Beagle Research Group

NetSuite One World

Last week NetSuite announced OneWorld, new technology that enables multi-national companies to manage their finances.  If you are not a financial person the distinction that the new offering provides may be lost but let me tell you why you might want to care.

Multi-national connotes bigness — big company operations, offices, factories and personnel — working at different locations all over the planet.  In fact this connotation is valid but it applies to smaller companies too.  In fact, these days success for an emerging company is often closely coupled with the speed at which the company can achieve distribution in many geographies at once. 

To complicate things, people in different places have their own currencies, work habits, laws and regulations and these differences represent a significant barrier to success for small companies.  The same company might operate in English and use pounds sterling (and drive on the wrong side of the road) in one part of the world and use Kanji and Yen (driving on the same wrong side of the road) elsewhere. 

Meanwhile, if the company has headquarters in the US there are obvious language, currency, regulatory, and driving differences.  Managing a company that has operations in all those places and then some can be a real challenge whenever the CEO wants to get a sense of the company’s health.

Not being much of a financial expert, I thought most companies had that consolidation and reconciliation problem figured out but NetSuite CEO Zach Nelson likes to refer to it as a giant hairball. And people with direct experience in running multi-national companies just seem to smile and nod knowingly.

This all got me thinking the other day that for several years, NetSuite has been playing the part of the tortoise from Aesop’s fable. This isn’t the company that comes first to mind when you think about brash CEOs or mind-blowing new technology. But the company has assembled quite a track record in its short life of listening to customers and delivering products that help them run their businesses. NetSuite is the only on-demand company that I am aware of that offers ERP/accounting, CRM and eCommerce all in one pre-integrated deliverable.

What’s remarkable to me is that NetSuite has maintained its position as a solution for small and medium businesses rather than climbing the ladder to enterprise computing. By doing this, they have avoided direct competition with SAP and papa bear’s other company, Oracle. There’s plenty of opportunity at this end of the market, made obvious by how many companies keep trying to shrink their products into the space.

One thing that might be a yellow flag for any small company implementing enterprise-wide software is complexity. There is not a lot anyone can do about it. Whether your are a ten million dollar company or a five hundred million dollar one, it takes work to set up all the applications you need to operate. So my advice to small companies thinking about enterprise-wide solutions — whether it’s NetSuite or something else — is to make a plan, engage outside assistance and set realistic goals. It’s a slow and steady approach and it works pretty well, just ask NetSuite.

A Busy Week by the Bay

They may be still waiting for the first signs of the much advertised recession in the Bay Area.  Everything I see here, especially this week points to growth and all that goes with it.  Multiple people have come up to me, phoned or emailed seeking introductions or support as they confess to having itchy feet or the promise of some capital to start a business.  Some — a few lucky ones — also have some cash from their last IPO and, having tasted victory, they are eager to do it all again.

I came here for announcements from two of the most successful and recent companies to run the gauntlet from start-up to IPO, Salesforce.com and NetSuite.  It is rare that two such companies have events so close together that I can consolidate a trip and I am not complaining.  While the two companies shared time on many analyst’s and journalist’s dockets it continues to amaze me that they only infrequently find themselves in the same deal.  Salesforce is squarely in the CRM camp with aspirations in the application development world and NetSuite is all about providing a soup-to-nuts solution for small businesses front and back offices.

This last might seem surprising in light of NetSuite’s announcement that it was offering new enterprise capabilities for its target customer base.  Specifically, the company said it now has fifty companies using its solution to run companies that operate in multiple countries with different currencies and accounting rules so this was more than an announcement of intent.   

NetSuite increasingly looks like the company that will compete head to head with SAP, Microsoft and Sage in the on demand market.  While I like Sage’s diverse collection of front and back office products and I respect SAP’s market prowess, I think it’s safe to say that NetSuite has room to stretch its wings.  You also have to respect all three companies’ money and marketing budgets but since its IPO, NetSuite can play that game too — come to think of it, with Larry Ellison’s money, NetSuite could always compete.

Salesforce-Google again

In a move designed in part to show the market place that Salesforce.com is sticking to its knitting, CEO Marc Benioff announced on Tuesday that his company’s flagship CRM system is tightly incorporating Google’s on-demand office tools such as email, calendar and instant messaging into its core capability.  I found this announcement interesting not so much for the technology as for the chess game that is going on in enterprise computing. 

Salesforce is making a bigger commitment to on-demand computing by so visibly incorporating additional on-demand office applications.  More than that the Force.com platform is intimately involved as well which means that there will be development and customization involved.  It’s is another clear sign that these two companies are not simply looking to automate what’s already there, they are seeking to inspire new thinking and new applications as well.

