Does Salesforce’s Refreshed SMB Strategy Add Up?

salesforce logoSalesforce hosted its second annual Analyst Summit last week. This year’s format was much more engaging and interactive format than last year, sparking lots of interesting questions and discussions among analysts and the Salesforce team.

At a high level, Salesforce’s executives laid out the company’s key themes for 2016, which included:

  • Continuing to invest in its core CRM space to maintain market dominance. To that end, Salesforce recently introduced its new Lightning user experience and development framework, along with Trailhead, its interactive learning platform to help users and developers transition more quickly and easily to Lightning.
  • Using IoT to strengthen customer engagement. Salesforce announced Thunder, its IoT Cloud, at Dreamforce 2015. Salesforce’s Adam Bosworth emphasized that while Thunder isn’t yet ready for prime time, it is in pilot with several customers. Salesforce is focusing on connecting IoT with business processes and customer experience to help its customers to help drive sales and revenues.
  • Reimaging Wave Analytics to provide better insights to users. Salesforce initially launched Wave Analytics as a platform in 2014, with plans to develop apps on top of the platform over time. After hearing from customers that it was too expensive and focused too much attention on the platform play and not enough on providing enough prebuilt apps for business users, Salesforce introduced its next iteration of Wave at Dreamforce 2015. In addition to a streamlined pricing model, the new version offers prebuilt sales templates and apps that make it easier for sales reps to get more value from their customer data.

Of most interest to me, however, was that Salesforce devoted more time to its strategy and solutions for SMBs than last year.

From SMB Startup To Enterprise Powerhouse

Salesforce.com website circa 1999, courtesy of Internet Archive Wayback Machine (https://archive.org/web/).

Salesforce.com website circa 1999, courtesy of Internet Archive Wayback Machine (https://archive.org/web/).

When Salesforce was founded in 1999, it was focused on the SMB market. As a cloud pioneer, Salesforce captured the market’s attention with its story of faster, easier, better and less expensive CRM. While SMBs were its target in the early going, the marketing genius of Benioff and a stellar sales team quickly moved Salesforce upstream, and capitalized on replacing enterprise dissatisfaction with Seibel to become the undisputed 800-pound CRM gorilla in the enterprise market.

To accommodate demands from large customers and a rapidly evolving market, Salesforce expanded its vision over the years to become what it now terms a “customer success platform.” Today, this platform encompasses many parts and solutions, including:

  • Multiple editions of its core CRM solution
  • A veritable storm of clouds (sales, marketing, service, community, etc.)
  • New Thunder and Lightning initiatives
  • More than 35 acquisitions, from ExactTarget to SteelBrick.

However, as I wrote in this post, Salesforce’s SMB Story: Great Vision, But a Complicated Plot Line, amid its enterprise success, the Salesforce story became harder for the average SMB to parse through. And, while the vendor offered relatively low entry-level pricing for it former Group Edition ($25/user/month), SMBs faced a steep jump to Professional ($65/user/month) if they needed more functionality that many wanted, such as pipeline forecasts, campaign management, contract storage and quote delivery, custom reporting and dashboards.

Either as a by-product or intentionally, Salesforce’s SMB story has evolved to focus on the “fast growth” SMBs and digital elite, where it has done an excellent job of capturing market share.

But when it comes the vast majority of SMBs the math is revealing. True, Salesforce is the #1 CRM vendor in SMB: SMB Group’s 2015 Routes to Market study shows that 25% of SMBs (1-999 employees) that currently use a CRM solution use Salesforce. However, 75% use other brands, from old-guard competitors such Microsoft and ACT!, to newer ones such as Insightly and Pipeliner. And then there are all of the SMBs still using Excel, email and/or basic contact management solutions.

Furthermore, according to Salesforce, about 150,000 businesses in total use its solutions, and about one-third of them (or 50,000) are SMBs. When you consider that there are roughly 6.5 million SMBs with employees (plus another 17 million or so solopreneurs) in the U.S. alone, Salesforce has barely scratched the surface in SMB market.

Salesforce’s New SMB Story

Recently, Salesforce has begun to refocus its SMB story, for a few reasons. In addition to the huge, untapped market potential, Salesforce sees SMBs as canaries in the coal mine in terms of requiring the simplicity and ease of use that all businesses—even large ones—increasingly demand from business application vendors. Salesforce also wants to tap into SMB diversity and innovation to help keep pits own focus fresh.

