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January 18, 2012

Forced or Not? You know the price

With Legacy applications, deciding about expected returns on IT investment has always been a tough task due to numerous cost components involved (Software installations, hardware investments e.g. servers, storage devices, maintenance, training etc.), longer deployment period spread across several financial quarters and nature of benefits achieved. By nature of benefits, I mean, that IT investment not only gives a measureable financial benefits but a majority of benefits are non-financial but crucial too.  Also, the legacy packages come with lot of tools/features which are rarely used by organizations. Does cloud computing add a new insight for decision making?

 

In a recent interview with Forbes Asia, Paul Maritz (CEO, VMWare)1 said that under-hyped thing about cloud computing is the efficiency and simplification that it will bring.  For the first time, we are starting to get some objective metrics with which we can measure IT.  We can measure our own IT with external benchmark.
While browsing through pages of some leading cloud-based CRM players, a sentence on Microsoft Dynamics CRM website caught my attention: "Don't get forced, Get what Fits".2 Certainly, an aggressive marketing strategy from Microsoft Dynamics over Salesforce.com.  On its website, Microsoft Dynamics has put a comparison chart to compare its offering with other major cloud CRM Players (Salesoforce.com and Oracle CRM On-Demand)3. The comparison chart shows that for Salesforce.com Professional edition charge is $65/user/month plus other charges like Mobile, Multidimensional knowledge base, offline access, visual workflow etc.  Oracle CRM on Demand charge have been charging $75/month/user plus other charges for Mobile sales assistant, Contact on demand, partner relationship management etc. As it is MS Dynamics website, they have certainly put their offerings as the best deal ($44/user/month).  My point here is not to evaluate which of these packages is the best one, but to discuss representation of IT investment in very simple components.
Although it can't be concluded that Cloud based packages provide better returns on the investment keeping data security issues and regulatory policies in view, it certainly puts itself as one of the viable options for decision makers in the organization.
Reference:
1.http://www.forbes.com/sites/richkarlgaard/2011/10/19/vmwares-paul-maritz-virtual-success/
2. http://crm.dynamics.com/online/default.aspx?fbid=Bm5MCQ5BFqU#right-value
3. http://crm.dynamics.com/en-us/price-comparison

January 13, 2012

Salesforce.com - Expanding footprint of Social Strategy

Come 2012 and Salesforce.com (SFDC) will add another lethal ammunition to its stable, taking the cloud wars to the next level. On December 15, 2011, Rypple, an innocuous start-up into cloud based human capital management (HCM), signed agreement to be acquired by SFDC. It will be re-christened as SFDC Successforce (http://www.salesforce.com/company/news-press/press-releases/2011/12/111215.jsp). This plugs a significant gap in SFDC offering portfolio, and will have significant (upside) impact for go-to market strategy for its enterprise social offerings. While Radian6's acquisition was aimed at improving the social strategy for SFDC client's customer, Rypple's focus will be on employees of SFDC clients.

Triggers for the deal
Dreamforce '11 was all about Social Enterprise Strategy. The social offering is broadly based on two pillars, Radian6 and Chatter. Chatter offering, was in fact, implemented internally by SFDC and anchored by Marc Benioff himself. Radian6 is a social media monitor and engagement tool, which is currently available as independent offering and not bundled with SFDC (plans are in effect to integrate radain6 with SFDC license by 2012 end). SFDC already occupies 'Leaders' quadrant in Gartner's Social CRM magic quadrants. Over 100,000 companies worldwide are using Chatter and Radain6 counts more than half of the Fortune 100 companies in their exhaustive customer list (http://www.salesforce.com/chatter/customers/ and www.radian6.com/about-us/customers/). So, why this need to tread the inorganic route? Well, the following points are the place to start.


Filling the Strategic Gaps
Gartner has forecasted that Social CRM market will be worth more than USD 1 bn by 2012 end.

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Source: Gartner Press Release 30 Aug, 2011 (http://www.gartner.com/it/page.jsp?id=1777938)

Spending on cloud computing and social media are the only bright spot in the otherwise gloomy scenario in the technology space. Social CRM solution provider space is highly fragmented, and the opportunity is immense. So, having tested the waters with its Chatter and Radian6 offering, the significant 'whitespace' in the portfolio for SFDC was human resource management (HRM) application. Rypple effectively plugs this gap.

Complementary and Supplementary DNA
Social Goals 2.0 agenda unveiled by Rypple on December 2011 is in sync with the Social Enterprise vision by SFDC. After Sales and Service cloud apps, HRM application is a significant complementary offering, with high levels of potential cross-sell opportunity. The client list for Rypple already includes prestigious and hig-end names like Facebook, Nexius, Zendesk, Gilt Groups, etc. The theme of the offering is to move from a transaction based, infrequently used to a engagement and experience based system, with focus on sharing, collaboration and productivity.

Proven Business Model
The on cloud, get-to go applications with collaborative platforms on Web 2.0, is based on businesses model that drive revenue by selling services. SFDC was the first of its kind firm to implement the business model, and no one understands the viability and potential upside better than them. That is why, even though with less than USD 1 mn in total revenue (and not profits) for FY11, the deal value is estimated at USD 65 mn (www.markevanstech.com/.../rypple-revenue-and-canadian-startups/).

