number one unless it’s the last survivor.  My point is that Oracle may have a different plan.

Although Oracle is in the applications business it has frequently been the runner up.  It has good products in ERP but SAP is at the head of the class.  Similarly it has serviceable CRM but Siebel leads that area by a comfortable margin — PeopleSoft had better CRM market share than Oracle and so does SAP.

Leapfrogging strategy

As I said at the beginning, when you think about leapfrogging the competition you need to have a plan that does more than achieve parity with the competition.  Oracle’s strategy has to be the delivery of a full suite of on demand, integrated, front and back office, solutions for the enterprise but to do that Oracle needed to bring in expertise and product from outside.  There are few companies that have been successful with the on demand model.  Obviously, Salesforce.com did it but I’m betting that the markets and the SEC would never allow Salesforce to be absorbed by Oracle.

Siebel’s on demand solution was in many ways a better fit for Oracle’s purposes.  Siebel has the in-house expertise in on demand that Oracle needs (thanks in part to Siebel’s earlier acquisition of UpShot) and Siebel also has a lot of experience dealing with very large implementations at the enterprise level.  Also, Siebel’s base of vertical applications and massive investment in things like its architecture and tools (and some cool stuff in the pipeline) make it a good fit for Oracle provided Oracle lets the Siebel people do their thing.  Finally, culturally, the two companies share memes — the social equivalent of DNA — Tom Siebel is one of several former Oracle executives who have done well starting or running companies using techniques learned at Oracle.

Oracle as consolidator doesn’t wash

Other people might continue to harp on the “Oracle has become another CA” theme, and they might be right.  I tried it and even though I don’t have all the inside information, that went into the decision, it just doesn’t feel right.  Certainly, if Oracle fails to deliver on the grand unified vision those criticisms will grow.

If I was Larry Ellison right now though, I would probably welcome the criticism I’m getting because there’s nothing better in this situation than surprising the market and your competition and no better way to do it than with a little misinformation spread by the people who “just know”.  I hope I am right. 

It would be very good for the entire tech sector and global business in general if we could forecast a time when the infrastructure of computing is recaptured by the solution provider.  Some of the largest potential markets on the planet — Russia, India, South America, and China — could benefit greatly from an IT architecture that significantly reduces infrastructure costs.

While Salesforce.com — as well as NetSuite, RightNow, and some others — has been selling this idea consistently for six years, it will probably take more than a handful of emerging companies to take the market to the next level and a company with Oracle’s stature would provide some additional leadership.  I could be very wrong in this analysis and only the passage of time will clarify the situation but the necessary drivers seem to be in place.  Most of all, Larry Ellison is a complete original and I can’t see him being just “another” CA, or another anything else for that matter.

Instant Legacy

Ok, so here we are a week later and what do we know for sure? Well,lots of things. First, Oracle now has seven assorted CRM packages from its acquisitions and those of its acquired companies if you count Siebel. The issue with counting Siebel is thatthe deal is not done yet. Dont look for the shareholders to derail this one since many have been clamoring for greater returns on their investments for quite a while. And dont look to the SEC to stop this one either. Unlike Peoplesoft, Siebel wants to be acquired, so the whole process should go much faster.
Meanwhile there are several factors which, deal or not, stand in the way of Oracle becoming the most dominant force in the enterprise software industry. Among them are the competition, Oracles increasingly decrepit business model, and time. By far, look to Oracles business model to weigh down the company.

The model
Oracle started life on the mini-computer. Its claim to fame was its ability to run on just about anything that had silicon and drew power from a socket. Last week in San Francisco I was joking with some analysts and reporters about what a big deal Oracle for VAX-VMS was. When the mini-computers and their makers went to the bone yard Oracle continued humming away by introducing tools and financial applications as it embraced client server computing.

In many ways client server was an easy evolutionary shift for the database giant because some organizations simply continued using their mini-computers with PC networks. Initially, manyusers simply used the PCs in emulation mode (i.e. like dumb terminals) as they gradually converted to more sophisticated applications.

