Beagle Research Group

Welcome to the know-how era

Lately I have been working on a keynote speech that I need to deliver in a few weeks and in the process of doing my research I came across some very interesting ideas that fit in well with my research focus. In the last half of the twentieth century a number of thinkers became increasingly dissatisfied with the classical model of economics and began looking for an explanation that better represented the facts that they saw daily.

One of the biggest issues staring economists in the face was the idea that economic systems don’t always seek equilibrium. The classic idea of supply and demand roughly equaling each other out doesn’t quite hold, especially in new and dynamic markets. The dynamic market — such as CRM which quite often stares me in the face — never finds equilibrium and in fact it is likely to fizzle out once demand is satisfied or when a disruptive innovation comes along.

That reality is more at home in an explanation that borrows heavily from evolution and for a lot of reasons makes much more sense than simple equilibrium.  All this is old news to many people, especially if they’ve ever analyzed a sigmoid or “S” curve maturity model.

What got my interest though was the thinking of the late Kenneth Boulding a towering figure in economics and systems theory who was one of the first to see the connection between economics and the other social sciences. Prior to that synthesis the neo-classical economists all tried to treat economics as a kind of physics, but the lack of correlation between the two led at least one wag to refer to his neo-classical economist friends as having “physics envy.” Maybe you had to be there to appreciate the joke.

At any rate, Boulding saw that the necessary economic inputs for production were not the traditional land, labor and capital but “know-how” — the sum total of ideas, plans and production capabilities in an organization. Know-how is the big idea I took from Boulding because I think it explains where we are in the CRM market today and why CRM 2.0 is so important.

Early in a company’s life, know-how is vested in the minds and productive capacities of the founders and innovators. Venture capital is important because it enables emerging companies to buy into the organization the know-how that the founders lack or that their limited persons can apply. Once a company burns through its funding it ought to be in a position where it has product and positive cash flow, if not it dies (a victim of the down side of evolution). 

What’s interesting though is that at that point, somewhere in the exponential growth phase, the repository of know-how transfers — to one degree or another — to the customer.  Having bought and used a product, the customer develops an understanding of the innovation and, most importantly, develops the know-how of what the next iteration of the product or service ought to be.

In market after market today that’s what I see. Innovative products and services have come to market and established themselves and customers are already expecting the next iteration. That is why CRM 2.0 is so important. 

There are a lot of companies that have become very good at anticipating the customer such as Apple and I suspect that it is because they stay very close to their proto-customers. In contrast, I also suspect that a company like Microsoft applies a slightly different and more expensive algorithm to the same economic challenge.  Microsoft’s approach appears to be to develop a portfolio of cool products and to nurture them enough so that if one hits it in the market they will be ready with a solution.  One attempts to lead the market, the other to follow very closely.  Of course, the reality is not that black and white, so don’t take this literally and sell some stock.

CRM 2.0 is an attempt to provide the tools to help companies lead their respective markets. It is a loose federation of solutions designed in one way or another to capture know-how from customers so that perceptive and receptive companies can leverage it in the design of products, services, messages and experiences.

A few months ago I said that a customer module was missing from CRM. The customer module needs to be the place where all of the tools that a company uses to capture know-how reside and share data. When discussed in this context I think the idea of CRM 2.0 becomes clearer.  It is easier to see why CRM 2.0 is needed and that it is not just another fad in the front office. Business processes involving the customer will never be perfectly predictable the way classical economists might like, but using CRM 2.0 and a customer module will improve the probability of understanding customer motives and that would be a big step forward.

New era

After a long build up I think we’re finally at the real beginning of a new era in computing.  The previous (nearly) ten years have laid an important foundation by which I mean on-demand computing but if you thought that was it, I think the next few years could blow you away.

Take a look at the driving forces in computing today — they at least include economics, technology and population and that’s probably just scratching the surface.  Most interesting in my mind is that CRM is really the driving force for much of what is happening and much that will happen. 

Here’s how I see it.  Economics has always been a major driver in our business but I think we’ve seen it kicked up a notch.  Old school economics were about productivity and the technology sector responded with increasing computing power (thanks to Moore’s Law) and the software to consume it and thus provide the productivity. 

