Beagle Research Group

Prime Time for PRM

After a long period in which there seemed to be little to report, PRM or partner relationship management, appears to be enjoying an upswing.  PRM was an unfortunate fellow traveler with all the other ‘RM’ permutations that came about in the dot.com bubble.  There was also eCRM which was a distinction without a difference and ERM in which the ‘e’ stood for employees and that idea has suffered much the same fate as PRM—not totally forgotten but decidedly a backwater compared to CRM. 

It may simply be that once a lot of people figured out how much work it took to implement and use CRM many enterprises figured one ‘RM’ (real mess?) was enough to have on the plate at a time.  At any rate, as CRM has settled into a more predictable business PRM is again bubbling to the surface, but that explanation is too simple to account for all things PRM these days.

A better set of explanations can be found in supply and demand.  For, example, for some time, the amount of technology products sold through the channel and channel partners has been steadily increasing to the point that people at BlueRoads, for example, tell me that more technology products gets sold through the channel today than through the direct sales force. 

What’s happening?  Well, to a degree this is a predictable part of the technology life cycle.  As product categories mature, much of the mystery goes out of them because the consumer becomes acquainted with a product type’s purpose, performance, and features so there is less need for sales forces to perform missionary selling.  At that point, producers or OEM’s become obsessed with lowering costs to effectively compete with other vendors doing the same and one of the major sources of cost in any product is labor.  By selling product through a channel, a vendor may give up some margin to make room for the reseller, but to a great degree, the vendor effectively gets out of the variable compensation business and pays only for successful conclusion of a deal.

Another approach, which is largely driven by the type of product and its complexity, is to simply go retail.  The retail approach is appropriate for consumer goods like personal electronics and routers for the home, but often as products are down shifted from a captive and highly trained sales force it is difficult to make a direct transition to the store shelf, hence the need for the partner channel.  This wisdom is reflected in the indirect channels strategies that companies like CISCO use and is confronted by the recent announcement by NetSuite to offer its product on the shelves of CompUSA. 

I am betting on NetSuite to succeed in this effort, by the way, but for different reasons.  The path has largely been paved already for NetSuite by many generations of business software sold at retail that do some of the same things, such as accounting, that NetSuite does, but it’s still a wait-and-see situation.

To net out the last few paragraphs, there is more structural need in the market for PRM today than in previous years and the vendor community is responding by supplying more product to meet the demand.  The demand and supply was most recently reflected by Salesforce.com’s entry into the category with its usual twist on things by offering its solution on-demand.  It’s hard to argue with the logic of on-demand PRM especially when it comes from a vendor of on-demand CRM. 

On-demand CRM has been a grass roots phenomenon in which small companies bought a few seats of CRM to manage their small businesses.  What may not have been apparent to many people is that a lot of small companies are resellers of OEM products.  With a large deployment in small companies, introducing an on-demand way for the OEM’s to manage their resellers was a no-brainer.

Nevertheless, PRM is more than simply CRM on steroids managing partners instead of end customers.  A good PRM package must be able to work in both directions—from the OEM to the partner and, just as important, from the partner back.  Where it gets tricky is that the pipelines going in each direction carry different things. 

The most important thing an OEM can get back from a partner, aside from a signed contract, is information.  That information can include how long it takes to work a lead, results of marketing programs that the OEM at least partially bankrolls, or accurate forecasts of the book of business.  On the other hand, partners like to get leads and marketing funds and they are reluctant to share deal information for fear of having the information fall into the hands of another reseller in the same market. 

Conventional PRM did a great job for some of the needs at the interface between the parties, such as lead sharing, and less well at providing visibility into the things individual sales representatives are working on.  Part of the reason for the resurgence of PRM lies in the fact that companies like BlueRoads and now Salesforce.com have identified ways to enable OEMs to gain more visibility into the activities of the sales representatives thus improving the information flow back to the OEM.  Considering the fact that PRM is usually paid for by the OEM, visibility has given OEMs a reason to care about PRM again.

So, to net it all out, the resurgence of PRM appears to me to be a sign of the times.  Markets and customers are changing and vendors are adjusting the way they sell to accommodate shifting demand.  Smart vendors of PRM solutions saw this shift coming several years ago and began adjusting their products or started developing from scratch.  As usual, it is the forward looking front office vendors that are reaping the biggest rewards.  The laggards will have no choice but to spend money to catch up and it is doubtful that all of them will recoup their investments.

Moe, Larry, and Shemp

I love the people at NetSuite and I think they have some good products, a customer oriented attitude, and generally that they have their heads screwed on right most of the time.  But I feel an irresistable compuntion to give them a noogie right now.

I just got email from them announcing some take-aways from Salesforce.com.  The email reads in part:

"Salesforce.com’s newly announced SAP connector essentially reveals Achilles heal: a CRM application without ERP integration is basically useless. CRM without ERP is like ham without eggs, Sonny without Cher." 

