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Last week at Salesforce.com’s Dreamforce conference, it was interesting to see how their Platform-as-a-Service offering, Force.com is starting to gain momentum among the Independent Software Vendor community including Computer Associates and BMC Software.
What is clear for traditional software providers who are starting think seriously about getting into the SaaS and Computing arena, it might be cheaper and faster to use a partner platform than trying to re-invent the wheel. Both CA and BMC have resources to rewrite their older applications but it isn’t the cost that seems to drive them it is the time to market. Force.com can provide a real advantage to software firms who have the domain expertise but lack the infrastructure and skills required to write Cloud and SaaS-based products quickly.
Other interesting aspects are that traditional ISV’s are not rewriting the old applications they have, they are re-inventing these applications leveraging newer development techniques. CA’s Agile Planner is actually filling a hole in the company’s product portfolio and could be a logical cross-sell or up-sell product for them. BMC’s Service Desk offering is designed to dove tail with Salesforce’s Service Cloud 2 offering, and provide something else ISV’s are looking for, leverage.
I am sure that many traditional software firms will have the internal discussion about build, buy or partner their way into SaaS. Up until recently there hasn’t been a good partner alternative for ISV’s who wanted to build their own solutions but were looking for a partner with SaaS and Cloud Computing expertise. Even though rumors abound about Oracle looking to buy Salesforce, firms competitive to Oracle like CA and BMC are dipping their toes in the water.
For these firms leverage doesn’t just stop at the platform, Salesforce delivers a very effective go-to-market capability that few other partners can offer. Witness the 19,000 participants at Dreamforce. This type of reach and ability to get IT and business buyers attention might make a bet on Force.com worth the risk. More importantly, these firms are also looking to bridge their older brands to the Cloud by bridging the Salesforce brand power. CA and BMC aren’t the only firms interested in upgrading their image how about Dell, Callidus, Fujitsui (Glovia) and the momentum is growing. According to the AppExchange, there are currently more than 200 native Force.com applications currently available.
While at Dreamforce I spent some time with the FinancialForce.com team at the booth and this is a really interesting story. FinancialForce.com is a wholly owned subsidiary of a European software firm, Agresso and their CODA division.
FinancialForce.com was started about three years ago at the time that Salesforce.com initially launched the Force.com platform. Jeremy Roche the CEO at FinancialForce.com, reached out to Marc Benioff to just learn on how to build a net-new SaaS product and learned about their platform. They had a number of discussions and then finally decided to build their new accounts receivable product on Force.com in 2006.
The CODA team started out by building an integration connector Saleforce.com and the CODA2Go (On-demand version) of their Accounts Receivable module. They wanted to understand how the products worked together and that required workflow between products. It took them about a year to get comfortable with the Force.com platform, there were issues that were specific to complex ERP-like applications but Salesforce was responsive and did update the platform to support these deficiencies.
Once the new company was formed, FinancialForce.com, CODA then built out an Enterprise Service BUS (ESB) to connect their SaaS solutions with their on-premise solutions. One of FinancialForce.com’s early customers, a UK-based newspaper, were using Salesforce for their CRM requirements and CODA for their back office financials but were custom developing an invoicing/AR solution. When approached about the FinancialForce.com AR module as a possible solution, what was appealing to the customer that this solution was able to integrate to both Salesforce.com and CODA. About 6 months ago FinancialForce.com also launched their General Ledger and Accounts Payable modules and now they have a solid SMB mini-financial suite.
As more partners begin building and launching applications and businesses on top of Force.com, it is clear that the momentum is building.
Last week at Salesforce.com’s Dreamforce conference, the big news was around the launch of the new business collaboration set of platform capabilities called “Chatter”.
After updating the audience on Service and Sales Cloud 2, which both had some really cool new capabilities, Marc Benioff announced the latest Cloud offering – Chatter or the Collaboration Cloud.
This new business collaboration offering, which was never to be confused with Social CRM, consists of a wide range of Chatter platform capabilities. Many of which look very similar to Twitter, but don’t get confused, this is NOT Twitter. Although Chatter will be integrated with popular social networking sitesl like Twitter and Facebook, these integrations are only feeds into Chatter.
The key line that kept getting repeated was “Why do I know more about strangers on Facebook than I do about my own employees?” This apparently was a major driver in the development of Chatter by Salesforce.