However, today economics is being driven by population — more people than ever are becoming computer literate and that literacy is a great marker for improving living standards which naturally drives needs for most things CRM. 

In the last few years we’ve seen a lot of movement along the lines of Web 2.0 and CRM 2.0 which is good, but will it be enough?  The thing few people really want to admit is that CRM got started as an attempt to organize the front office, not necessarily service the customer.  Tools were put in place either to help managers bring scientific management principles to sales (SFA) or to organize the chaos of customer service. 

We all know the story.  Along the way the customer changed — we found our voice and our wallets and became demanding — and CRM began to get out of synch with the market.  That’s when vendors began throwing software at the problems like a hiker offering his backpack to a charging Grizzly.  For the moment the bear is barely sated but far from fooled. 

The latest wave of social networking and community solutions offer a tantalizing view of a future in which vendors and customers collaborate and co-create value, but as good as it is, I have my doubts.  I think there’s still too much software development from the bottom up when we need to be thinking a bit more from the top down — strategically.

As good as many of today’s CRM 2.0 technologies are, they still suffer from a point solution mentality.  A vendor might say, I see a business problem and I can fix it, regardless of the fact that the problem might be part of a cascade of issues.  Like the story about a butterfly flapping its wings in the Amazon rain forest and influencing the rain patterns on the east coast, there are more moving parts than can be modeled with any precision. 

Dealing with customers is part social science.  We can have all the physics envy we want but it won’t change the fact that where physics has mathematical certainty, social science has the bell curve and probability.  Nonetheless, we can do a better job in customer facing applications if we take a bigger picture view of what we are doing.  We need to think more about the process than we think about solving the point problem.  The companies that I see working on the bigger picture today include Salesforce.com, Oracle and nGenera — to name only a few — and each has taken the view that some kind of platform is required to bring everything together.

By far, Salesforce has demonstrated this understanding best.  With the AppExchange and Force.com, the company has brought forth a logical platform that supports whole business processes by bringing applications together.  I am less sure that the partners recognize this and their responsibility for inventing a new future — they seem more interested in the short term need to integrate a couple of applications for a specific engagement. 

You can’t blame the partners because that’s what is paying the bills but you can say this is an opportunity for future growth.  My counsel is for groups of vendors to band together to own and brand a business problem and its solution.  By problem and solution I mean something like order to cash in pharmaceuticals, for example, something less specific will not attract the firepower needed or present the opportunity to make the effort worth while.

Oracle may be on the same line.  So far, Fusion looks more like an attempt to stitch together a crazy quilt of CRM 1.0 acquisitions but there is great potential within the architecture to do more on a process level.  I think the next few months — and announcements from Oracle — will tell the tale.

Then there’s nGenera, which buddy Paul Greenberg blogged about the other day.  nGenera appears to be taking the bull by the horns and is buying up companies (the latest one is Talisma) in an attempt to craft end-to-end customer facing solutions.  Whether nGenera will fare any better than any of the other companies with the same strategy that have graced the scene in the last few years remains to be seen.  Given the work already done on many fronts with XML and Web services, I’d have to say these guys bear further looking into.

Lastly, and this cannot be over stated, as the demand for customer facing solutions accelerates, engineers in other parts of the world are seeing the same needs and opportunities and they are watching from places with lower labor costs.  What happens next is largely in our hands but I would like our chances better if we thought bigger.

I love disruption

I once played organized football, not that I was any good at it, but I played it with relish.  My favorite part had anything to do with disruption of the opponent’s carefully planned plays which included covering kick-offs and punts as well as regular defense.  This bit of information has almost nothing to do with this column except that it points out an early character trait (some would say flaw) that has perversely influenced my career.

Show me a train wreck and I will study it for hours, analyzing what went wrong and theorizing about the cascade of minor events that led to catastrophe.  On-demand technology has been the train wreck of my life though paradoxically, its ever unfolding cascade of follow-on events has produced the opposite of a train wreck.  True, on-demand has caused and will continue to cause dislocation and catastrophe for some who misunderstand its import and refuse to either get out of the way or board the on-coming train.