Screen Shot 2016-01-19 at 12.57.27 PMTo that end, Salesforce has recently taken a couple of big steps to refocus its SMB story, including:

  • Launching SalesforceIQ for Small Business at Dreamforce in September 2015. Positioned as “the smart, simple CRM to grow your business,” SalesforceIQ, at $25/user/month, replaces Group Edition as the vendor’s CRM entry point for SMBs. Based on the acquisition of RelateIQ, SalesforceIQ automatically captures, analyzes and surfaces customer information across email, calendars and other channels, using pattern recognition to provide users with sales insights and proactive recommendations.
  • Announcing a free integration between Desk.com, Salesforce’s small business customer service app and SalesforceIQ. The integration gives give SMBs a unified view of their customers, enabling them to provide the more connected, personalized experience that their customers will increasingly demand.

Screen Shot 2016-01-19 at 1.02.03 PMSalesforce also quietly rolled out Trailhead  in 2014, and then showcased it at Dreamforce 2015. Trailhead provides users, developers and administrators with a guided, learning path through the key features of Salesforce to help people get more value from Salesforce solutions more quickly. According to Salesforce, Trailhead earners have passed more than 1,000,000 challenges, earning more than 250,000 badges.

In addition, Salesforce’s AppExchange—one of the first and most successful app stores, which just celebrated its 10th birthday—offers more than 2800 applications that integrate with Salesforce). Many of these are SMB-oriented, and Salesforce continues to ramp up SMB partnerships and integrations, with vendors from MailChimp to Slack to Sage Live (link to blog) on board.

Perspective

There are many things I like about what Salesforce is doing in the SMB space. I think SalesforceIQ gives SMBs a much better bang for the buck than Salesforce Group Edition. Furthermore, the integration between Desk.com and SalesforceIQ gives SMBs a cost-effective way to improve their customers’ experience, and level the playing field against larger companies in today’s increasingly social, omnichannel world.

Salesforce’s ecosystem is also a huge plus for SMBs that are already Salesforce customers. The AppExchange makes it easier for SMBs to find apps that will work well with Salesforce, and reduce potential integration issues. Meanwhile, Trailhead is one of the most fun training programs I’ve seen in the business applications space.

But, Salesforce will need to do more if it really wants to become an SMB mainstay. First, of all, Salesforce needs to improve SMB segmentation and understanding. Sure, it gets those Silicon Valley startups, but it needs a deeper understanding of the broader SMB landscape and their diverse attitudes and requirements.

This leads to my next point, which is that the broader swath of SMBs still need a lot of business and conceptual education about how and why sales, marketing and customer service are changing, and what they need to do to succeed amidst these changes. Salesforce paved the way in educating SMBs about the big picture benefits of the cloud, it should have the same lofty goals in terms of educating them about the new customer journey.

In addition, Salesforce says that there is “a clear migration path” from SalesforceIQ to Sales Cloud. While it sounds like Salesforce can easily migrate data from SalesforceIQ to Sales Cloud, the applications are built on different code bases, and have different user interfaces. So its not intuitive as to how this works in real life in terms of user learning curves. As important, what is the strategy for all of the ISVs on the AppExchange that target SMBs? They’ve integrated with Sales Cloud offerings, not with SalesforceIQ. Since Salesforce is now pitching SalesforceIQ to SMBs, what do they need to do, and how will Salesforce help them? Another question is how does Lightning—and Thunder for that matter—fit into the SMB story?

That said, as evidenced at this event, Salesforce is listening, and is formulating plans to increase investments to educate and engage SMBs both locally and online. While engaging the broad SMB market is never easy, Salesforce has the right attitude, and the brand and budget to create a wider lens through which it can gain the pulse on SMBs it needs to capture SMB attention and market share.

My Top Posts From 2015

new-year-images- collectionSeems like we blinked and its already 2016! I hope your New Year is off to a great start. Here are my most popular blogs from 2015.

Thank you again for reading and commenting on them. And please let me know what SMB related tech topics are of most interest to you in 2016.

SMB Group’s 2016 Top 10 SMB Technology Trends

Making The Internet of Things Real For SMBs

Are You Keeping Pace With Your SMB Customers?

Taking the Plunge: Triggers for Small Businesses to Move to SAP Business One

Trends in Small Business Adoption of Mobile Solutions

Cloud Is The New Normal for SMBs—But Integration Isn’t

SMB Spotlight: Empowering A Billion Women by 2020 Teams Up With Xero

The Cloud: Mother of Re-invention for IBM

Charting a Course in the ERP Clouds

Mobile Solutions Play a Big Role in Small Businesses

Slide Show Version! SMB Group’s Top 10 SMB Tech Trends for 2015

(Originally published on the SMB Group website and available here in .pdf format).