So the point now is that Oracle continues to look like a client server application provider despite advances in the Web orientation of its database and the fact that even companies like Salesforce.com run their hosted services on top of Oracle databases. But by buying up so many leading client server application companies and vowing to make it all work together, Oracle has cemented itself into a paradigm that is on the way out. Moreover, the vow to make it all work is a distraction from what should be the work of leading software vendors like Oracle to usher in the age of the utility model for enterprise computing.

It was said a lot last week but it may bear repeating, in its present form Oracle looks a lot like a later day Computer Associates gobbling up healthy but troubled or sun-setting applications companies with a plan to capture the maintenance revenue. In my view, there is something almost biblically foolhardy about trying to capture market share by buying up your competition, sort of like trying to bail out New Orleans with a sieve.

Time and competition
There has been a lot of talk about 2007 and 2008 recently. Microsoft said that their converged products will hit the market some time that year, and now Oracle is forecasting great and wonderful things beginning to hit the market two years hence. The trouble is that markets dont stand still and there are a lot of existing and emerging competitors out there that can use the intervening time to tell a more coherent story and grab a lot of market share, especially from defecting Oracle customers whowant stability or who may not want to put all their delicate eggs into the Oracle basket.

SAP for one stands to be a big winner from the Oracle mashup. This company already has tens of thousands of customers and is further along in the quest for a fully integrated front to back enterprise business application suite. Then there are the on-demand vendors like Salesforce.com, NetSuite, and a long list of others that want to move into the space. Last week in San Francisco, Salesforce.com made a big splash with an announcement that pits it squarely against Oracle, SAP and all the other companies still selling a modified client-server suite.

And for different reasons, Salesforce.com has also positioned itself in direct competition with Microsoft (and later Oracle) for the databases and tools that enterprises use to fire up a simpletracking application for small groups, for example. Think of it. There hasnt been an improvement on the basic idea of using PC databases and tools to develop small applications since Intel was numbering its chip families. While databases and tools were a vast improvement on spreadsheets and index cards, they were hardly intuitive for a business user. And when the apps were done, they didnt always feed into the corporate data repository.

The on-demand model offers orders of magnitude lower costs which make it immediately attractive at the enterprise level and the latest announcements from Salesforce.comindicate that a community of secondary providers, also known as partners, is growing up around the service. The result will be an accelerated build-out of additional applications such that the on-demand service will be able to rival anything that comes to market in, say, 2007.

The road ahead
So Oracle has some work ahead of it. Oracle has created a new category of software which I have heard called instant legacy meaning that regardless of the product plans and futures of acquired applications, with Oracle at the helm its a new ball game. The ideas of fusion and long term support for the acquired applications are really separate, not partof a continuum. To do fusion in a two year time frame means that a lot of redundant code will be left out. And as a practical matter, it only makes sense. If Oracle has seven sales force automation products, they will mostly overlap so six are redundant. That means the Siebel products will most likely be the ones that dominate whether its in SFA, marketing or call center.
As for the installed customer base the real prize Oracle was shooting for when its time to look for the next generation of business applications smart buyers will still perform their due diligence and Oracle will very likely be invited to propose. But that seems a rather small return for the billions invested in the takeovers. Thats why I say that the company should have innovated its way to the next generation rather than buying up competition it might have defeated in the field anyhow.

Dreamforce05, Seismic Shift

It’s very rare that you get clean demarcations between historical eras.  Maybe the asteroid hitting the earth 65 million years ago was such an event but I wasn’t there to experience it so I can’t tell you.  Monday September 12, 2005 will go down as a deep line in the sand identifying the before and after in the enterprise software industry.  It was the day that Siebel agreed to be acquired by Oracle and coincidently the day that Salesforce.com opened up its Dreamforce user conference in San Francisco.