I love disruption, though these days I see it more as an opportunity to roll the dice and start over.  Disruption is to a crowded marketplace what a green field is to a cow, it opens up myriad possibilities.

A couple of companies made announcements recently that make an old train wreck watcher almost gleeful.  One sows the seeds of changing the user interface and the other promises to change how we market.

User interface

Ever since the ice age ended and we quit punching holes in cards, we have applied some of our expanding computing power to making better user interfaces.  That invariably meant improving what a user had to read in order to do useful work.  Graphics were a huge improvement and through graphics we got the idea that we could employ universal symbols to do the work of some words.  However, people are more strictly visual — ask an iPod owner.  More fundamental to our existence as people, we speak and listen, but the spoken interface has so far eluded mainstream computing, a measure of how hard it is to get right.

Last month, one new company, Ribbit, made an important contribution to changing the user interface from something that is only written and silent to something more.  Ribbit concluded a private beta for salesforce.com customers of its voice interface product.  The way it works is pretty simple.  Ribbit lets sales people dictate notes of encounters directly into the SFA application while the results of a meeting are still fresh.  More importantly, the user interface can also kick off workflows that make things happen — send a letter, invoice, schedule follow-up, whatever.

Ribbit calls itself Silicon Valley’s first phone company and while that makes sense, it downplays the real power of their solution.  As a VoIP provider, Ribbit can play traffic cop for all of the phones in a company, recording calls that sales people can decide to keep or not.  Customer calls can be recorded verbatim and all of a sudden, sales people and their managers can have a complete record of what was said, including nuances like emotion, rather than someone’s recollection.  Finally, Ribbit also offers transcription so that a text record will be available when needed.

The significance of this solution is not the fact that mundane conversations can now have immortality.  Ribbit is also offering an API that enables developers to embed voice as another interface into any other applications as well.  Suddenly there is clarity in this disruptive approach to the UI.  With voice as an increasingly regular part of the UI, the cell phone becomes more valuable as an input device and our wireless devices can assume a more natural role in the human-computer interaction.  Perhaps that will lead to smaller PDAs without keypads.  It will certainly make emoticons quaint reminders of an age when computers were largely silent.

Data, data, data

The thing that runs our marketing outreach and which is its greatest potential limitation is access to correct personal data.  Small companies need it to get growing and to grow and large companies need some way to continuously cleanse it.  So far data provisioning companies have made a tidy sum cleansing and selling contact data but that may be a thing of the past if Jigsaw has anything to say about it.

Today Jigsaw announced that it is offering free and accurate contact data to its users.  The company can do this because its users are the people responsible for inputting cleaning and correcting the data in the first place.  This application of social networking concepts makes it cheap, cheap, cheap for Jigsaw to maintain and provide the data.

For example, a company with one hundred thousand contact names in its data base for customers, prospects and the like has little means to ensure the information is right.  Frequently bad or expired data is not caught until a piece of mail is sent back unopened.  Then what?  An expensive effort ensues to fix the broken data or perhaps the contact is simply written off.

Having the ability to keep contact data up to date and clean won’t win anyone a Nobel Prize but it will have a disruptive impact on companies that specialize in cleaning contact data and selling it.  More importantly, from my perspective, it is an important factor in what I believe is an evolution toward a new CRM module, the customer module. 

I have written about the customer module before.  Briefly it will give companies the ability to know who all of their customers and contacts are as well as enabling them to carry on a dialog that will shed light on customer likes, needs, biases and life styles.  All of these are important things to know for co-creating value in a market that’s tight and getting more so and table stakes in a social network.

Scheduling briefings

Sometimes I think we rely too much on the written word, and e-mail in particular.

E-mail is great for a lot of things and one of its most appealing aspects is the ability to work asynchronously — literally without being in the same time. Asynchronous communication makes it possible for one party to do something and let the other party respond whenever it’s convenient. This is not new to e-mail, it has been part of human communication as long as there have been letters. Asynchronicity has its limits though which become apparent whenever a communication needs to happen synchronously or in the moment. Humans have an old solution for that situation too, it’s called language. Language is great for conversing and getting quickly to a resolution.