To this list I suppose you could add Moe and Larry without Curley and in one of their gags on the best sandwiches in the world, honey without peanut butter or bologna without whipped cream.

Useless?  hmmm...strong words.  I think this is more like two parties talkiing past one another as in a low calorie beer commercial: "Taastes great!"  "Less filling!" Now let the mud wrestling begin.  Que the blonds.

In fact there are, as I see it, two distinct markets that are parallel but not intersecting--one where the integration of front and back office is vital and the other where it is not only non-essential but where tight integration might actually be a not very good thing.  This all centers around the idea of whether or not a company already has back office functionality (most big companies do) in which case bringing in an ERP function along with CRM might be the latter day equivalent of coals to Newcastle.

Salesforce.com has been smart enough to integrate with SAP, which makes a lot of sense since SAP is everywhere and many SAP customers do not operate, or do not want to operate, SAP CRM.  You only need to look at Siebel's success to understand that.  So it makes a good deal of sense to offer a connector to SAP as a sort of software modus vivendi.  It would make far less sense for the company to offer tight integration with MAS back office products from Sage given that Sage has a pretty full inventory of CRM including SalesLogix, Sage CRM, and the popular ACT! product.

NetSuite, on the other hand, is executing a smart strategy for smaller companies that might not have either front or back office applications or possibly those that are running on back office solutions that operate on a single PC and could stand an upgrade.  That's a great market and it doesn't matter which end of the business NetSuite implements first; I am sure there are lots of customers that are glad to know they can go to a one stop shop for all their business solutions and not have to worry about a costly integration between front and back office systems.

NetSuite offers a lot of functionality and its sweet spot is the company that needs both front and back office functionality.  But I remain unconvinced that large companies with back end functionality already in place would be ill served going with SFDC.

At the end of the day, to a degree, it's a matter of personal preference: either you like balogna and whipped cream, or you don't.

Moe, Larry, tickle my foot! nyuk, nyuk, nyuk!

Wanted: Web site development tools

Over the last several months I have been engaged in a process intended to upgrade the Beagle Research Web site (www.beagleresearch.com).  That included planning site content, number of pages, hiring a consultant to help with design and development--stuff like that.

I had been managing the site all myself with Microsoft Publisher, which I found to be an adequate tool for developing static Web pages that enable free download of white papers and other things I write.  It gave me a footprint on the WWW, which every company needs today to be competitive. The old site had/has a couple of glaring problems that needed rectifying and only a rebuild would fix.  MS Publisher, while easy to use, does not support non-MS browsers and the site suffered from my amateurish efforts at "design".

I found a site on the net that introduces customers to developers and engages in the bidding process.  From that I quickly found a small company in Texas that was very good and so we did business.  The Texans recommended a public domain portal technology called DotNetNuke (Iam not making this up!) which uses ASP.net and which is a self-contained environment for building sites.  We agreed to use DNN and away we went.  In a couple of weeks they had a nice design and had built the site.

Did I mention that it was always our understanding that whatever implementation technology we used, I insisted that it be simple enough for me to maintain by myself.  I think that's a reasonable thing.  After all, I did manage to teach myself Publisher and built and maintained the original site for 2 years.  But that's when the fun started.

Unknown to me when we started the process, DNN is an on-line tool meaning that you actually log in as a developer into your actual site.  If you inadvertantly break something, as I have done, it goes into the live system unless you are smart enough to undo it, which I am not.  The environment is also not supported by a GUI.  You can't mouse around clicking and making changes the way you might in someother tool such as Dreamweaver which also lets you work off line and only upload your work when it passes muster.  With DNN you have to fill out forms and update the site to see the effect.  It's all pretty slow too since you are essentially operating in client-server mode across the Internet.

To educate myself, I went to the DNN Web site and sampled the "Community" tab which lists companies that do training and other things.  But when I tried to follow what appeared to be links to the companies sites (labeled 'Visit'), the system simply brought me back to the original page.  In other words it is a death loop, you can't get out to the source you are trying to contact.  Unfortunately, that was not the case with just one supplier--it was the case for all of the links in the list.

I also tried to buy a training manual.  Luckily for me, there is a new version of the product and the developers have just published a manual to go with it.  The manual was so new I had to wait a couple of weeks for it to be published.  No matter, I figured, the new site is fine.  I'll just go on vacation and the book will be here when I get back and I will spend the summer updating and adding to my new site.

No such luck.

The book arrived as promised but I was underwealmed to the max by it.  The authors spend the FIRST 80 PAGES clearing their collective throats.  There is a HUGE amount of history in the first two chapers on things like the evolution of DotNetNuke (Chapter 1), the history of the first 3 versions of the product, the core team, and some fun and not so fun bumps in the road on the way to version 4.0.  It was like indoctrination into a cult.

Spare me.

The book is aimed at people like me but when you get to what you bought the book for in Chapter 3, all you get is a bunch of tables listing all of the modules, pages, functions and whatever that make up the product and very little about how to really use it.