You might be tempted to say that there’s no news here and you could be right, but what I see is the on-demand approach gaining more steam as Salesforce and Google make it possible to deliver new functionality from the cloud.

Salesforce.com is a superb marketing company among many other things.  They religiously adhere to the rule of three — tell them what you what you are going to say, then tell them, then recap.  All of the announcements I remember follow this pattern and this week was no exception.

I forget precisely if this was the second or third time they announced an alliance with Google.  There was a Google AdWords announcement when Salesforce bought Kieden and there was an announcement about integration with Google applications last year.  This week CEO Marc Benioff told the world that Google Apps are tightly integrated with Salesforce CRM and that Salesforce will be delivering that functionality as part of its product set.  That’s three if you count AdWords as part of the same group.

I wonder though if this is all window dressing and that another announcement is in the offing.  Lots of tongues have been wagging about an acquisition of Salesforce by some larger power.  Last year, Oracle was the designated suitor but that never seemed like a real idea you could sink your teeth into.  The rumor was for $75 per share and it went no where.  I said at the time that it was too low, that Force.com has too much potential to let it go for such a small fee.  Also, mixing Oracle and Salesforce seemed like some medieval alchemy experiment — let’s see if this blows up!

The new idea that has people looking closely is, of course, a marriage between Salesforce and Google.  Without commenting on the utility or futility of such an arrangement, let me say that the two parties seemed rather chummy at the announcement.  Google CEO Eric Schmidt and Benioff each made reference to the two companies “shared values” and there was even a slide on the topic.  The reference involved each company’s philanthropic foundation which uses a model Benioff made popular 1:1:1 donating one percent of his company’s time, equity and product (profit).  Shared values make a good basis for a long term relationship, I think.

Perhaps the big loser in the Google-Salesforce announcements is Microsoft.  The company took its time to respond to the on-demand threat and only recently fielded a credible product in CRM.  This announcement threatens Microsoft not in a peripheral application area but where it lives.  Microsoft is being buffeted by market reaction to Vista and the increasing utility of on-demand office products will begin eating into an important franchise.  The operating system miscue has caused a lot of people to look elsewhere at Linux and at Apple — all the demonstrations at Salesforce-Google announcement were performed on Mac’s which, I believe run Intel chips these days. 

I know there is a Microsoft Live product set so there’s no need for panic but it has to be said that Google has street-cred in the office world now and that’s something Microsoft could do without — as the OS business goes so does the office automation business. 

Multi-tenant matters

There is an interesting debate beginning to brew in the on-demand market.  Although most people are still clearing their throats, sides have been chosen and trial balloons have been floated.  It appears that a small group of big companies including Oracle, SAP and Microsoft are trying to slow Salesforce.com’s momentum by going after the crown jewel.  Another way to say it is that these companies are trying to hop on board a moving train.

In one corner is Salesforce.com, the incumbent and still champeen with its multi-tenant architecture. In the other corner are the challengers singing a siren song about freedom of choice offering various flavors of hosting ranging from multi-tenant to single-tenant with a lot of wiggle room in the middle and a Cheney-esque “So?”

Of course, all this tenancy refers to the way the software is put together and made to work.  Single tenant means one computer (usually) and one copy of the software and all of a company’s users.  In single tenant, or single instance, each additional company has to buy its own software and a system to run it. 

Multi-tenant is different; it means one or more computers, one copy of the software, and as many users as you want — it’s all you can eat and it doesn’t matter what company you’re from.  Behind the scenes in multi-tenant architectures there is a lot of sophisticated software that keeps things separate but it’s all invisible to the user.  The benefit to everyone is that one copy of the software means one copy to manage, maintain, improve, patch and generally take care of.

Not long ago, there wasn’t much choice, every application or package you could buy was single tenant.  It was client-server software and it was expensive to buy and implement but that’s the way it was.  Then Salesforce.com came along and made several changes almost over night.  In addition to leading the charge in on-demand and multi-tenant they achieved a new price point for business software that ran in a browser and just about killed the market for conventional business applications.  That’s not to say that enterprises all jumped on the bandwagon but there’s been a steady erosion in the on premise market ever since.  I can’t remember the last time a new software company raised its hand and said, we’re going to make ours using the old recipe.

That’s all ancient history.  Fast forward to today and you see the challenge I alluded to.  Companies are trying to sell single tenant on-demand and they are saying that the architectural underpinnings don’t matter.  To hear the other vendors tell the story multi-tenant is snake oil and everyone ought to have a choice to go in whatever direction they like.  That sounds pretty reasonable but is it a valid proposition or just convenient marketing of single tenant software?

For example, according to Anthony Lye, senior vice president of CRM at Oracle, “On demand is just that, a service, a subscription, a delivery option to an application that provides business value to its users, we do that and do that well. We have chosen to provide our customers with choice.”  By choice Lye means using single or multi-tenant as needed.

