Last week, Salesforce.com released its plans for the Marketing Cloud, a new identity management offering and a Dropbox-like feature for the enterprise.
Yet, one item that garnered much of the attention at the annual Dreamforce user conference was IT analyst firm Gartner’s report that by 2017 the CMO will spend more on IT than the CIO. Salesforce.com CEO Marc Benioff mentioned it several times during the conference. In fact, Benioff thinks Gartner may be too conservative.
“Personally I think it’s going to happen faster than that,” Benioff said in a question and answer session with the press. “I think Gartner is maybe underestimating.”
That sentiment is not surprising given how much Salesforce.com spends on marketing itself, not to mention its recent acquisitions of BuddyMedia and Radian6. Still, it’s clear Benioff believes in the trend.
“In many ways the CMOs are becoming the number two officers in the company right behind the CEO,” he said. “They’re flying these expensive jet fighters and they need a cockpit and they don’t have that. We bought a billion dollars worth of companies to give it a go.”
But do others agree? Clearly there are doubts. Frank Scavo, of Constellation Research, voiced his skepticism on Twitter and found some fellow doubters. Barb Darrow at Gigaom ponders whether putting the CMO in charge of IT is really a good thing.
There certainly are some factors putting pressure on marketing departments to modernize and automate, trends Benioff was happy to note during his keynote address. For example, according to research firm IDC’s worldwide collaborative applications forecast for 2011 to 2015, there will be a 47% annual growth in spending on social networking. According to an IBM survey of CEOs, social networking was cited as the most important way to connect with customers, and companies are having 150 million conversations a day with customers on social networks.
GE, which has invested heavily in Salesforce.com and its Chatter collaboration tool, would seem to agree with Benioff and Gartner.
“It’s already happened,” Ian Forrest, vice president of marketing for GE Capital, said during the conference. “The way I look at it is the CIO and CTO had everything because they owned the systems, the platform, the business rules, the logic, everything. And if you look at it today, today all the business rules and logic sit with the marketing teams. I just think it’s a trend that’s going to continue because the business owner now doesn’t have the gate of IT to develop the customer.”
Forrest, a marketer with a budget of his own, doesn’t want to wait for IT anymore.
“Logically as a marketer, you’re going to be thinking: How do I go faster? How do we go deeper? And you’re going to be a lot more reactive because you don’t have to deal with IT,” he said.
It’s not like Salesforce.com is alone in chasing this trend, of course. IBM is hoping to appeal to marketing departments after buying Unica, Coremetrics and Cognos. Oracle, for its part, spent a reported $300 million on Vitrue and more on Collective Intellect. You now can count Adobe among that crew as well.
Whether CMOs ultimately outspend CIOs or not, it’s clear IT needs to take notice. As Michael Hickins points out about Salesforce.com in the Wall Street Journal:
The company’s customers may end up paying a price for its success. Salesforce.com may be reducing the overall effectiveness of its services, as its emphatic outreach to executives outside the IT department threatens to cause a fracturing of IT services within organizations, reducing the potential effectiveness of each of those individual applications.
Salesforce, with its emphasis on social software, is also increasingly emerging as a potential threat to the influence of CIOs. The vendor is brazenly circumventing IT and speaking directly to CEOs and CMOs. Burberry CEO Angela Ahrendts, GE CEO Jeff Immelt and GE CMO Beth Comstock, all actively endorsed Salesforce during this week’s conference.
Benioff acknowledged the challenge his customers may face with the rapid releases during his Q&A session.
“This is probably more technology than customers can assimilate,” he said.
If they can, it’s going to take both the CIO and the CMO to make it happen.]]>
Despite the hype around private clouds, Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), most organizations are focused squarely on Software as a Service (SaaS) — if they’re in the cloud at all.
Results from the TechTarget 2012 IT Priorities survey indicate that SaaS is the predominant use for cloud computing – by a long shot.
Of the respondents using cloud computing in 2012, 55% are using Software as a Service, far outdistancing Storage as a Service, the next highest response at 35%. For comparison, 31% had plans for IaaS, 28% plans for disaster recovery/business continuity in the cloud, 27% for PaaS, and 21% had plans for hybrid cloud integration.