 Competitive Intensity
On October 2011, Oracle acquired RightNow Technologies, Inc. for about USD 1.50 bn, paying about 19.60% premium to the listed price (www.oracle.com/us/corporate/press/519740). This gives Oracle a significant presence in cloud spaces (especially service space) and mid-market CRM solutions with 2,000 customers. SAP, whose cloud offering Business ByDesign failed to create any ripple in the cloud space, announced a USD 3.40 bn all cash to acquire SuccessFactors, provider of cloud-based human capital management applications. The premium paid is almost 52% (http://www.bloomberg.com/news/2011-12-03/sap-to-buy-successfactors-for-cloud-offerings.html). What gave in was the diverse customer base (3,500 customers across 168 countries) and sound business model (15 million paying user for repeat business). Hence, when the two of top three package solution companies are growing their footprint in the cloud space, the leader in cloud based packaged solutions needed to respond effectively, and they did by improving their solution footprint (in HRM) and enhancing their strategic offering (Social CRM).
The cloud computing and solutions market place are teeming with seemingly endless and innovative opportunities, and the firm(s) with vision, technological prowess and courage can chart the extraordinary path. The arena is set for the battle among the industry heavyweights and technology leaders.

January 5, 2012

Cloud Computing: Will it thunder or rain?

Higher productivity, better resource utilization and innovative solutions are some of the critical factors for sustainability of any organization. In today's highly competitive environment, organizations need to be more agile, flexible and able to respond to changing customer preferences quickly. IT, as an enabler of doing business efficiently, has always provided a bucket of solutions to organizations to achieve their business goals. Customized applications, SAP, Oracle, Siebel packages etc. are some of the preferred solutions for the organizations. Although these IT solutions provide desired results to organizations but their implementation and maintenance are huge upfront costs for any organization. In global economic uncertainty and tightening market, organizations need to evaluate other options which are secure, reliable and cheaper. It makes a case for cloud computing based IT solutions. Cloud computing has become buzzword in today's business world globally and organizations are certainly cannot ignore it without evaluation. I am going to discuss various benefits and concerns associated with cloud computing solutions. I have taken example of Salesforce.com (SFDC) in next few paragraphs for better illustration. SFDC is pioneer in cloud computing based CRM packages.
Some of the important features of cloud based solutions are multi-tenancy, rapid deployment, pay-as-you-go model, high flexibility, On-demand solution, automatic upgrade and Lower total cost of ownership.  Salesforce.com as compared to traditional systems (SAP or Oracle) has very small implementation cost and deployment time. Pay-as-you-go model works like our electricity bill. Organizations are charged for what they are actually using. Hence, Organizations are not needed to buy heavy infrastructure and licenses keeping future expansion plans in mind. They can scale up their CRM application as per their requirement. It puts lesser burden on company's cash flow.
Salesforce.com offers automatic upgrade to any new feature to running applications. It also has a repository of hundreds of applications where organization can browse, test and implement as per their need.  Force.com is delivery platform for Salesforce.com which is secure, reliable and scalable. Salesforce.com also offers Chatter, a collaboration cloud product for providing private organizational networking tool.
Cloud computing solutions are fast, user-friendly and cost-effective compared to traditional IT solutions. So, should we assume that traditional system has outlived its utility and cloud based solutions are going to replace them? In my view, there is little possibility for it.
There are certain downsides also with cloud computing solutions. The biggest threat is that as organization's crucial data is lying in cloud and if unauthorized access is obtained to these data, it would pose a big question mark to Cloud based CRM reliability.  As these cloud service provider has tie-up with various third-party vendors, it makes the system more susceptible.
As most of the organizations have already invested huge sum in implementation, training and maintenance of legacy system, they would be reluctant to move to cloud based system. Any CTO would not be willing to experiment their business data with new cloud solutions.
Any interruption in third-party data hosting facility would impact the all organizations under multi-tenancy arrangement. In August this year, Amazon's Elastic computing cloud (EC2) suffered outage for few hours impacting its clients' (Foursquare, Netflix) business.
Keeping above concerns in view, organizations can adopt private cloud or hybrid cloud options. I would discuss about these options in my next blog.
Reference:
http://www.pcmag.com/article2/0,2817,2390702,00.asp

Enterprise networking using Salesforce Chatter

In today's complex networked organizations, integration of different business functions has become more important than ever. Consider the case of a manufacturing unit - the procurement team requires inputs from inventory management before placing orders for raw materials; the manufacturing division has to negotiate with resource management for optimizing human and capital resources; and the sales team has to constantly keep the finance department in the loop about customer pricing. Up-to-date information has to be shared across the organization for centralized decision making. The need of the hour is a platform that helps business information to be shared in real time. Enter Chatter, the enterprise networking application from Salesforce.com.

 

Chatter brings to the forefront the networking principles pioneered by Facebook and Twitter but with an enterprise twist. Over and above vanilla networking functionalities like creation of profiles and contact lists, Chatter provides enhanced capabilities like tracking record updates using feeds and sharing business information using groups (1). The wealth of information available by integrating data across the organization assists management in making critical decisions. For example, a retail store manager will be able to place timely orders for a particular product by tracking real time updates to the inventory field of that product (2); a business opportunity can be converted by creating a group to share available information before the client presentation.


According to a Gartner report (3), over 50 percent of enterprises will use activity streams like micro-blogging by 2012. The quest for synergizing organizational capabilities has set the precedent for a new paradigm in which an 'enterprise Twitter' or an 'enterprise Facebook' will be used not just as networking tools but also as change agents. What is needed is a holistic understanding of the benefits of enterprise networking and how Chatter, with its collaboration capabilities and built-in integration with the Salesforce CRM suite is best-placed to lead this revolution.
References:
1) http://www.salesforce.com/in/chatter/features/
2) http://www.infoworld.com/d/applications/salesforce-steps-enterprise-social-networking-718
3) http://www.gartner.com/it/page.jsp?id=1293114
4) http://www.socialmediaexaminer.com/salesforce-chatter-social-network/