The difference between synchronous and asynchronous communication comes into sharp focus whenever someone tries to make an appointment to brief me. First there’s an e-mail to gauge my interest in receiving a briefing. If I respond positively there is another e-mail requesting dates and times I am available.

I never give dates and times and instead ask people to call me to get the scheduling done and over with. Back when I would offer some dates and times there would be a long delay while the booker — typically a PR agency — went and checked with the client that actually wanted to give the briefing.

But because my time is valuable it is my perishable inventory. I don’t hold time slots open while someone is checking with a client. To do so would add more complexity and would eventually result in wasting some time slots.

Let me suggest a more efficient process. If you want to do briefings, set aside a block of time when you are available, plan a couple of weeks to a month in advance then hit the phones. Armed with your known calendar it should be easy to slot all the briefings in. You might find yourself doing briefings back to back in succession and, while that could seem tedious, you’ll actually warm to the task and get pretty good at it.

On-demand infrastructure

Zuora introduced itself to the world this week and while they are not a typical CRM company their position should have a big impact on CRM and all other markets that offer on-demand solutions.  Founders Tien Tzuo and K.V. Rao and Cheng Zou formerly of Salesforce.com and WebEx, chose the usually sedate billing market because they have a new idea that looks like it has legs.

One of the big disconnects in the on-demand market has been the constraints on product packaging imposed by billing systems.  The on-demand model takes a product and renders it as a service but existing billing systems more or less still bill for the service as if it were a product.  Confused?  Think of it this way.  Conventional software sells product by the seat in a one-time transaction while on-demand currently sells by the seat each month.  For most situations that works pretty well but it works largely because it’s the only game in town.  What happens, for example, if you negotiate a different seat price?  Conventional product oriented billing systems would have issues with that.

On-demand computing was once called the utility model because it mimics the delivery of water, gas, electricity and other services.  In a utility model there is really only one product to sell but vendors can package that one product in numerous ways.  The packaging and pricing model is driven by what the billing system can support.  It’s not a stretch to say that if the billing system can’t adapt to a packaging idea, the idea cannot be implemented.

A utility billing system takes much more into account than simple product information or even the nature of a recurring charge.  For example, utilities are always thinking about rates and fee schedules and many times quantities—you get a certain rate for a specific quantity and often rates become more favorable for customers that buy in higher volumes.  There are also special situations such as non-profit organizations which are often billed according to different schedules.

In the product world multiple rates and quantity discounts are available but not to the same degree as in the service world.  Part of the reason is the greater cost associated with making and selling a product.  While mass produced goods can have very low incremental costs, specialized products like software often don’t reach those economies of scale.  But in the on-demand world the incremental cost of an additional seat sale can be very small opening up more opportunities for creative pricing and packaging—if the billing system will support them.

Enter Zuora, a company dedicated to providing flexible billing for subscription companies.  As an idea, billing for subscription companies may be the fourth wave of Internet commerce.  Other models and their paradigms include Amazon for retailing, PayPal for one-time payments processing and Google for advertising.  The other models have become very successful and lend support to the idea that many economic entities that were once part of the brick and mortar economy are moving to the virtual world.

Of course there are practical limits to how far any of these models will go.  As successful as a company like Amazon is, there will always be a need for a hardware store and a cash register and I have no doubt that the other modes will be similarly limited.  However, the really interesting part of the Zuora story for me is that we really don’t know where the upper limit is. 

It strikes me that at the heart of this introduction is a core ability for vendors to make their companies easier to do business with.  As markets age and multiple vendors become capable of delivering more or less the same product or service, the competition moves from features and functions and toward secondary attributes such as the convenience of the customer facing business processes.  Zuora gives its subscription company customers the ability to better tailor their offerings and that in itself should be a major differentiator.

Up to this moment subscription companies have been rather limited by their billing systems and this introduction could spawn a whole new round of innovation in software as a service once companies have the ability to tinker more with their delivery models.  Who knows where this will lead.

Insights on insights

I sometimes forget about the fact that people are trying to do business and that their business is top of mind -- not CRM. That point was brought home to me last week when I was on-site with a client.