Lye makes a good point.  Some companies are not willing or able to go with a multi-tenant approach.  Some entities, like banks, have regulatory mandates to keep their data behind their firewalls and I hear the EU insists on keeping some types of data inside the EU.  Nevertheless, providing a choice of single or multi-tenant is not the same thing as saying that on-demand is just a delivery option. 

I like Anthony Lye and I think he’s one of the bright spots in the Oracle bureaucracy but I think Oracle and the others are trying to blur a distinction that really matters.  In the years since Salesforce.com came on the scene every software maker worth it compiler has been working hard to eliminate the biggest causes for customer angst.  They’ve replaced client-server software with browser based applications that put nothing on the client machine and they’ve worked on making their applications less expensive and easier to use — all good things.

However, now the message seems to be if it’s low cost and delivered in a browser across the Internet, it’s good enough.  I believe that single tenant or even an application that can be distributed as either single or multi-tenant poses hidden problems.  The biggest challenge I see is that single tenant delivered on-demand is not simply another delivery option, it is a neat way of perpetuating a vendor’s hold on the customer and it is facilities management by another name.

With single tenant all you’ve really done is to place a longer wire between the server and the client and it reminds me of a very old approach called facilities management (FM).  In FM a vendor hosts your data center at another location and takes care of all the management for you.  In this it sounds a lot like any other flavor of on demand but in the FM data center, rather than having a single copy of the software to manage, there are hundreds or even thousands of copies running on a similarly huge number of servers.  The vendor achieves economy of scale, takes a profit and passes some of it on to the customer so that the cost per user these days can approach that of multi-tenant.

But consider what that means.  By choosing the single tenant approach, you also choose a more limited number of applications that you can work with and often that means locking in to the vendor’s own portfolio.  In contrast the multi-tenant approach gives you no choice over which delivery mode you use but the number and kind of third party applications is greater.  In the Salesforce.com case, we all know that the AppExchange contains about 800 applications from third party developers and all of them are pre-integrated.

So, in my mind the debate really isn’t about giving customers a choice between single and multi-tenant — that’s a false choice, like saying my way or the highway.  The choice is really about giving customers a choice between vendor lock down and the freedom to choose whatever applications make sense for their businesses.  In my mind, single vs. multi-tenant and the idea of choice are a big side show designed to deflect attention from the success of multi-tenant and save an empire’s worth of old code.

Active and passive CRM

Active is much better than passive in most things, not just CRM.  In writing I am constantly reminded to write in the active voice because active voice is terse, to the point and more intelligible. 

Passive voice takes perfectly good sentences and turns them into gobbledygook.  For example, the actively voiced, “Why did the chicken cross the road?” becomes the slightly unintelligible, “Why was the road crossed by the chicken?” in the passive voice. As you can see, the main actor in the first sentence, and its subject, becomes the object of a preposition in the next, greatly degrading its meaning.  It sounds like something from another country, Washington, DC, maybe.

The same kind of thing happens in CRM when good, active ideas become perverted into passive programs of dubious yield and questionable value.  Take the overused and misunderstood idea of the customer experience for instance. 

If you have read this space before you may have encountered an interview with Joe Pine a few weeks back.  Pine and his frequent writing partner, Jim Gilmore, penned “The Experience Economy” in the late 1990’s — the book from which much of the seminal thinking about customer experience comes. 

Pine and Gilmore’s point was that active customization of an economic good produced another economic good of higher value.  Thus a product was a commodity which had been customized and following that line of reasoning a service is a customized product and an experience is a customized service. 

The pair’s conclusion was that vendors needed to consider actively staging experiences for customers but that proved to be too difficult and costly in many situations so a passive form of customer experience came to prominence.  Today when we talk about the customer experience we usually refer to the after the fact assessment of whatever took place.  We have substituted the value of a good customer experience, defined as one where the customer leaves a transaction without bad feelings, for a unique customer experience which was the original idea.

In Pine’s own words, “… so many folks who claim to have read The Experience Economy missed -- or act and talk as if they missed -- the main thesis: that…experiences are a distinct economic offering, as distinct from services as services are from goods. So many glom onto the language of “customer experience” or “experiential marketing” rather than truly design and stage experience output.

Passivity is not limited to the customer experience and the same degradation we saw with customer experience appears to be taking shape now with the idea of community.  There is a big difference between active and passive communities and the passive side took another step forward last week when Starbucks announced its MyStarbucksIdea.com community site.  I believe the site is powered by salesforce.com and their IdeaExchange technology which also powers a similar site for Dell.