On a funny note, during the analyst meeting, someone asked Marc if he was going provide Chatter on-premise? (Remember Salesforce is in the Cloud!) In a sarcastic reply said that he was actually packaging up the Exodata Chatter servers and that they were being shipped out to clients at the time of the launch. That got a big laugh from the audience. This was also humorous because Chatter won’t be Generally Available in the Cloud until sometime in 2010.
Key capabilities include employee profiles, status updates that are familiar with LinkedIn and Facebook, Groups, external and internal feeds, ability to share content with groups and events, alerts and notifications that allow for your apps to speak to you, an extensible API for the Force.com platform, integration with Google Docs, Twitter and Facebook. To learn more watch this Chatter demo by Parker Harris, Salesforce.com’s EVP of products of the opening day keynote.
Unlike other emerging business-related Social CRM players like Jive Software (SAP partner), Lithium, RightNow or even Oracle, Salesforce seems to be focusing much of it competitive energies against Microsoft SharePoint. I think this is probably a red herring.
Another major benefit to the Chatter strategy is the addition of a new Salesforce mascot family. Saasy now has Chatty. People were lining up to get their photo with both of these mascots… wow.
Here’s what I think the real Chatter strategy is based on…
- Stickiness. This is a ‘fun’ business application and if it is widely adopted as a business collaboration tool, it will be hard to replace. This process may take awhile for this adoption to take place but it will have lasting impact on their clients. The flip side to stickiness is that customers will be much less likely to cancel their service if they are hooked on it. With industry attrition averages between 10-20%, this could have a real hidden benefit. This is especially interesting in that they are giving the basic Chatter capability away with the basic and enterprise subscription licensing. Wonder if they have modeled out this impact?
- Barrier to entry. I think that it is interesting that Salesforce is thinking that this capability might actually upset Oracle Fusion and SAP’s next generation of SaaS offerings because it would require a rewrite of their core platforms. Actually this might make it more likely that SAP might do more than expand their partnership with Jive Software, and force them into a situation where they might have to buy them to keep up with the Benioff’s. With Fusion targeted for GA some time in 2010 (probably December), if they were to add in a robust collaboration capability, it would most certainly delay the GA, which would push Fusion into 2011. So Chatter becomes a key differentiator for Salesforce, even if it experiences low user adoption.
- Facebook and Twitter. By aligning themselves with these leading social networking platforms, Salesforce will be able to differentiate their solutions as hip compared to the older generation. With all types of younger workers continuing to move into the market, this makes Salesforce solutions possibly more interesting to the Generation Y workforce.
- Productivity. By putting collaboration (email, chat, document and knowledge management) in context to various business processes, the hidden strategic benefit might actually be a more productive workforce – closing more deals, resolving more issues, and engaging more employees. Because this is a solution that doesn’t need any training, it could be rolled out broadly without a lot of costly change management activities. Difficult to quantify this benefit but as more use cases become exposed over the next 6-12 months, this will be a really interesting benefit to solutions like Chatter.
So what are the issues with Chatter?
- Security. Kept emphasizing that Chatter has been built on a common security architecture that is the same one being used by Salesforce, which meets stringent bank-level security requirements. This actually might be a CIO selling point because it might be a way to reel in employees who are social networking with corporate information on unsecure sites like Facebook and Twitter. By integrating with them but controlling the internal networking, and not allowing export of data to these sites, the security teams can at least protect data access and distribution.
- Adoption. Salesforce has never really launched a enterprise-wide application before and Chatter is even a different animal than a traditional employee-oriented application. This is uncharted territory for Salesforce and it is unclear how rapid or widespread the adoption of their technology will be. What is good is that Marc Benioff did mention that they are not making any projections on what is going to happen with Chatter, they figure it will be popular but were reluctant to make predictions based on wide-scale adoption. It is in Salesforce’s best interest to make sure Chatter is successful because even modest adoption would ensure a level stickiness that their current applications may not even enjoy.
Just try and take away someone’s Facebook and you will understand stickiness!
- But its not Twitter. What is interesting is that Chatter uses a very similar to Twitter (I didn’t count the number of characters in the message box but I would bet it is 140), but it is a different application. There is only a one way feed and employees are still going to try and go out and use their Twitter. What was confusing at the launch was one of the Twitter board members, Jason Goldman, that Chatter was not built on top of Twitter? We just took your idea and asked to join us on stage? Hummm… sounds like an SAP or Microsoft-type partnership
If employees only want to use Twitter, they probably won’t like Chatter.