I won't give too many details, but the company has no CRM per se, just some spreadsheets they use for forecasting, a customer database shared with ERP (enterprise resource planning) and a few other databases written in a PC programming tool. The company is growing like a weed, and though CRM once looked out of sight for them, it now looks like a necessity.

The users told me how their business processes worked and all the manual effort required for doing things that CRM addressed a long time ago. There's no doubt that the users would be more productive if they had sales force automation, analytics, marketing automation and more. The company could get closer to its customers and perhaps even shave some positions or at least reassign people to more rewarding jobs.

The amazing thing to me is that despite all this, the company is making a fair amount of money -- so much so that they will not be categorized in the small- to medium-sized business space forever. So, that's all good, and it got me thinking about some things. First, it's inevitable that this company will implement some CRM applications in the not too distant future, if for no other reason than because their competition is doing the same thing. Having CRM when your competition does not is like going to the proverbial knife fight with a gun, so no one wants to be the last adopter.

The second thing it made me think about is the importance of the adoption curve. We've been focused on every new nuance of our technology and early adopters for a long time, and for good reasons. Early uptake is fun to watch -- there's a bit of risk inherent in it because we don't know if it will actually work. Early adopters keep us interested in the hunt. What happens after the early adopters have their fun is worth pondering, too.

Some of that thinking came with me to Insights, the Sage Software partner meeting being held this week in suburban Washington, D.C. Sage has taken a few shots in the last year from a variety of sources for the performance of its stock, and the company recently brought in a new CEO, Sue Swenson.

Swenson is from the telco space and is very smart. It is also important to note that she is not a software person, but she has great instincts; I would even say CRM instincts. To her credit, Swenson has not done anything rash. She has refused to make change for the sake of change and instead has embarked on a long-term outreach effort. Her schedule has been full of travel to meet Sage people and, importantly, to listen to what they can teach her about the company, its products and customers.

In my mind, Swenson is just doing what any CRM-oriented person ought to do, and what's interesting is that she said it was a habit she first got in wireless. At T-Mobile , the executive team she was part of made a religion out of traveling and visiting with the troops on a quarterly basis. The purpose was to listen, not preach, and then to come back to the office and analyze the data before instituting any improvements. That's what she's doing at Sage, and one can hope it will have a positive effect on Sage and Sage's customers.

I expect that Swenson will discover a few things about her company and its people in her travels. One thing that should bubble right to the top is that Sage and its customers are a different group -- not good or bad but really different. Sage has made a science out of selling accounting and front-office products to small and emerging enterprises -- the kinds of companies we might also call "later adopters."

To be sure, all of Sage's customers are not late adopters, but many are. Late adopters, like my client mentioned above, are used to doing things without a great deal of automation support, and it sometimes takes a while for an innovation to get to them. There are many reasons for this, including cost, experience and risk.

Small companies have small budgets and don't buy early in a cycle when technology is expensive and unproven. They wait until technology becomes a whole solution at a lower price point with lower risk. Sage has traditionally relied on a strong partner program to gather up the knowledge and experience needed to deliver automation that works for these customers. Lots of vendors see the opportunity inherent in the late adopter market, but many seem to miss the optimal packaging. If their products meet the right price point, they may be too complex, or if they are easy to use, maybe they are under powered or there's no one to provide service.

At Insights this week, we were all introduced to a number of new initiatives, including integration and interoperability strategies and streamlined partner programs. I would bet that virtually all of this was in the works prior to Swenson's arrival, but I also believe that it would not have gone forward if she had not approved the general direction. After several years in which Sage introduced only cautious changes in its products and its business, this appears to be a year when they are stepping out, and Swenson appears to have arrived at a good time.

Swenson has embarked on a big balancing act, trying to improve Sage without breaking anything. It's a tough job, but her first moves are on target, and they are being deftly executed. I look forward to her keynote next year when she can tell us how it's all working out.