These sites are useful ways to gather customer input and I have referred to them as automating the suggestion box.  There’s nothing wrong with that at all but a suggestion box is not a community.  In fact, when salesforce.com started telling me about IdeaExchange they never used the word community. 

A community is an active thing and it requires the vendor or sponsor to do some things other than collect ideas and apply statistical analysis to figure out the most popular.  Here are a couple of things that are imperative for operating an active community.

1.  Select your community members.  Let’s be clear about this, a community is a group of people who will actively contribute ideas and respond to inquiries made by the community leader.  Active participation is essential and for the information to have validity, you should know who your members are by measures that are important to you.  That doesn’t mean stuffing the ballot box but it does mean ensuring relevancy.  For example, a community giving feedback about a drug ought to include members who are either using the drug or doctors, pharmacists and other professionals administering it.  Since a community is a subset of your customer population, ensuring that you have a cross section makes it possible to extrapolate from any information you gather.

2.  Ask direct questions with the expectation of logical answers.  Opening a Web site and asking anyone off the street to “tell us what you think” is an invitation to chaos.  A good company can still care what its customers think without getting all Dr. Phil on us.  The range of things that a company cares about is presumably small or at least a subset of what its customers think about so don’t ask customers to “tell us what you think” unless you really, really want to know.  Ask about products, services and messaging as well as about needs, desires and even biases but keep it relevant to your business.

If you do these two things in you will have an active community and you will gather reliable information which will help you identify product and service innovations as well as help you understand your core customer.  Your active input will be worth while.

Happy WizKids Day

Some time between Groundhog Day and March Madness each year we try to publish a short report that showcases some of the brightest emerging companies in front office computing.  We call it the WizKids Report and we present the companies in the report with a small award.  At times, companies who have felt they deserved the recognition of a WizKids award but who did not receive one, have referred to it as Passover. 

What can I say?  It’s that time of year again.

Throughout the year we take a lot of briefings from the newest and smallest companies to the very largest in our space and we make our decisions on which companies to profile in the report based on those briefings and later follow up.  We also speak with real customers to ensure that what we’re hearing in the briefings matches reality. 

There have been times when we have followed a company for two or three years before including them in a WizKids report simply because when we started coverage the company was truly embryonic and one of our requirements is to speak with customers who have used the product for a while.

This year’s group is really eclectic and reflects several trends in our market including the prevalence of the SaaS business and technology model and the general level of maturity in the market.  Interestingly, six out of the seven members of the Class of 2008 are involved in the salesforce.com partner program and their wares can be seen on the AppExchange (.860 in baseball terms, not bad really).  That could simply reflect my need to get out more but I think it’s also a sign of the times.

Another sign of the times is the emphasis more and more companies have on delivering solutions that make their clients easier to do business with.  I have been investigating this phenomenon for a while and believe it is very understandable. 

Fundamentally, we’re at a point in many markets where competing on features and functions is becoming less effective because so many competitors have acceptable functionality.  When that happens companies look for other ways to compete and one of the richest areas to explore is a company’s customer facing business processes.  With that comes a need for technologies that streamline and simplify making it easier for the customer.

Here’s a rundown of this year’s WizKids.

• Firepond helps vendors improve their sales processes with a configuration, price and quotation SaaS based solution which organizes proposal data and reduces error leading to better margins and improved customer experience.
• InsideView is a sales intelligence SaaS service that uses Web crawler technology to find and deliver useful information for sales professionals.
• Lithium Technologies helps companies deliver great service through customer communities. 
• LucidEra provides on-demand analytics to sales professionals and managers so that they can run their businesses more precisely and profitably. 
• Marketo delivers sophisticated on-demand marketing solutions to emerging and small companies in a format that is affordable and easily consumed. 
• TerrAlign brings sophisticated mapping and planning to territory planners for large sales teams such as pharmaceutical companies. 
• Verticals onDemand has made a business of providing vertical market versions of Salesforce applications, for example in pharmaceuticals and medical devices.

If you’d like more information about any of these companies check out their Web sites or download a copy of the WizKids 2008 report at www.BeagleResearch.com.

What’s interesting to me is that some of these companies look more like parts of a solution than the whole enchilada and no doubt some might get acquired but the current environment suggests that acquisition is not as certain as it once was.  The presence of rapidly improving platform technology makes it possible for all of these vendors to integrate with other applications and thus deliver end-to-end functionality out of the box — or off the cloud to be precise. 

Thus platform technology is reducing the need for some companies to buy others.  For example, there has been a great deal of consolidation in the analytics space in the last few years but that does not seem to faze LucidEra which offers a growing suite of on-demand analytics. 

There’s also an economic angle here.  The current financial situation is drying up credit and many IPOs have been delayed and there’s no telling how much M&A activity has been forestalled.  Having the ability to stand alone and play well by partnering with multiple other vendors is a good strategy for survival and something common to these companies.