Here are SMB Group’s Top 10 SMB Technology Trends for 2015 in slide show format!

SMB Group Top 10 SMB Technology Trends for 2015

crystal ball

(Originally published on the SMB Group website and available here in .pdf format).

Here are SMB Group’s Top 10 SMB Technology Trends for 2015! A more detailed description of each follows below.

(Note: SMB Group is the source for all research data quoted unless otherwise indicated.)

  1. Cloud is the new IT infrastructure for SMBs.
  2. SMB IT staff and channel partners evolve into cloud managers.
  3. SMBs recalibrate IT strategy and spending for a mobile world.
  4. The Internet of Things (IoT) comes into focus.
  5. SMBs reinvent marketing for the new buyer journey.
  6. KPIs trump ROI and TCO as the new “show me” metric.
  7. Analytics gets SMB-friendly with “bring your own data” and freemium offerings.
  8. It’s time to reimagine work.
  9. SMBs place a premium on protection.
  10. SMBs opt for an incremental, integrated solutions approach.

Detailed SMB Group Top 10 SMB Technology Trends for 2015

  1. Cloud is the new IT infrastructure for SMBs. SMBs increasingly view technology as a key business enabler. According to SMB Group research, 67% of small businesses (1–99 employees) and 81% of medium businesses (100–999 employees) say that technology solutions help them improve business outcomes or run the business better. However, most SMBs don’t have the resources necessary to keep pace with technology on their own. Just 19% of small businesses employ full-time dedicated IT staff. And while 86% of medium businesses have internal IT staff, they are typically IT generalists who lack expertise in newer technology areas such as mobile and analytics. As SMB requirements for fast, easy access to new social and mobile analytics solutions, more compute power and storage, and other services have been increasing, cloud adoption has boomed—with 92% of SMBs are now using at least one cloud business solution and 87% using at least one cloud infrastructure solution. In 2015, cloud solutions are poised for hockey stick growth as more SMB decision-makers turn to a cloud-first approach that not only supports existing business models, but also enables them to develop innovative new products, services and business models. Public cloud adoption will continue to significantly outpace that of private cloud, but more medium businesses in particular will consider a hybrid cloud approach, particularly in industries and applications where security and privacy are top concerns.
  2. SMB IT staff and channel partners evolve into cloud managers. As the cloud becomes mainstream, both internal SMB IT staff and external channel partner roles will evolve from implementation and break/fix support to become more proactive and strategic. SMBs will look for staff and channel partners that can work with line-of-business decision-makers to better align technology investments with business goals, select best-fit solutions and manage cloud service providers. Internal IT staff and channel partners will also need stronger integration expertise to help SMBs get more value from their technology investments. Channel partners will need to cultivate consultative selling and adjust staffing skill sets accordingly. SMB decision-makers will seek help to better understand and articulate new skill-set requirements, and to hire and/or contract for these needs. They will be hungry for thought leadership from SMB vendors, analysts and other influencers.
  3. SMBs recalibrate IT strategy and spending for a mobile world. A growing majority of SMBs now regard mobile solutions as essential business enablers, with 60% saying that mobile solutions are critical to their business. 86% of SMBs agree or strongly agree that mobile apps are a complement to traditional business applications, and 71% believe that mobile apps will replace some traditional solutions entirely. Mobile solutions also account for a growing share of SMBs’ technology budgets. SMB median spending on mobile technology and solutions as a percentage of total technology spending rose from roughly 12% in 2013 to 16% in 2014. Mobile service and device costs still account for the bulk of SMB mobile budgets, but SMB spending in other areas is rising as a percentage of mobile spend. On average, in 2014, SMBs spent 11% of their mobile dollars on apps, 9% on security, 11% on mobile management and 8% on consulting. Planned increased investment in mobile apps and more diverse mobile devices will necessitate a spike in mobile management adoption as well.
  4. The Internet of Things (IoT) comes into focus. IT vendors and prognosticators have been forecasting explosive growth for more intelligent and connected devices of all types. However, many IoT scenarios have been cast in a consumer light, such as smart watches and Tile (a locator for items such as keys and glasses), and the IoT vision has been fuzzy for many SMBs. In 2015, however, early but compelling use-case scenarios and solutions will emerge, leading more SMBs to the “aha” moments required to spark adoption. For instance, radio-frequency identification (RFID) has been used in logistics to track pallets and crates for some time, but mostly in closed-loop systems for high-value goods. IoT will help reduce RFID costs, making it more practical and appealing to retailers to use in order to help improve inventory accuracy, automate customer checkout and reduce theft. Beacons, which are indoor positioning systems that communicate directly with smart phones via Bluetooth, provide another compelling SMB use case. For example, a network of in-store beacons can identify the location of customers in a store and send them push notifications. Or, a trucking company could install beacons to monitor the state of its trucks, provide more timely maintenance, reduce vehicle downtime and decrease costs. Once SMBs understand use cases more clearly, IoT will hold great appeal because it is mostly invisible to end users, which negates adoption issues, and it provides real-time data for better decision-making and better business outcomes.