SocialNetworking 2.0

May 2, 2008 -- I have been investigating the possibility that social networking is something that can be used inside an organization (intra-organizationally as my bureaucratic friends might say).  That should really be no surprise — the entire employee base is a natural community, though in many companies the group is small enough that good old face-to-face communication works pretty well.  But there’s at least one place where community oriented techniques not only work but they can have a lot to do with profit and loss.

I am referring to the forecast, not just the revenue forecast but the business forecast.  What’s the difference?  Glad you asked?

In CRM we’ve become accustomed to thinking about the revenue forecast as the only thing that matters but it turns out that may be a rather provincial way of looking at the world.  The revenue forecast is a dandy way for a software company to figure out how it will make money but it doesn’t serve the rest of the world as well.

A software company, a telecommunications, provider and many other high tech businesses basically have one product to sell — maybe the product is SaaS or a box with a CD and a manual or time.  In any case there is no real supply chain to worry about and the revenue forecast is the forecast.  But!

Consider the situation where a company actually makes things and there is a supply chain.  For such companies, the revenue forecast is nice to have but the operations people sweat about a whole different set of issues. 

For example, if a company can make three different products and knows what its capacity is for making each, then that company also knows that it can’t make its numbers if it sells 300 percent of its capacity to make just one product.  In that scenario, a sales team is selling things that operations cannot deliver (I know that’s highly speculative and has never happened, but bear with me).  That’s not a happy problem because it leaves customers unhappy which is nothing compared to the tough love that the executive team get from the board. 

A couple of weeks ago American Airlines had such an unhappy problem when it found that it couldn’t fly because its planes were receiving mandated maintenance — it had customers but no product.  What I am about to say next won’t help American or any other airline because airlines seem to be refractory to help, but I digress.

I’ve recently been watching a company — Right90 — that helps companies manage the business forecast.  By that term, they mean all the things that can and should be forecasted in addition to revenue so that a company can keep its supply chain informed of changes to the forecast.  Think about it, if you want to optimize just in time inventory, then you have to be very good at knowing what to deliver just in time.

What’s interesting about Right90 is that they capture and track changes to the forecast in real time.  If a sales person reports that a customer is doubling an order for 32-inch HDTVs, managers in sales and operations get alerted and the full implications of the change on the forecast get thoroughly reviewed.

This kind of attention to detail gives every relevant person and department a seat at the table and makes them accountable for bringing in the forecasted revenue in the forecasted product lines. More importantly, companies that make the stuff that makes our lives run, make so much of what they make that it’s almost impossible to do a good job of managing the forecast.  And to make matters worse, they try to do it in spreadsheets.  (The only winners here are the people who make Prilosec because they just make all they can all the time.)

At the end of the day, this looks an awful lot like a community working for the co-creation of value but because all this work happens internally, it has been overlooked as a good example of how communities and social networking techniques in general can be applied to business.  What’s fascinating to me is that for a long time we have been thinking about social networking in the context of vendor-customer interactions without really considering the possibility that the same techniques could work inside the enterprise too. 

This is a long way from Facebook or YouTube or any other first generation social networking site (did I say first generation?) which brings me to the question of the week — have we already crossed into, gulp, social Networking 2.0? 

In a way this should not surprise anyone.  It’s the normal evolution of an idea.  First a product comes to market and then the early adopters figure out its real best application.  For a long time we’ve used social networking as a toy but Right90 just might be giving us a glimpse of how this powerful interpersonal communication tool can be used as a powerful inter-personnel communication tool. 

I just love it when things come together like this.

Boycot American Airlines

Boycott American Airlines.  I usually don't write on topics unrelated to CRM but this is different.  Again I say boycott American Airlines.

It won't inconvenience you much and it might do some good for a whole lot of people.

In the country at large American is still having to deal with the SNAFU a couple of weeks ago related to grounding a large portion of their fleet for repairs that had not been performed in a timely manner.  In Boston there are labor issues as well.  The company recently lost a suit by its skycaps over lost tips.

Apparently when American went to charging $2 to check bag at the curb, customers complied but were then reluctant to tip the skycaps for the service.  In effect the airline was horning in on the skycaps earnings.  The sky caps sued and a federal court in Boston agreed and American was ordered to repay the skycaps for the lost wages. 