The two events were like bookends and this is as much about Oracle as it is about the rivalry between Salesforce.com and Siebel because in one day Oracle conceded any pretense of being a leading software industry innovator while Salesforce.com happily crowned itself.  In all cases, the driving factor was not so much technology as it was business model and finance.  Let me explain.

Oracle has been dominant in application development for a long time.  Since the 1980’s, first its database and later its tools and its enterprise business applications set the standards for how computing is done for big companies.  Oracle ultimately spawned numerous software companies — Siebel and Salesforce.com among them — that essentially followed the same model of building large suites of software that enterprises would spend millions to license and millions more to configure, customize, install and train end users to operate. 

But the model was getting old.  It was challenged by Salesforce.com more than five years ago and the upstart company with the brash slogan of “The end of software” got away with its challenge turning itself into one of the fastest growing software companies and a public company in only six years.  Meanwhile, Oracle, Siebel and all the others were content to play the part of lumbering dinosaurs.

Monday changed all that:  on that day Salesforce.com presented to the market its second major disruptive innovation in enterprise software when it announced Appforce and ApplicationExchange, two products that would definitively put an end to the tedious and expensive way we have come to believe enterprise software can and should be built. 

Briefly, Salesforce announced that its users and partners could now use the Salesforce.com architecture to their hearts’ content to build any applications they want.  More importantly, Salesforce.com through its ApplicationExchange lets all of these people evaluate, rate and purchase applications made by others for their own use within the hosted service.  All applications built this way have the same underlying database, operating environment, look, feel, and security.  And they can be manipulated and customized using the tools used to build them.

Globalization

For the first time in history application software development does not require a heavy investment in infrastructure, all that’s needed is a PC with an Internet connection and a browser.  With such a low barrier to entry we can reasonably expect to see a swarm of new applications hit the market developed by people on the other side of the planet in economies with very different — read lower — measures of fair value for work.  But it also means that if you have a garage or a spare room and a PC you can be in business too.

It is equally important to observe that with an online marketplace for enterprise software — which is effectively what the ApplicationExchange is — the cost of selling and marketing software will also come down significantly.  “Frictionless” sales and marketing are words that come to mind here.  Fewer people will be required to do the work so emerging software companies will not require the same amounts of money they once did and that will have a profound effect on the venture capital community. 

While we’re at it, the systems integration community is in for a shock of its own.  Salesforce.com demonstrated how applications developed independently using its platform technology could integrate — automatically — with whatever else a customer is using from the vendor.  Translation: you can take a test drive of new software with your own data at your leisure; there will be no more elaborate demos and proofs of concept.

The New Software Economy

In short, Salesforce.com introduced the world to a whole new software economy on Monday, the same day Oracle gave up on innovation and a week after Microsoft more or less did the same.  Talk about inflection points.  At Dreamforce, Salesforce.com CEO, Marc Benioff, compared Oracle to Computer Associates (CA) the company that bought up a number of mainframe software companies at the end of the mainframe era.  CA’s strategy was to simply milk the maintenance stream until customers upgraded to client-server systems.  Now, Oracle, the company that led the charge into the relational database era and client server computing, finds itself in a similar position.

You might ask why companies, like Oracle and Microsoft, which are full of smart people, would take such predictably suicidal turns.  And while the answers are numerous and complex, I think you need to look closely at business models and the financial community.  Companies are founded on certain assumptions about how they make money (business model) and how much they can make (margin).  The traditional client server model which is dying has a built in expectation of revenues and margins and so does the on-demand model.  Unfortunately, the financial community simply wants to know how well your model worked in the 90 day period just ended.  In that way the decline of a business model is like boiling a frog.

But each successive model in this industry has offered orders of magnitude lower costs to the buyer — and lower margins for the vendor.  Ultimately, I think it’s far easier for a company to burrow in and milk an installed base than it is to change its model and re-educate the public markets about the realities of doing business in a new era.