A few years ago, I thought the market would play out like this and I wrote about it but I had no idea how many new and different applications would be developed as a result.  The WizKids program has identified some pretty cool solutions but even more interesting to me is the high degree of innovation that the SaaS model continues to inspire.  There are a lot of vendors offering the application delivery part of SaaS these days but still very few who are providing the ability to create and deploy solutions at a low price point.  The WizKids are a great example of why it is important to provide both.

Beagle Research Group, LLC Recognizes Software’s WizKids

Announces annual WizKids™ Award and report for advances in CRM

Stoughton, MA, March 26, 2008 — Beagle Research Group, today announced the winners of its annual CRM WizKids award for innovation in front office software.  The WizKids award is given to emerging software companies that demonstrate new and innovative solutions to business problems encountered in the rapidly changing front office.  Denis Pombriant, managing principal of the company and the report’s author said, “This year’s awards showcase a group unified by their abilities to deliver high performance applications to many specialized situations through on-demand computing.”

This year’s report includes companies with solutions that support specialized sales processes.  For example, Firepond provides a configuration, pricing and quotation solution and InsideView delivers market place intelligence to sales people and TerrAlign enables managers to configure sales territories and LucidEra which provides on-demand analytics for the sales process. 

The 2008 WizKids Award winners are: Firepond, Inc. Framingham, MA; InsideView, San Francisco, CA; Lithium Technologies, Emeryville, CA; Lucid Era, Inc., San Mateo, CA; Marketo, Inc., San Mateo, CA; The TerrAlign Group, Inc., Reston, VA; Verticals onDemand, Inc., Pleasanton, CA.

The full report is available at www.BeagleResearch.com.

About Beagle Research Group

Beagle Research Group, LLC is a consulting and market research organization focused on emerging companies and technologies that will have an important impact on the way business is conducted in the future.  WizKids is a trademark of Beagle Research Group, LLC.

Automating the suggestion box

Starbucks’ new customer-community-let-us-hear-from-you idea shows how hard it is to do the social marketing thing and it also shows how corporations sometimes take good ideas and drain the life out of them and then present the morphed idea as the real thing.

A short diversion is in order. Customer experience follows the same trajectory. Back in the late 1990’s Jim Gilmore and Joe Pine published a ground-breaking book called “The Experience Economy” in which they argued that the next big idea in improving marketing was in staging experiences for customers.  The idea sort of caught on at least to the point that their latest related book is titled, “Authenticity: What Customers Really Want”.

The pair argued persuasively for an evolutionary scale starting with commodities and ending with experiences in which the higher item on the scale was merely a customized version of the lower item. Thus a product was a commodity which had been customized. Following that line of reasoning a service is a customized product and an experience is a customized service.

So far so good, but when the corporate world got hold of the idea it became immediately apparent that customizing service was simply too expensive or too much bother or both. At that point a customer experience went from something that was actively staged by a company for a customer to a passive idea mediated by secondary metrics.

Everyone wanted to know if the customer experience was a good one, as defined by their metrics. As a result easy things got quantified and the hard stuff sometimes got ignored.  Was the call answered on the first ring?  Did you wait in queue for more than a minute?  Did the agent use your first name? Did the clerk smile? A lot of it was pretty useless and even silly.

I interviewed Pine recently and asked him about his reaction to the uptake of the customer experience in the market, here’s what he said:

“One thing is really bothersome, and that is that so many folks who claim to have read "The Experience Economy" missed -- or act and talk as if they missed -- the main thesis: that…experiences are a distinct economic offering, as distinct from services as services are from goods. So many glom onto the language of “customer experience” or “experiential marketing” rather than truly design and stage experience output.

Now we’re at it again and if you didn’t know better you might think that Starbucks was way out front on the leading edge of a new marketing idea but I have to say, whoa horsey, not so fast.

The idea of capturing customer input is a good, even noble, one but it needs to be done with some science or it won’t be much good. Out of the thousands of people who use your product what slice of them participates in your community? Is it the same cranky people all the time?  Your competitors?  Do you know?

Setting up what amounts to an automated suggestion box leaves all these variables wide open and gives your marketers the impossible task of deriving meaning from what, pardon me, Shakespeare called “a tale told by an idiot, full of sound and fury, signifying nothing.”

A few weeks back I wrote a piece about choosing a vendor who can help you set up a community.  Today I would like to suggest that the secret of community success is that it must be active and it must be actively managed. Gathering random comments from customers might be useful and I won’t dismiss it, but if you are planning to use the input from a community to make decisions about how you manage and grow your business, you need much more than the feedback from a random group.