At the time these hard working people were being paid only $5.15 per hour so tips were an important and necessary part of their income.  Undeterred by the courts, the corporation just put up signs at its Boston airport location informing customers that they were restricted from giving tips -- read the news story here.  The airline also boosted the wages of the skycaps to the $12 to $15 range but according to sources, that doesn't make up for the lost income. 

I think it's entirely reasonable to tip skycaps and, at all other airports I have ever been, it is an accepted custom, like tipping a waiter (but not the counter help at McDonalds, for example).  Skycaps handle a lot of jobs at curbside -- checking bags, issuing borading passes and performing the first line security check.  True counter agents inside the terminal don't receive tips but they don't help you with your bags or stand out in the heat and cold all year either.

All this is happening only in Boston, by the way, so the intent of punishing the skycaps by the airline could not be more obvious.  So my response to this to boycott the airline.  There are enough alternatives that it won't inconvenience people and it might teach the airline how to deal with a very important constituency -- its employees.  As a wise man once told me, the inconvenience would be like being deprived of rutabagas.

Safe flying.

Briefing season

This is one of my favorite times of year because it’s announcement season, the time when all sorts of vendors book briefings to tell me about what’s new in their worlds.  It has been a busy couple of weeks and I expect the briefing deluge to continue for the rest of the quarter. 

I love this because I have a ringside seat to what’s happening and I get to see first, or at least early in the cycle, some cool new technology ideas.  Some of the new ideas will stick like cooked spaghetti to a wall while others won’t.  I write about some of the best but that needs to be tempered by the reality that it’s just my opinion.

I will have a few things to say about individual vendors in the next few weeks but the thing that got me thinking this week was how all this relates to a maturity model of the industry.  Where are we in the life-cycle of CRM?  Early-middle?  Middle-middle? 

The trouble with keeping score is that before CRM gets old it morphs into something else and though we don’t start over, we don’t seem to get any closer to an end either.  That is as it should be because CRM is a process not any one product.  Taking a maturity model approach tells me that we mostly end up somewhere in the middle, no longer neophytes in CRM but few of us reach the ninja state either. 

This year’s crop of briefings can be divided into two classes — the really new and some good but unexciting announcements from the majors.  I suspect that some of the announcements coming out of the big CRM and SaaS vendors lack a little in the oomph department because we’ve heard the announcements before. 

Companies like Salesforce.com, NetSuite and Microsoft have all made official announcements in the last few weeks that were pre-announced or leaked some time ago.  Salesforce announced a tighter integration with Google but that had been revealed a while ago when some of Google’s on-demand applications had not been released yet.  Now we all wonder about a future merger of the two.

NetSuite intimated a while ago that it was working on a capability that would give its users access to company-wide roll up data across multiple countries and currencies.  It was an announcement that lacked a little in sizzle but had plenty of steak.  In fact, the official announcement was held back until the company could say it had more than a score of customers implemented.  It was a good strategy and something that will be important as NetSuite tries to bring the innovation to market.

Finally, in what must be close to a world record for rollouts, Microsoft re-announced its on-demand CRM with a new name — On-line CRM — and re-emphasized the importance of its integration with its office products. 

None of this was particularly earth-shattering news and I got the impression that it didn’t make a lot of sense to announce really new news given the state of the economy.  That’s a debatable point because on the west coast, where these and many other software companies are from, it’s hard to see the effects of recession. 

What is more surprising to me is the number of companies that are springing up.  The people who I have known when they were at large and successful post IPO companies like Siebel and Oracle and who are now forming new companies is impressive.  Mark Organ, who started Eloqua, has a very new company.  Andrew Salzman who ran advertising at Siebel is CMO of a startup.  Cary Fulbright, who ran marketing at Salesforce and several other places is at it again.  Tien Tzuo came from a senior strategy position at Salesforce and he’s got a new company too.  In the last year there are even more names we could call attention to.

My list is far from exhaustive but you get the idea.  On one hand you might look at all this activity and say the economy must be doing pretty well but I think smart people like this take advantage of a downturn to reposition themselves and get ready for the next upsurge.  Buy low, sell high.