So rather than smooth transitions from one era or style of computing to another, we have seismic events like we saw on Monday.  Don’t look for everything to change literally over night; these things can take years — client-server took a decade.  There’s still work to be done building out the model, Salesforce.com is not the only player, and it may not ultimately be the one that gets all the way to the goal line.  On the other hand, a decade might be far too long.  I started writing about this new model two years ago in a white paper called “The New Garage” and I was very surprised at how quickly yesterday arrived.

Oracle-Siebel First Reaction

What does this deal mean for the future of the CRM industry? 

I think it's important to take a deep breath and understand that although ownership has changed, that is largely a financial matter the financial economy is not the 'real' economy where products and services are bought and sold so that companies can do useful work. That said, I think it opens up a lot of opportunity it puts more substance behind CRM and Siebel. Oracle had been a #3 or #4 player in CRM and I don't think acquiring Peoplesoft was the knockout punch that Oracle needed to become dominant in the space. But now with Siebel in the stable they have the #1 CRM provider with a great deal of overlap into the same enterprise customers Oracle has always sold to and the Oracle-Siebel Peoplesoft combination gives that combination the critical mass it needs to compete with SAP on the high end and others like Salesforce.com on the low end. Nevertheless, There is also plenty of risk inherent in this combination. Oracle
now has a combination of some very good products that don't automatically work well
together. It's sort of like having a Porsche engine disassembled on your garage
floor. Putting it all together is going to be critical. Meanwhile none of the
competition is standing still.


Is this a smart move for Oracle?

No, it's stupid, frankly. 

I have previously said that Oracle had lost its ability to innovate when it bought Peoplesoft. It would be better, I think, for a company like Oracle to invent something than try to take the Lego route. But obviously, Oracle decided that it was more expedient to buy the Legos and put something really big together. This is all too reminescent of the Comoputer Associates era when CA bought up mainframe software companies and milked their maintenance streams.  Long term this is bad for Oracle and bad for Siebel but probably great for Salesforce.com, RightNow and many other on demand CRM vendors.

What does this mean for existing Siebel customers?

Not much. Part of taking a deep breath is to remember that the software these customers have still works, it's didn't expire at mid-night. Since many of these companies already have relationships with Oracle it might be greeted with a major yawn. The biggest question I have is what about IBM? Siebel is a partner with IBM in the on demand space. IBM sells Siebel CRM OnDemand and hosts it. How will this event affect that relationship?

Will there be any real choice left in enterprise CRM?

I think this leaves plenty of 'choice' in Enterprise CRM -- Siebel continues to be a strong product and brand, SAP has new strength and companies like Salesforce.com have moved up in the pecking order. Salesforce has been making great strides in the enterprise and it wouldn't surprise me if this event lends more clarity to the enterprise decision -- to host or not to host becomes the biggest question. If that logic prevails, might it mean that CRM becomes more likely to be the application that enterprises host?  And therefore might Salesforce.com be considered on a completely equal footing with the traditional vendors?  This is a major positive for Salesforce.com.

Microsoft's Swiss Army Knife

Microsoft shot itself in the foot yesterday when it announced a plan that will converge some of its business applications in an attempt to court medium sized companies. In a series of announcements by Bill Gates and Steve Ballmer, the company set its sights on integrating its flagship Microsoft Office products, back office accounting and front office CRM and other products. The company also announced an initiative to compete in the on demand CRM domain with Salesforce.com while continuing in its core business of providing traditional software licenses.

Where to begin? I can see at least three reasons for concern: in no particular order, they are: convergence, divergence, and pre-announcement. Lets take them one at a time.

Convergence
Absent any real new, new thing on the technology horizon, vendors are turning to convergence the bringing together of separate technologies into a single uber product as a means of bringing new products to the consumer. Ironically, an opinion piece in the September 1, issue of The Economist took aim at digital convergence in the home but many of its observations fit equally well in the software business.