So how much does it cost? For existing Salesforce customers who have already purchased seat of Sales or Service Cloud, those seats will get Chatter at no cost, which is good deal. For those employees who don’t have Salesforce seats but want to have limited access to Chatter, the pricing is $50/seat/month. After talking to a product manager on the Dreamforce show floor about this, it seems like a lot of money for almost no functionality. My guess is that when they roll out Chatter later in 2010, they will have a better thought out plan around pricing
In the end, the Chatter strategy makes a lot of sense. The customers I spoke to about it really like it and I will anxiously await the official launch in 2010.
Company: Cast Iron Systems
Started: 2001
Located: Mountain View, California
Geography: Global
Market: SaaS and Cloud Integration
Products: Cast Iron Integration Solutions
Key Customers: Allianz, British American Tobacco (BAT), Amerisource Bergen, Emerson, IBA Molecular, Krueger International, Peet’s Coffee & Tea, PGP Corporation, and salesforce.com.
Website: Cast Iron Systems
Twitter: @Castironsystems
Recent News:
Cast Iron Systems Reports 12th Consecutive Quarter of Growth
Cast Iron Systems and SuccessFactors to Help Customers Improve Business Execution
Cast Iron Accelerates Data Migration and Application Integration to Amazon Web Services
Cast Iron Systems Wins Most Innovative Business Model Award
I asked Simon Peel, Cast Iron Systems’ SVP of Strategy and Marketing a few questions about his business and his view of the SaaS market in 2009.
Did you start out as a Software-as-a-Service company?
We started out in 2001, and our first commercial product was launched in the market in 2003. This first product was intended to be a mission critical integration for on-premise systems like Oracle and SAP.
One thing we knew all along was that application integration is different than data integration. Originally there was business process integration and then new applications started to show up such as Salesforce.com that needed a standardized approach to application integration. Our Salesforce partnership began in 2004 and then our business really started to pick up. We found that customers were very interested in connecting on-premise systems to Cloud-based systems, using a hybrid model, so we then provided connectivity between Salesforce CRM to on-premise ERP systems.
Cast Iron had kicked off the Salesforce relationship with some transactional projects but later the partnership became mission critical for Salesforce and other SaaS-based application systems. After the Salesforce.com partnership was launched, it took a couple of years to get rolling but then a lot of other SaaS companies began coming out of the wood work because many of our competitors viewed this connector market as an after thought.
Other phases and partnerships during our history include when Netsuite, Taleo, RightNow and they all came to the realization they needed integration. That’s when we launched the Powered by Cast Iron program. This was validated by companies like Taleo, who decided it was smarter to just OEM Cast Iron, because they want to take the integration off their development team’s plate. As part of the Powered by Cast Iron program, we also needed to show our partner’s sales teams on how to sell our integration technology and then advise them on how best to build their own application programmable interface (API).
Then the latest phase of our growth has been in the Cloud with new relationships with Google, Amazon and HP and our most recent Dell new announcement. They all want a piece of this new rapidly growing Cloud market.
We view application the integration market like how Cisco looked at creating ‘packaged networking’ solutions. Remember all of the SPX, IPX drivers how they were a big nightmare for customers looking to put together networks, Cisco just took this complex problem and provided an easy solution. Our founders came out of companies like Webmethods, Vitria, Tibco and Informatica. They understood that most large customers didn’t use 80% of the delivered functionality, customers want suppliers to keep it simple, with a plug-and-play solutions that can handle transformation, that keeps data clean, and manages the logic, workflow and alerts. Cast Iron also adopted the appliance form factor, just like Cisco did with their router boxes, because we knew we had to provide integration-in-a-box. SaaS applications doesn’t want to provide a complicated solution, they need to just make it easy.
Why do your customers buy from Cast Iron?
Cast Iron is the best-known integration provider and we have been in the market the longest. We are the trusted integration provider for hundreds of clients, because can connect so many systems in just a matter of days.
We are flexible and have many case studies on how Cast Iron has deployed our solutions in just 10-15 days in a variety of form factors; Cloud-to-Cloud, hardware appliances or on a VMWare server.
Customers also see that mega partners like Amazon.com, Google, Salesforce.com, Netsuite, HP, and Oracle have selected Cast Iron and it shows how that they have done their due diligence and selected us as their trusted integration partner.
What do you see as the key trend emerging in the SaaS industry?
Integration is becoming a mandatory requirement for any real Cloud computing initiative. Simple uploads are no longer good enough. First generation SaaS firms are also starting to think about growing up. Enterprise architects are now looking at these systems because they all need to talk to each other.