The online survey polled 2,642 global respondents, 1,308 in North America, at the end of 2011.
Rick Hassman, director of applications with Pella Corp., the Pella, Iowa window manufacturer, is among those who have stepped into the cloud with SaaS. Running some applications in the cloud via the SaaS model made perfect sense, but moving other core IT functions there — well that he’s not so sure about.
Pella, an Oracle applications shop, runs the E-Business Suite as its core ERP with the SaaS-based CRM OnDemand product in some sales groups and Oracle CRM in another.
“Based on the investment we’ve put into the infrastructure, the network, the redundancy, the disaster recovery, I would say our core strategy moving forward would still be to host this stuff [ourselves],” Hassman said. But CRM made sense because, in Pella’s case, it’s not heavily transactional and most of its users are remote. “We felt we could integrate it and we didn’t have the inherent skill set in house.”
Pella is far from alone in this thinking.
The TechTarget 2012 IT priorities survey showed SaaS is becoming more pervasive throughout the enterprise. On-premises software/hardware and on-premises appliances remain the primary deployment models at 58% and 23% respectively, but 35% of respondents said they would use a SaaS deplyoment model in 2012. Only 16% planned to run their software on a public cloud infrastructure and 26% had plans to run their software on a private cloud. Just 17% had plans for mobile deployments in 2012.
Of those SaaS adopters, 57% said that the end user population will be using one or more cloud apps next year. Additionally, roughly a third said that as much as 40% of their end user population or more will use cloud apps this year.
Other research has shown that the spending is following SaaS. According to Gartner, vendors with SaaS models for enterprise applications brought in $9.2 billion in 2011-that’s up 16% percent from 2009 when Gartner sized the market at $7.9 billion. Additionally, momentum shows no signs of slowing as SaaS and cloud continued to converge in 2011. Gartner predicts a more than 16% growth rate for 2011 with SaaS revenue to hit $10.7 billion.
SaaS’s dominance of cloud computing is not particularly surprising given its maturity relative to other approaches like IaaS and PaaS. It can serve as a gateway to other cloud-based initiatives, according to Jeff Kaplan, managing principal at THINKStrategies, a Wellesley, Mass.-based consultancy.
“It’s the success of SaaS that opened the door to the broader idea of cloud computing,” he said.
Looking at the evolution of SaaS, it was typically brought into an organization by a renegade user, like a sales manager who bought a few seats of Salesforce.com, or some other sort of productivity-oriented application, Kaplan said. Once they found success, SaaS often found its way into the rest of the organization, with users looking at front and back office tools. From there, organizations often began thinking of other cloud-based applications that meet their industry requirements.
“Then IT takes a look and says, ‘maybe we can get them to work for us as well,’” Kaplan said. “That’s where storage as a service and infrastructure as a service comes in.”
A company’s size, age and infrastructure clearly play a part in their willingness to adopt SaaS or other cloud technologies. As Hassman mentioned, Pella has to consider the investments it’s already made in infrastructure.
“The more established companies who have a tremendous amount invested in infrastructure are less inclined to give those up and migrate over to a SaaS app unless they feel confident they can do it with little pain,” Kaplan said.
While its CRM OnDemand deployment has helped Pella prepare itself for the idea of other cloud initiatives, SaaS is no panacea.]]>
Recent events suggest that Oracle, SAP and Salesforce.com will soon be all that’s left of the enterprise software vendors – at least when it comes to the cloud.
An examination of recent announcements from the three demonstrates that the business applications giants are investing heavily in the cloud and competitors better watch out.
Current and potential customers of SAP, Oracle or Salesforce should be also concerned because consolidation is seldom a good thing for buyers.
After the last several weeks, it certainly looks like these three vendors will be the ones reigning over applications in the cloud. We start with Oracle.
Oracle acquires RightNow
Oracle has gobbled up plenty of cloud-based application vendors over the years (and plenty of other vendors as well) but its acquisition of RightNow brought a competitor of Salesforce.com’s Service Cloud in-house. The addition of the customer service offering also served to help round out Oracle’s cloud-based CRM portfolio.