Enumerating converged devices of the past, The Economist went to the venerable Sears catalogue of the early 20^th century, to find converged devices: among others, ...A vacuum cleaner that also dried hair, heated rooms and spray-painted walls... and summarized its objections as, A converged device is invariably complex, and people like simplicity. A converged device represents a single point of failure, and people like to know that they can still look at baby photos even if the TV breaks down.

Theres also the eminent marketing guru, Al Reis, who discusses convergence in terms of the Swiss Army knife. Lots of people have them, but who uses them? Each element in this converged device is a compromise the fork is not as convenient as a real fork though better than nothing. OK, but how do you cut a steak if the knife and fork are on the same handle?

No doubt, Microsoft will defend its decision and product direction as a way to bring greater customer value by simplifying the buying and implementation decision for companies of up to 1,000 people. That part of the market really doesn't have time or resources to do it themselves. And theres the rub. Convergence at the application level is appealing because no one has yet brought to market a good, cheap and easy way to make disparate applications work together,but that is changing.

Major business software providers like SAP AG, Oracle, Siebel, Salesforce.com and others have each made strides at enabling convergence of diverse applications. The need to buy it all from one vendor is waning, as it must because no vendor can support the increasingly complex matrix of applications. It is impossible to know which attempt will become a standard and at this stage all could, but the betting has to be that the tide is turning against converged business software of the type Microsoft envisions.

Divergence
This might be less of a problem for Microsoft but mostly because the company has not diverged very far. The divergence in question is the idea of supporting both a traditional Microsoft CRM product and an on demand product which Microsoft president Steve Ballmer said would give Salesforce.com a very effective run for its money. The easy problem with this divergence is keeping the products synchronized and different sales channels motivated and out of each others way you'd expect they would go after the same customers after all. Those problems are easy both relatively and because Microsoft has so many resources.

The harder problem for Microsoft is its business model. The company has grown big and profitable selling licenses to personal software products, networking and database products according to a story in the Seattle Post Intelligencer, the company's business unit Microsoft Business Solutions lost more than $200 million last year.

The point is that the market is taking dead aim at the on demand software delivery model which has very different financial underpinnings can Microsoft go against this tide? Alternatively, can Microsoft skillfully re-architect itself to become an on demand software provider? If so, can it re-educate Wall Street about earnings expectations? At some point in the not-too-far-off future, it needs to make these decisions.

Pre-announcement
Lastly, the announcement I read said that aside from some re-branding to a new Microsoft Dynamic badge much, if not most, of the deliverables are scheduled for 2007. That's fifteen months into the nebulous future and practically a whole software generation away. Customers are expected to buy the new Microsoft Dynamic products and wait for the cavalry to come and link it all together. The problem, as I see it, is that no one else is standing still. For example, in the intervening fifteen months SAP will, no doubt, have an improved NetWeaver and Salesforce will have gone through 4 or 5 new generations of its products. Meanwhile, no one expects Oracle, Siebel and all the others to take a semi-permanent vacation.

All together, it looks like the people in Redmond are trying to play catch up in a big way. It would be a mistake to discount Microsoft's ability to catch up. After all they have a lot of cash and a lot of talent to take on the job. Still you have to wonder about a lot of things.

When Apple Computer saw itself marginalized from mainstream personal computing the company went on an innovation binge. The personal digital assistant -- remember the Newton? -- was the first new product to come out of that spree and desktop movie editing for personal use was innovated at Apple as well. And the latest big hit for Apple has been the iPod and iTunes. Faced with maturing markets and no new software niche on the horizon Microsoft has stepped away from innovation and settled on a safe strategy of convergence. But given the meager success of converged products from the multi-function vacuum to the home media-center PC it will be surprising if they succeed.

Time to give ROI a rest

I wonder if ROI is about to lose its popularity as a measure of success in implementing expensive IT projects. I am beginning to see cracks in the façade which is whats driving my curiosity.I have been talking about the end of ROI for a while and truth be told focus on it seems to be cyclical and usually follows a period of great innovation and uptake of new products like the Internet bubble.