That means you should pick your community members — I didn’t say you should stuff the ballot box but you need to pick the members — so that you have a representative cross section of your customers. The data that comes from a cross section of your customer population will be more accurate (not perfect) and enable you to make reasonable extrapolations.

If you pick your members you also need to specifically pick what you ask. Open ended questions that solicit rants might make it seem like the vendor is really interested in community input but, again, it simply leads to chaos. The best questions are derived from lots of listening.  When multiple customers express a similar thought you might be witnessing a pattern emerging but you need to test it further. Develop a question or two designed to get people to choose among a short list of possibilities, then find multiple ways to ask the same question.

In the end, the difference between a community that works and one that simply makes you look good is similar to staging experiences compared to worrying about the customer experience. The way that works requires active participation by the vendor while the cheap and easy route bastardizes the idea and only leads to confusion. 

If we follow the cheap and easy route, in the not too distant future it is conceivable that communities will get a bad name because “everybody knows they don’t work”.  Analysts will develop data that proves the fact and that will be that.  We’ll go back to not listening to the customer because some genius might have even proved that communities are no better than dartboards and dartboards are way less expensive.  I digress, but the thing that will be proven not to work will be the thing that couldn’t work.

So hats off to Starbucks for automating their suggestion box.  Now, your coffee break is over, get back to work and develop a real community.

Microsoft Convergence

Microsoft Convergence is a very large show. Last week in Orlando, there were in excess of 9,500 people most from outside of the United States and by that measure alone it was a successful event.  Convergence is one of Microsoft’s chances to meet face to face with its partners and customers for the usual mix of training, new product announcements and the like and I went hoping to learn more about the company’s continuing effort to field a relevant CRM solution.

What I found was a mixed bag.  First off, Convergence is an ERP show.  There’s nothing wrong with that but Microsoft has, I believe, four ERP systems and CRM is a latecomer to the mix.  Also, a show like this has equal parts devoted to the products, partners, customers, prospects and press and analysts and all of the parts are moving so it’s somewhat difficult to tease out the CRM part. 

What I got from the CRM part was this: Microsoft has a very serviceable CRM 1.0 product.  By that I mean all the parts for conventional CRM such as SFA, marketing, and service are there and the partners and end users are making use of them in creative ways to derive value.  However, in a world that is increasingly talking about CRM 2.0, social media, social networking and communities, Microsoft still has some distance to travel.  I did get to see some community applications and was told that version 5.0 would have more emphasis on CRM 2.0, but that’s still in the future.

Microsoft’s messaging was another matter.  I can’t quite describe it but seems like they are trying to sell CRM as if it is another part of ERP.  ERP is inherently inward looking and its purview is a limited set of well defined business processes.  On the other hand, CRM is inherently outward looking, its processes are mediated by the vendor and participated in by balky customers and that difference can be substantial.  At a time when most CRM vendors — Salesforce, SAP, Oracle Sage and others — are making visionary statements about engaging the customer in new and different ways, Microsoft’s CRM messaging was filtered through a green eyeshade.  For me it didn’t work.

While we’re on the subject of messaging, it was surprising to me that there was no third party speaker offering any visionary statements that backed up the company’s primary messages and speakers.  The only visionary speeches were the keynotes delivered by Microsoft executives, most notably Steve Balmer.  Microsoft is not the only vendor to avoid bringing in visionary speakers but I can tell you it makes a difference.  Sage, on the other hand, routinely brings in people like Martha Rogers and Joe Pine to talk about the future of business, not computing per se.  These speakers get partners thinking about how their businesses need to continue changing and in my opinion it’s worth the effort.

After a few years in which the company did not have a great deal to show for CRM, they have gone to the other end of the spectrum and can now inundate you with features and functions.  Sometimes that leaves an impression that Microsoft CRM is more of a tool kit than a set of solutions.  While I don’t think that’s quite accurate, lots of partners make a living customizing Microsoft solutions so the tool kit impression might have been good for partners but not so good for me.

The company also focused on a couple of things that I don’t think of as important — the centrality of Outlook and the ability of its CRM product to operate behind the firewall in conventional mode or across the Internet in an on-demand mode.

Outlook is wonderful and I use it, but I am not certain that it makes sense to build the CRM user interface around it.  After all this time, there should be other, better, metaphors to focus on, if not, the designers in Redmond ought to come up with something — customer microsites for example.  It makes no sense to me that the company that completely re-invents the PC operating system every four years can’t come up with a better metaphor for a CRM work environment than email.  (Then again there’s Vista.)

As for the on-demand/on-premises debate, I can understand the attractiveness — even seductiveness — of having both options and Microsoft has done a good job of building one code set that supports both modes.  I can also understand that there are still outposts of the computing world that are not ready to cut the tie with conventional and expensive on-premises computing and for them the Microsoft solution is brilliant.  Nonetheless, I don’t think messaging that positions the future of computing as a choice between two completely equal options is valid.  The options are not equal, on-demand is the emerging metaphor.