Competition aside, what’s also interesting is that RightNow’s architecture is not, by most definitions multi-tenant. As Oracle moves its Fusion Applications — and subsequent acquisitions to the cloud — it’s clear it’s focused on virtualization as the underlying architecture and not multi-tenancy. Why does that matter to enterprise software buyers? In general multi-tenancy creates economies of scale, at least some of which get passed on to customers. Oracle does not seem interested in that.
Salesforce.com releases the Social Marketing Cloud
Perhaps the most interesting tidbit from Salesforce.com’s Cloudforce event in New York last week was CEO Marc Benioff’s aside during a press QandA about Oracle, multitenancy and their product line. Benioff, taking great pleasure in tweaking his rival in Redmond Shores, pointed to a fundamental difference in the competitors’ approaches to cloud computing.
“We heard this week– now this is just something I heard — that Oracle is discontinuing Oracle CRM OnDemand and shutting down that organization and that sales force and moving everyone onto Fusion, which is not a multi-tenant system,” he said.
Meanwhile, Benioff continued to preach the gospel of the social enterprise with the release of the Social Marketing Cloud (Paul Greenberg has a pretty good critique of the strategy). That line of business is based on Salesforce.com’s acquisition of Radian6, a onetime independent cloud vendor. In fact, Salesforce.com has bought up more than a few independent SaaS vendors to add to its suite. That’s likely the fate for many rising SaaS companies– getting acquired by one of the new big three.
Which brings us to…
SAP to buy SuccesFactors for $3.4 billion
Compared to SAP’s acquisition of BusinessObjects for $6.8 billion, the purchase of on demand talent management software SuccessFactors over the weekend seems not nearly as big a deal. But as co-CEO Bill McDermott said on the call with reporters, “we will become the No. 1 business software company in the world in the cloud. It’s only a question of what year.”
Clearly the race is on to move existing apps to the cloud (Fusion Apps); build new ones (Salesforce.com’s Chatter, SAP’s Business ByDesign); buy up what’s already doing well (RightNow, SuccessFactors); and stake out positions (multi-tenant vs. single tenant). And, as Oracle and SAP are seeking to become more like Salesforce.com, Salesforce.com is doing its part to be more like premise-based enterprise software, offering an enterprise license agreement and a database residency option for customers that absolutely, positively can’t let some data leave their home.
What about the others?
Of course, those three are not the only companies selling enterprise software.
I suppose apologies are due to Microsoft, which has a competitive cloud-based CRM offering and is scheduled to release its Dynamics NAV ERP application on SQL Azure in 2012. But in July, there was plenty of concern that Azure is not ready to run ERP and NAV is a newer, more Web-enabled application. Moving Dynamics GP (Great Plains) and AX (Axapta) and their client-server code bases could prove a more daunting challenge. We’ll hold off on Microsoft.
(UPDATE: one day after publishing this post, Josh Greenberg at EAC made a pretty good case for Microsoft joining this list thanks to some cross-company synergies)
What about Infor? Judging from Infor CEO (and former Oracle CEO) Charles Phillips’ appearance with Benioff in New York, it’s clear the Salesforce.com platform is their cloud platform of choice while Infor services its existing premises-based customers itself.
Bottom line for buyers?
What does that mean for enterprise software buyers in the long run? Buying cloud-based apps means savings on hardware and maintenance and, while calculations differ, generally appears cheaper on a per user basis. How long will that last? Doug Henschen at InformationWeek lays it out pretty explicitly in his coverage of the SAP news:
What’s more, cloud apps vendors earn notoriously slim margins. SAP had to reassure financial analysts that cost synergies and growing scale driven by cross selling would improve SuccessFactor’s profit picture. The company lost $12.5 million on $205.9 million in revenue last year.
As Oracle, SAP and Salesforce increasingly compete with packaged cloud applications, they as well as a host of other companies are also pushing hard on the PaaS front, bringing a new dimension to the ages-old build vs. buy dilemma.
Think another vendor should be included? Make your case below.]]>