You know the ROI drill. The vendor tells you about how much you can save from investing in the latest widget or gadget in the company sales bag, so you buy it. But then you discover that there is a one or two or yikes! three X (and Im not talking Mexican beer here) multiplier for implementation, training, and all the other stuff that lurks below the waterline like the Loch Ness Monster.
If youre early to the party you never see it coming, a bit later and the industry is up in arms about ROI, demanding it as a precondition of even talking to the vendor. Maybe youve been such a vendor I have and its no fun. Still theres usually a sense of Were not going to get fooled again in the air and it is what it is.

But why are we always so disappointed in the repeated failure to garner good solid ROI from our investments? I can think of two reasons. One has to do with expectations and the other with the reality of infrastructure building. Lets start with infrastructure because Im a guy and Id rather deal with that concrete reality than with expectations and feelings at least initially.

I was doing research for a book a few weeks back when a friend recommended that I re-read Geoffrey Moores Inside the Tornado and I am glad she did. Its all there the discussion of infrastructure that is and its one of those things that I had so thoroughly internalized I thought I had dreamed up half of it. Tornado adoption of productslike CRM, ERP, data warehouses, even putting PCs on everyones desks, require massive infrastructure build outs and the massive investments that go with them.

If you want to gauge real ROI you might have to wait years for your ship to come in. Take a look at the investment in PCs that started in the 1980s. It took a decade and a lot of network development and stringing cable throughout buildings before the payoff happened. But sure enough, by the mid-1990s the economy was robust and we were discovering thatwe had reached a new level of productivity thanks to technology investments one that enabled us to have growth without a lot of inflation.

Of course, there are details that I am merrily skimming over but the big point is infrastructure you need lots of it and it aint cheap but once you get there the results and the ROI can be dramatic. Just dont expect to see the ROI next week.

Ok, so now lets move on to expectations because its here that the most work needs to be done. We have painted ourselves into a corner with a mind set I call actuarial thinking, the idea that we can apply accounting principles to every aspect of business and that somehow we have a right to expect results to fit neatly into our quarterly and annual reports because, well, thats the accounting period after all. But as the foregoing discussion of infrastructure shows, the financial payback might easily lag the investment by years plenty of time to ruin the career of the Bozo who thought computer networks were a good idea or CRM for that matter.

Its actuarial thinking that ultimately drives this need for ROI. The opposite of actuarial thinking is what, hopefully, moves a decision maker weighing an investment in infrastructure. Many, if not most, of them are smart enough to know that investments in infrastructure take time to mature. And when dealing with something new, its often hard to figure out what the right time frame is. The opposite that I am thinking of lacks a good term and usually boils down to doing something because, intuitively forget the spreadsheets and the accountants intuitively, you know that getting PCs on every desk or CRM systems before your competitors do is smart and really, really good for the bottom line.

Right now we seem to be coming out of a period of cost cutting and consolidation within many enterprises when all the technologies bought during the bubble were implemented and, yes, infrastructure was built. But we cant go on forever counting our nickels and dimes of cost savings. Growth is on the agenda again and thats when you can expect to actually see the ROI on all those earlier investments.

WizKids -- Emerging companies

I like to find emerging companies that target underserved or unserved sectors with, yes, disruptive innovations. Right now, there are a lot of new or emerging companies - formed by refugees of some of the largest and most successful companies from earlier generations - starting the cycle of innovation all over again. Here's a sampler:

Rearden Commerce
Just when you think there are no more underserved customers you discover the latent pain many large companies have in provisioning services - everything from printing to travel to parcel delivery services and much more. We tend to think about service provisioning as a string of one-off deals despite the fact that many enterprises put a lot of effort into developing relationships with preferred vendors and negotiating volume pricing agreements. When employees don't use those agreements, it ends up costing hundreds of thousands of dollars. Sending a package over night? Which delivery service do you use? What time of day should the package arrive? Do you know the cost differences? Is buying an expensive service above your pay grade?