  5. SMBs reinvent marketing for the new buyer journey. The buyer journey is evolving rapidly and includes many more touch points than ever before. SMBs must transform their marketing approach to connect with more prospects and customers, and to provide them with the right information at the right time in the buying journey. Although many small and even medium businesses rely on point solutions, more will turn to an integrated marketing approach. In 2014, 20% of small businesses and 25% of medium businesses had purchased/upgraded to a marketing automation solution in the past 24 months. Meanwhile, 22% of small businesses and 26% of medium businesses plan to purchase/upgrade a marketing automation solution in the next 12 months. More SMBs will realize that choosing the right marketing automation solution is one of the most important technology decisions they will make, particularly as cloud, mobile, social, analytics and other technologies continue to transform the buying process.
  6. KPIs trump ROI and TCO as the new “show me” metric. Historically, vendors have tended to focus on proving solution value through return on investment (ROI) and total cost of ownership (TCO) analysis and metrics. But these assessments and metrics, while often beneficial, are frequently too vague and/or too dependent on nuanced measurements to be compelling for SMBs. In comparison, key performance indicators (KPIs) can provide SMBs with specific, actionable insights on business performance and what areas need improvement. With so many vendors fighting for SMB dollars, SMBs will increasingly seek out those that help them understand what KPIs are most relevant for their business and industry, and those that provide credible, specific metrics about how their solutions affect these KPIs.
  7. Analytics gets SMB-friendly with “bring your own data” and freemium offerings. Most SMBs don’t have data analysts on staff. These businesses often are intimidated by analytics solutions, which have traditionally been expensive, complex and difficult to use. But cloud computing, better user interfaces, visualization tools, improved algorithms and natural language capabilities as well as a growing number of freemium offerings designed for business decision-makers—not data scientists—are poised to change this. For instance, IBM’s Watson freemium offering allows users to bring in data from many sources, and it has capabilities that reduce data preparation and loading time, including a “fix it” button to repair data quality issues. Once data is plugged into Watson, users can query in natural language to analyze information. As more solutions designed for people with little or no data preparation and analytics skills emerge, analytics will become more consumable for SMBs.
  8. It’s time to reimagine work. Whether you prefer the hashtag #futureofwork, #newwaytowork, #reimaginework or something else, it’s clear that change is on the horizon. Processes, tools, attitudes and behaviors are shifting as mobile, social, cloud, analytics, IoT and other technology advances take hold in SMBs. Likewise, demographic shifts are reshaping the makeup of SMB workers as well as their expectations of what technology should do and how it should do it. For instance, millennials and digital natives are rising through the workforce ranks, while baby boomers are starting to retire or move to part-time work. Meanwhile, the ranks of temporary and contract workers continue to grow. The National Employment Law Project found that temporary help agencies, staffing agencies, professional employer organizations and employment placement agencies fill 2.5% of all jobs, up from 1.4% in 1990. In addition, easy-to-use consumer apps and devices have raised the bar for user experience in the business-to-business (B2B) world. This changing mix of resources, behavior, attitudes and requirements will lead more SMBs to seek better, easier and more affordable ways to access, evaluate, buy and get productive with technology solutions. Vendors that understand and plan for this evolution, provide clear solution value and make SMB customers feel that they are part of a strong ecosystem will have a decisive edge as this trend unfolds. Providing easy access and free trials, clear messaging, a delightful user experience, superior support and vibrant user communities will be key to tapping into this trend.
  9. SMBs place a premium on protection. SMBs are already using basic security and backup tools. However, our research shows that most use point solutions that only tackle part of the problem. The use of more comprehensive solutions to protect and manage data is still far from the norm. But greater reliance on technology, an increasing number of “moving parts” (traditional apps and infrastructure, cloud, social, mobile, etc.) and the need to manage data no matter where it resides necessitate better security, control and management capabilities. SMBs need only turn on the news to understand the financial, brand and legal ramifications of data breaches at large companies such as Sony Pictures, Home Depot and eBay. As awareness rises, SMBs will place a premium on more comprehensive solutions from vendors that offer proactive guidance, deeper expertise, stronger service-level agreements (SLAs) and 24/7 support for an always-on world.
  10. SMBs opt for an incremental, integrated solutions approach. New cloud, mobile and social solutions have made it easier for SMBs to access and use new applications, but they have offered little help with integration. Although 63% of SMBs have partially integrated some applications, 79% still rely on manual Excel file uploads or custom code for integration, which underscores the severity of the problem. SMBs typically lack the expertise and resources to manage the entire integration process, and they need solutions that both encompass and better integrate cloud, mobile, social, analytics, security and other technologies. However, SMBs don’t want—and can’t digest—monolithic solutions. Vendors need to accommodate SMB integration requirements with a LEGO-like approach that enables SMBs to acquire only what they need at a given point in time, and then to add on new capabilities (their own or those of partners) with as little friction as possible when new needs arise. Although integration remains one of the toughest technology nuts to crack, we see new hope. Open ecosystems, embedded integration capabilities and stronger APIs should help pave the way, as should toolsets designed to help non-technical users to configure integrations without coding if they understand business integration workflows and requirements. Built-in collaboration and social communities to help users crowdsource information, find experts and share and/or sell integrations will also be key to making SMB integration a reality.