What’s most interesting to me is how, in their own ways, each of these new companies is building something new, taking advantage of the buzz in social networking and community and applying it to the old problem of making money.  The first generation of CRM applications that addressed social networking made rather tentative efforts but, from what I am seeing in some briefings, the next generation will begin to put more wood behind the arrow.

Briefing season, like spring, re-starts a cycle and I am not surprised that the two coincide.

Salesforce and Google

Salesforce’s announcement that it would partner with Google to integrate and deliver Google Applications said more about the software industry today than it said about either company or even about the propensity of software makers to deliver software as a service. 

The software industry, like many others before it, has always had a tendency toward bigness though each time the dominant companies of an age reached dominance, market forces changed the rules and we were back to the beginning more or less.

You can tell a lot about a civilization by what dominates the business-economic discussion and you need not go all the way back to the stone age.  In relatively recent eras there has been an industrial age, an automotive age, an electronics age and Dustin Hoffman’s character discovered in “The Graduate” even an age of plastics.  Each age was made up of industries like big rail-road, big steel, big automotive or big petrochemical companies.

As each age passed you could watch the companies that made them passing — even now we can watch as big oil liquidates itself.  It is a little remarked fact that for much of this young decade, big oil has used its tremendous profits not to look for new sources of petroleum or to invest in new refining capacity or new fuels — that’s what government handouts are for, after all — but to buy up its stock.  Exxon-Mobile for example made a shade under $40 billion in 2006 and spent three-quarters of that buying up its stock.  Even at that prodigious rate it will take many years to complete a buy back and Exxon is not alone.

The software industry is somewhat similar in its latest incarnation of delivering its wares as services rather than products.  The SaaS movement has caused a disinflation of software’s true costs which has accompanied a financial zeitgeist that promotes all things low cost and efficient which rewards consolidation and bigness. 

So what to make of the Google-Salesforce chumminess on exhibit at the Four Seasons Hotel last Monday?  CEOs Eric Schmidt of Google and Marc Benioff of Salesforce.com focused attention on their similar technology architectures but also on their corporate cultures and even their philanthropy models. 

The ostensible purpose of the event was to showcase a teaming up of on-demand applications that would enhance the productivity of front office workers who could now use all of their essential office software from the cloud rather than using installed versions from Microsoft or whoever else is still in that game.

It could not have been great news for Microsoft, the dominant force in the current (last?) software era which still gets a significant portion of its revenue from selling boxes full of manuals and CD’s that contain software for installation.  True enough Microsoft is certainly still in the game with products from its Microsoft Live product line that do some of the same things that the Salesforce-Google alliance does. 

I say ‘some’ here not to qualify Microsoft out of any front office discussion.  The Redmond company has much more experience in office productivity applications than Google and many people say a richer product set.  But at some fundamental level, Microsoft is looking more and more like a dowager than a dominator, like General Motors than Toyota, like a company focused more on finance than on product.  Much the same can be said of Oracle which looks more dysfunctional by the day.

Into that milieu Salesforce-Google launched their partnership and an observer may be compelled to ask, where to next?  The above mentioned Zeitgeist, if it were animate rather than simply a metaphor, will approve of this partnering to the point that it will expect more, a deeper partnership and I think eventually an acquisition.  How would Marc Benioff run Google? (LOL!)

The shared cultures and philanthropy will become one and bigness will arrive for SaaS just as it did for mainframe computing or client-server.  But just as nature abhors a vacuum, the software industry seems to abhor bigness and I wonder if the arrival of bigness (again) is simply equivalent to a TV series jumping the shark. 

Financial matters are what could be different this time.  Previous changes-of-the-guard have always resulted in economies being achieved — mini-computers were less costly than mainframes, browser based and on-demand applications less expensive to own and operate than client-server.  But there has always been enough cash in a transaction to make it worthwhile for entrepreneurs to innovate.  One wonders, even in light of emerging platform technology, if the same will hold true this time.

There is no doubt that platforms make it easy and cheap to build software products, but will new software vendors be still able to build companies to market and sell their products absent the margins the industry has traditionally provided?