Rearden Commerce does the heavy lifting by encapsulating the business rules that should drive these considerations and interfacing with the service vendors to ensure that employees use the preferred vendors and get the negotiated rates. It's a simple idea with big implications. To my mind, this company should grow like a weed.

nSite
There are a few products on the market for configuration and quoting but that's not a bad thing given that it takes more than one company to make a market. The interest in this sector, especially by companies joining Salesforce.com's ecosystem remains high and nSite's approach - which is to provide its solution as a Web service - should play well with many different SFA and CRM products. I think this company's challenge is to continue to find underserved customers in order to stay disruptive.

BlueRoads
Although I may have written about BlueRoads BlueRoads before, they deserve another look simply because they are further down the track now. Another sales tool, BlueRoads has carved a niche out of the specialized indirect sales channel which some still call partner relationship management or PRM. But unlike PRM, which focuses a lot on the primary relationship between an OEM and the top tier of the channel, BlueRoads is all about following - and managing - the relationships all the way down to the feet on the street. BlueRoads provides channel visibility back to the OEM that other approaches do not. And because it is offered as a hosted service, partners in the channel are less reluctant to share deal information because this third party is perceived as more able to protect confidential information. BlueRoads continues to gather momentum and customers and at this stage there is organized competition from other established SFA products but the bake offs usually favor this emerging company.

Despite the lack of any one "new, new thing" innovation continues and some of the results are very interesting. I guess you could say it's like baseball and we're in a "small ball" phase right now. Regardless of whether you hit bunts and base hits or homers, the runs count the same.

Communispace 

This company is a pioneer in helping large enterprises develop and work with customer communities to understand what customers think.  The community approach has helped enterprises develop products, refine messages, and zero in on target customers by engaging with them in ways that are both low cost and far more effective than previous outreach attempts.  Communispace has shown that involving the customer in processes from developing branding to co-innovation yields positive bottom line results.

Knowlagent

Beaking new ground in the call center and enabling companies to realize the dream of generating consistent revenue streams from what was once seen as a pure cost center.  In the Knowlagent process, companies maintain high service levels while enabling revenue generation again through better customer engagement.

Five9

The complete on demand IP based call center solution.  This technology radically redefined the call center and enabled entrepreneurial call centers to better fit their services to their customers’ needs even as those needs changed.  Call centers that were once focused on inbound calling only, can now easily configure their businesses to match the demand.  As an on demand solution, Five9 removes much of the risk and expense from call center operations thus enabling call center operators to focus on their businesses and their customers.

ShareMethods 

Adds valuable workflow and document management to on-demand sales force automation (SFA).  This simple innovation has enabled services oriented vendors — whose products are often written deliverables — to craft detailed proposals and incorporate them into a workflow that closely follows the sales process.  This approach has saved time and effort and has resulted in increased revenue.

RightNow 

Has shown how service can be tightly embedded into Web sites and products resulting in a concierge style of customer care that many authors have been calling for.  RightNow’s on-demand solution makes it possible for virtually any business to afford to provide this level of service to its customers.

Eloqua 

One of the first of a new generation of full service marketing solutions available on demand.  While typical on demand marketing is focused on outbound email generation, Eloqua takes an intelligent look at the customer by helping assemble a profile then intelligently marketing to it.  With tight integration to Salesforce.com, Eloqua adds significant value to SFA and creates a closed loop sales and marketing environment that only large companies could once afford.

Salesforce.com

A familiar name that has contributed several major innovations throughout its short history.  The company is being honored this year for AppExchange which we believe is a major turning point for the on demand enterprise software industry.  The significance of AppExchange cannot be underestimated.  Half of the companies in this year's WizKids report are engaged with Salesforce.com in its partner ecosystem in which they deliver complementary functionality to the core Salesforce.com service. 