What I have more trouble understanding is the way Microsoft enables its partners to host on-demand CRM.  I was told that Microsoft has no hard rules in place that stipulate things like service levels that the partners must provide.  In effect, every partner gets to make its own service level plan and a Microsoft executive told me the company expects that simple competition will drive higher standards. 

As a practical matter, that means one vendor might offer a SaaS 70 Type II data center with mirroring, and another might not.  It seems like a big risk for the customer to first understand the differences and then to shop for the better alternative.  It is an even bigger risk for Microsoft to be making its software available in such an unstructured environment and to place its reputation in the hands of a Balkanized group of partners with differing SLA standards.

I have to say I just don’t get it.

Microsoft Convergence had a good deal going for it.  The show was well attended, the show floor was packed with partners and customers looking for solutions and there were many good sessions.  The show highlighted the company’s jewel in the crown which is its partner program.  If there’s one thing that Microsoft gets it is how to operate a partner program. 

There are numerous partner programs in the CRM space right now and, no surprise, some are better than others.  The biggest unanticipated consequence of Convergence might be the effect it will have on other partner programs.  With credible CRM to complement its multiple ERP solutions Microsoft may at last be in a position to compete more effectively with CRM vendors that do not offer as many amenities for their partners.  If that is true, look for other companies to beef up their partner programs in a hurry.

Little Deuce Coupe

You might be tooling down the information superhighway right now in your cool new hybrid SaaS-mobile wondering what that thing is in the rearview that’s beginning to gain on you.  It’s best to look twice and convince yourself that what you are seeing is no mirage.  It may look a lot like your father’s Oracle-mobile but it isn’t, not exactly at least.

At the wheel is one Anthony Lye senior vice president of Oracle’s CRM group and he’s driving something with an improved engine and a new chassis bought from a garage down the street — Siebel, Inc.  In fact, some of the parts even came from another racing team no longer in the biz — guys by the name of Upshot. 

Then again, you might still be driving that client-server clunker you bought just before the last MIPS crisis.  It still runs great but it’s hard to get enough fuel for it and your boss is complaining about the high costs. 

If any of this sounds familiar, keep reading.

Lye and his team spent the better part of the last two years and more than eighteen million bucks working on their ride.  It’s still a work in progress in some ways but when you drive it, to retread an old lyric, you “Get rubber in all five gears”.

Yesterday, you might have noticed, Oracle announced version 15 of Oracle-Siebel CRM OnDemand.  That makes it the 15^th release in its four and a half year life span and the fifth release since the Oracle acquisition of Siebel.  Fifteen releases going around the track four and a half times keeps pace with the lead car, if you’re keeping score.

What’s interesting about this release and the direction that Lye is heading is the CRM 2.0 orientation.  Speaking with Lye is like listening to any 2.0 gear-head in the CRM business.  He uses words like ‘consume’ to describe what users do with on demand applications and his vocabulary is peppered with other words like mash-up, Web services, and mobile.  All this is fine and far from unique, but coming from a honcho at Oracle you shake your head and wonder if all the planets are where they belong.

Maybe that’s over stating it a bit but the fact is that Oracle is resurgent in CRM and the company is doing some interesting stuff picking up on social networking among other things.  Lye is a big believer in the whole CRM 2.0 idea and he’s ready to compete anywhere you can find an Internet on ramp — browser, desktop, portal, PDA. 

The release announced yesterday aggressively goes after all the nooks where there may be things that CRM can take advantage of and Oracle makes a big deal about connecting them to CRM.  That includes RSS feeds, custom applets, and leveraging social networking sites like YouTube as well as news services all in an effort to give the CRM user relevant access to the larger world.

Lye’s shop is making its play in CRM right at a time when the primary competition is looking at building out other markets.  Salesforce.com is a formidable competitor and the car to beat on the CRM track though some wonder about the foray into application development.  I don’t.  Platform is a smart and very logical direction for the leader in on demand to be taking the industry. 

Still, a few people wonder if salesforce.com might be taking its eye off the ball and that may have been part of the reason that, a few weeks ago, some people gave credence to the rumor of a buyout of Salesforce by Oracle.  I am not one of those people for numerous reasons which can be briefly summarized as, the price was too low and Benioff is not foolish.

Meanwhile, Oracle continues its push with new functionality, focus on the social side of CRM and a novel approach to the multi-tenant/single tenant argument.  I am not sure I buy into the bit about the looming unimportance of multi-tenant architecture despite the fact that some vendors are starting to pick up on it.  Many people can be wrong all at once regardless of what they say about the wisdom of crowds.