I am giving up an DNN.  In some ways it seems to me to be not ready for prime time and in others it seems like the product's time is passed.  It needs a GUI, and offline component and a community that checks to see if the links are broken once in a while.

In an effort to save the project--I NEED a Web site--I am having the guys in Texas convert me to Dreamweaver but I am not optimistic.  I have DreamweaverMX 2004 but according to the Macromedia Web site there do not appear to be any companies offering training in my remote outpost of civilization (aka Boston).  Apparently there is a new version of Dreamweaver, version 8, which I might have to upgrade to in order to find training.  I dunnno for sure, still checking.  I'll get back to you on that.

So, if you have read this far, please consider recommending a course of action that I should take.  Do you know of training for any of this stuff?  I don't need more consultants, I need to be self sufficient.

I think I will add to this entry as things progress, maybe it will be a fun learning experience.  Let me know your thoughts.

Troubling signs from market leaders

I was in Chicago for a few days of R&R when Steve Balmer, CEO of Microsoft, spoke to the Microsoft partner meeting in Boston.  As a result, I got news of the company’s latest projected delivery dates for its on-demand CRM not from Microsoft, but from Paul Greenberg’s blog: “On Demand Means Right This Second, Even for Microsoft”.  Greenberg makes some good points and I completely agree with him that the second quarter of 2007 is a long time to wait given the speed of evolution we have been seeing in the on-demand market.

I might even add another reason to Paul’s list and it’s this: Microsoft needs to deliver something to create some separation between itself and the competition before it has a viable on-demand product or strategy.  In years past, the conventional wisdom was that the 800 pound gorilla could hang out and let the market develop a bit before swooping in and taking all the bananas off the table, but that was when markets were new and there was a need for the leadership that standardization provides, that’s not the case today. 

Take the early PC industry for example.  When IBM launched the IBM PC there were competing architectures and operating systems (DEC alone had three—think about that!) and it was hard to get software that ran on more than one vendor’s products.  IBM set the standard and instantly you could write simple equations like ‘operating system equals MS-DOS’ and the rest, as they say, is history. 

Separation anxiety

That’s not the case this time.  The CRM market is already rather full of companies offering on-demand solutions from Salesforce.com, which says it has fifty percent of the market, to players like RightNow, Sage, and Oracle/Siebel (pick a name all ready!), as well as Entellium and a bunch in the third tier. 

That’s why I say Microsoft needs to find a way to create some separation between itself and the competition.  Unfortunately, though, the R&D that Microsoft is pouring into on-demand CRM will most likely be only enough to get it close to the leaders but not to surpass them.  Conventional CRM is, after all, a fairly well worn path at this point.

When that happens, the investment in development rarely pays for itself.  As Geoffrey Moore has pointed out, the challenging product might be good enough to cause the leaders to modify their prices downward but insufficient for the challenger to charge a premium and thus cover the R&D cost.

Add to that the fact that Microsoft has new competition from on-demand office applications like word processing and spreadsheets and more coming from advertising funded competitors and you can imagine a scenario in which the company looks more like Gulliver pinned down by a lot of Lilliputians than a market bestriding colossus.  Keep this in mind: Microsoft won’t fail in its CRM rollout; there will be many customers for these products.  However, failure to achieve separation will not provide the revenue boost that a company this size requires to fuel growth and that could be troubling.

Expanding product definition creates separation

Creating separation is something that other established companies need to deal with as well and last week provided an example of a company going in the opposite direction in my humble opinion.  The company is Oracle and the event was selling off the OnTarget Sales Methodology Division to Select Selling, which is combining the two companies to form The TAS Group. According to the press release, “OnTarget, the creator of Target Account Selling®, was one of the largest and most recognized sales methodology providers.”   Many companies today are increasingly relying on formal methodologies to boost sales performance.  This might only be a yellow flag but it raises my concerns and serves to illustrate another point.

The technology market in general, is reaching something of an apogee; hardware commoditized a while ago and software is in the early stages of the same inevitable market phenomenon.  With few, if any, new market niches for software companies to conquer, vendors seeking growth are compelled to find new strategies to drive revenue growth such as product line extension, customer directed product enhancement, and improved processes.  One of the better strategies for increasing top line revenue in a situation like this is to find ways to add related products and services to the core product offering as it commoditizes.  If you are talking about SFA or CRM then one natural conclusion is improving sales processes through sales methodology, which is why I find Oracle’s move so questionable.

At the same time that Oracle was announcing this sale, Harvard Business Review was announcing its double summer issue.  Ironically, the issue is dedicated to selling and covers such topics as how we sell today, getting sales and marketing to work better together, and most importantly, a discussion of how customers and markets have changed and how vendors must catch up.  Sounds like a good time for methodology to me. 

One of the benefits of being an analyst or a pundit is that you get to have opinions that sometimes disagree with the people in the trenches, like now.  I am sure the deal made sense to some people at Oracle but I suspect that sometime down the road Oracle might want to ask for a Mulligan to try a different outcome for its methodology division.