Selling in the Call Center Is a New Paradigm

A number of trends are coming together to suggest that selling in the call center is going to be an important issue for many companies. First there is the insatiable demand for top line revenue growth every company faces and in an economic expansion that's an especially potent driver. Then there is the issue of organic growth which can complicate issue number one. And finally, this environment is driving a renewed interest in the customer. Let me explain.

The idea of top line revenue growth is one that needs little or no explanation to anyone with a pulse. But the way top line growth has been achieved has changed lately. For many years organizations have grown accustomed to the revenue jolt that comes with successfully entering new markets and coming up with new categories of product or service.

Through much of the 1990's and early part of this decade when growth occurred it was because vendors were out conquering whole new markets. People were buying their first wireless phones, ERP or CRM systems, iPods, or whatever. Market share was of paramount importance and growth was frequently achieved through new transactions; people paid attention to attrition rates too but with so much new territory to cover there was always enough new business coming in to cover the attrition. That's not so true any more.

We are in an era where there is no "new, new thing" and we're reduced to growing business the old fashioned way - organically - which means selling a second or third product or service to a customer. Getting to that hat-trick requires paying attention to the details and actually creating a relationship with a customer that goes beyond the initial transaction. There's actually a whole school of thought on this topic which has been most recently elucidated by Peppers and Rogers in their book, "Return on Customer".

Basically in an era of organic growth one of the most important assets a company has is its customer base; just like one of a farmer's most important assets is his land and that brings us to the idea of selling in the call center. The call center is where you can most consistently touch your customers; it's the place where the relationship is made or broken and the place where loyalty is defined.
We all know that building loyalty and through it repeat business is the way to generate revenue growth in an organic growth era. This revenue is frequently the most prized because it comes with greatly reduced cost of sales and therefore increased margin. Selling into your customer base is like passing on a price increase without anyone knowing about it.

All the preceding is good but according to research we conducted earlier this year, most of our call center thinking is still centered on getting people off the phone fast. We use metrics like call duration, time in queue, percentage of first call resolution and that old chestnut, customer satisfaction.

It still surprises many of us that satisfied customers don't buy more and sometimes leave for another vendor's offer. But it shouldn't surprise anyone. When you conduct a satisfaction survey you get exactly what you asked for. In this scenario when a customer gives an opinion on satisfaction it is an opinion about the most recent transaction and it can be boiled down to whether or not the person feels he or she got equivalent value for what he or she spent. That's it. Organizations that attach any loyalty significance to such an interaction are whistling past the graveyard in the dark. But back to our survey.

According to our data, people in charge of call centers and of generating new revenue from them, are not very sure of how to get to this nirvana. In what looks like basic human nature, they're attempting to add selling onto the basic set of requirements already on their call center agents. Some are setting goals without incentives, others are evaluating results without setting goals and sometimes without incentives. It won't work and I suspect it won't last long either.

Making the switch from service only to service and selling is not simple but it can be done if we keep a few things in mind. First, customer service people are human and they respond to the same stimuli others do. That means setting realistic goals and incentivizing their attainment. Second, nothing that's random in selling works very well, so just like outside sales representatives, people in the call center need training and coaching and for the sake of the managers as well as the representatives, there has to be a process everyone can agree on.

Back in May I visited a call center operated by Coca Cola Enterprises in Tampa. It was a model facility that had already implemented the suggestions above. What was most interesting to me is that the facility was started from zero two years ago by people with no experience with call center activity. They did it by asking reasonable questions, setting goals, and generally avoiding blindly accepting common knowledge. Any organization ought to be able to emulate that.

Fraudulent Photo

A friend recently accused me of using a "fraudulently good" photo of myself in my publications. In fact the mug shot many people recognize is a few years old but I think any lack of verisimilitude owes to the fact that it was taken by a pro with good lights and all the rest. Over the course of the summer I have taken the needed corrective steps to ensure better accuracy in the headshot including purchasing a digital camera and even getting a hair cut. Who cares? You're right. I hope.