If Lye continues to drive his race, he and Oracle have enough product at this point so the limiting factor will be more along the lines of whether Lye can teach an old database company to dance.  Companies in this state have crossed over into financial innovation and Lye is all about product innovation.  So far, Lye has made some important strides but the challenge for the foreseeable future will be to teach a few new tricks to a company that has been in the pole position so long that many in the organization believe it’s theirs. 

Picking a community partner

A community, a.k.a. community of interest, is usually thought of as a large group of people with some common reason for associating.  These days that usually comes down to the user group but in practice a community can be any group that is passionate about a product or service and wants to improve it.  Communities are as old as the hills and I have often cited the informal gatherings of enthusiasts for the steam engine that sprang up spontaneously in the English Midlands in the middle of the eighteenth Century.  In a short time these enthusiasts helped turn an unwieldy contraption into the heart of the Industrial Revolution.

Not much has changed.  Today and the idea of community is making a comeback for many good reasons.  First among them, communities work, and also, with social media all the rage, communities have become very affordable and computing technology has amplified their impact, making them a great vehicle to drive innovation and growth.  It’s no surprise, then, that lots of vendors are elbowing each other aside to claim the mantle of community and at this point, a confused public might well ask, “What makes a community anyhow — and how do I choose a partner?” Below is my unscientific summation of what to look for when trying to select a community.

Make sure that they understand what a “community” is.  Many suppliers use the word community, because it’s “hot”, but they aren’t actually building a community.  For instance, if the supplier builds a website and invites 5,000 people to “join”, and if the “members” don’t know each other and don’t interact with each other, it’s probably more of a panel rather than a community.  The difference is important because a community proves its value when members examine and share ideas.  A panel is just a fancy survey mechanism.

Understand their specific capabilities.  There is a wide array of objectives that communities address.  Find out where the supplier has expertise.  You might want to look at the Forrester construct for the types of objectives for different communities:  Listening, Speaking, Energizing, Supporting and Embracing.  Ask the supplier what they are good at then match your requirements to their strengths.  If they say “everything”, assume that they aren’t being straight with you.

Get clear on their engagement metrics.  Any community vendor should be able to specify three numbers for you that describe an engagement pyramid.  At the base is the number of members you’ll have; in the middle, the number who will come in and read, but not actually participate and create content; and at the top the number who actually will participate.  The higher the participation numbers, the higher the engagement — which is really where the gold is.

Make sure you understand what you are getting for your money.  Will the supplier recruit members for you? Will you get weekly reports?  Will the supplier monitor participation and interact with your community members?  How often?  Will the supplier do some work for you, or will you have to do it yourself?  “Self-service” often sounds good, and it’s very profitable for the supplier, but you might not have time for that option.  Furthermore, managing a community is a skill that you might not have in-house and your community’s success is dependent on that skill.  Remember, if it was easy to do everyone would already be doing it.

Get references.  It never hurts, especially in a new market like this.  Ask the supplier for the names of three clients they’ve worked with for at least six months.  Call those clients and ask about their experience.  Would they do anything differently?  Focus especially on what happened when there were problems or when service was especially important.

Visit the supplier’s offices.  If you are spending a lot of money and a significant portion of your budget, you should kick some tires.  Meet the management and prospective members of the team that would manage your account.  Talk about your needs and your vision and see if there is overlap.  Make sure you feel that they will be able to build confidence with executives in your company.  Ask for biographies of their staff and make sure that you have partners with experience that is relevant for your company and industry.  Lastly, understand whether there is depth in the organization, and notice whether you feel more or less confident after that visit. 

Ask if they’ll work with your partners.  If you have an ad agency or PR firm or other interactive partner, find out whether they are willing to integrate their efforts with that firm.

Find out what’s new.  Ask about their future plans, their innovation priorities, how their solution will change over the course of your relationship, and so on.  If you are working in the community arena, you want a supplier who has ambitious plans for the future and who will keep up with you.

Understand their experience.  Ask for case studies of companies they have worked with in the past.  See if they can talk about their lessons learned, their mistakes, and how they have improved as a result.  Organizing a community is as much about methodology and service as it is about technology.  Beware of companies that just seem to have good technology, but who lack the real-world experience to handle your complex needs.

Ask the ROI question.  Many emerging companies do not have good ROI numbers because it’s hard to calculate and our research shows that customers often don’t take stock of their situation before plunging ahead with an implementation.  In that case everyone is left to wonder what the ‘real’ ROI is.  So if the prospective vendor cannot give you an ROI statement don’t be put off but weigh it in relation to the answers to all the other questions.

Picking a community vendor/partner might not be easy at this stage of the market’s evolution, but remember, it’s the early adopters that get the biggest returns on their investments in new technology.