The fact that Marc Benioff, the CEO at Salesforce.com, was a keynote speaker at Oracle World a few weeks ago, shows that SaaS and the Cloud have made now made it over the hype hump and won’t be pushed out by on-premise ERP, it is okay for on-premise solutions and SaaS to co-exist. In this new world, there needs to be more cooperation among ecosystem providers, so integration is now key to strategy, business processes, and every piece of the eco-system.
There are many layers of the Cloud – infrastructure, platforms, and application companies in each layer is figuring this out because they also need to bridge SaaS and on-premise systems and make it easy. This is a big shift because many Cloud and SaaS companies are asking ‘should I own integration or partner instead?’ For example, Dell integration services provides integration for both Cloud and on-premise systems in multiple form factors. The Dell team looking at this challenge is young agile and quick thinkers and their decision was to either own integration or outsource it and they ultimately decided to partner with Cast Iron. Vendors who are smaller than Dell can’t afford to deal with their integration solution and that is why they are looking work with firms like ours.
What is your outlook for 2009?
Before 2009 we had to push, push and push, but given our new partnerships with Google, Dell and HP, we are starting to get a lot of pull in the marketplace. Over the next couple of years, we believe a lot of application vendors will all be reselling our integration solutions. Many mega vendors have already figured this all out and realize that embedding integration technology makes financial sense and the per unit costs will continue to go down over time.
The dirty little of secret of SaaS is the 6-year total cost of ownership is actually more expensive than on-premise. Many SaaS firms are experiencing approximately 1% churn per month, or 12% per year. Customer acquisition costs are huge. But by embedding easy integration plumbing, this one step can actually dramatically lower churn rates from 12-15% to around .5% per year. So we believe this is what is driving a lot of our momentum in the marketplace.
Thank you to Simon Peel for contributing to this profile.
Company: i365 – A Seagate Company
Started: 1997 (EVault)
Located: Santa Clara, California
Geography: Global
Market: Cloud-based Storage
Products: Data backup, eDiscovery, and Data Recovery
Key Customers: ArtsMemphis, Meritan, CBRE and People’s First Community Bank
Website: i365
Recent News:
I asked Valerie Fawzi, Vice President of Product Marketing at i365 a few questions about her business and her view of the SaaS and Cloud Computing market in 2009.
Did you start out as a Software-as-a-Service company?
i365 is a wholly owned subsidiary of Seagate and was created through a number of acquisitions around the data protection market, starting with EVault. eVault was started in 1997 and was acquired by Seagate in 2007 and was always based on a software subscription business model.
We service mid-market companies who have between 10 and 1,000 employees. i365 also services large companies but usually for their remote or branch offices. I365 is an online service, that protects data on Windows, Linux Unix and other operating systems on both virtual and physical platforms.
Why do your customers buy from i365?
It’s hard today for small business customers because they have to glue together many different storage solutions but they would prefer to have a single provider. The small business customer usually only has a small number of IT resources to handle these important storage and backup challenges, and i365 offers a broad array of storage solutions and we make it easy purchase and support our products through many different channels.
For example, in October we announced EVault Offsite Replication Service that offers a hybrid pricing model, a passive vault and disaster recovery including D2D2T – Data to Disc to Tape, D2C - Disc to Cloud, and D2D2C - Disc to Disc to Cloud.
We provide our technology in many different formats including a license for large companies, a managed service and as a hardware/software appliance. All these deployment options are based on our same technology platform in the Cloud.
i365 distributes our solutions both directly and through channel alliances with major tele-communictions companies. We can offer our services through one of our ten SAS70 Type II data centers across North America and Europe.
What do you see as the key trend emerging in the SaaS industry?
We think customers are going to be careful about moving to the Cloud but would be more open to a blended on-premise and Cloud solution. The ability to provide storage to a variety of on-premise solutions like Microsoft Exchange, SharePoint, SQL databases and even desktops that could be backed up in the Cloud. This is especially attractive for customers in regulated industries such as healthcare, legal and pharmaceuticals who need a data protection plan. This is the type of bridge approach that customers are looking for from us.
What is your outlook for 2009?
We have recently had an important change in management, Terry Cunningham, the former President and COO of Seagate Software, with a track record of success, has rejoined the company to head up i365. Today Seagate is the largest independent storage company. Our new vision is to use our SaaS and Clouding Computing core competencies and move into becoming the leading managed services storage firm. This is a very exciting time for i365 and Seagate.
Thank you to Valerie Fawzi and Rachel Levine for contributing to this profile.
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