About SMB Group

SMB Group focuses exclusively on researching and analyzing the highly fragmented “SMB market”—which is composed of many smaller, more discrete markets. Within the SMB market, SMB Group’s areas of focus include: Emerging Technologies, Cloud Computing, Managed Services, Business and Marketing Applications, Collaboration and Social Media Solutions, IT Infrastructure Management and Services, and Green IT.

How Scribe Software Solves the Integration Puzzle for SMBs 

This video interview was originally posted on SMB Group Spotlight. 

Laurie: Hi, this is Laurie McCabe here with the SMB Group Spotlight and today I’m talking to Peter Chase, who is the founder and executive Vice President for Business Development at Scribe Software. Scribe specializes in providing integration solutions both in the cloud and on premise to help business integrate and get more value from their business solutions. So Peter, welcome and thanks for joining me today.

Peter: Thanks for having me.

Laurie: Before we get into a lot of detail about what you guys do can you give us a little bit of background on the company?

scribe logoPeter: We’ve been around for 18 years now, so 1996. We are in the same business we started out in, which is helping companies get their business systems to connect with one another. We sell across the globe so we have customers all over the world. We do about 25% of our business in Europe and we have a large partner network that we work with that help us deliver value to customers across that global footprint.

Laurie: Okay, that’s a good introduction, so given that what you do is integration can you tell us a little bit more about the kind of integration solutions that you provide to small and medium businesses?

Peter: Sure. Most small and medium businesses are using multiple systems. There was a recent Venture Beat survey that said small businesses use somewhere between two to five, on average, different marketing systems just to run their different parts of their business as well as now the advent of CRM and other types of system support, your back office systems. None of those applications were really meant to design to communicate well with one another, especially as we’ve added all of these new cloud applications. So how do we as a small business make sure that we have a single view of the truth around a customer, how do we make sure that we have efficient processes so that when, let’s say some marketing activity, say you’ve done a webinar, how do we know when that prospect shows interest that gets followed up by the sales team while they use different systems. We sort of sit in between and it enables companies to be able to define those data exchanges without having to write code in a visual environment, so it really lowers the barrier for small/medium businesses.

puzzleLaurie: So basically you’re helping them integrate those different workflows among the point solutions, which we’ve found in our research is a very big problem. Most small businesses and even medium businesses have barely touched the tip of the iceberg when it comes to that kind of integration.

Peter: Exactly, and part of that reason is because the barrier to get that done has been so high. You need programmers, you need large IT staffs, and most organizations don’t have those staffs or those specialized skills to be able to do that effectively.

Laurie: Right, and the promise has been a long time from a lot of vendors is that we’re going to make integration easy. How are you guys trying to do that at Scribe?

Peter: Well, there has been a lot of progress in that area, especially in the cloud-based applications with better application programming interfaces, what they call APIs, which make those applications more open, but companies still have to define how they want that information to be exchanged, when it happens, how it happens, and that information isn’t always compatible so you might have to sort of build some business rules and some data rules around how you exchange that data. We provide this nice visual environment that allows you to be able to do that, and not having to be a programmer, just that you understand your data and how you want to exchange it. That really is critical to enabling small/medium business to affect that.

Laurie: So it sounds like it’s a storyboarding kind of thing almost, a WYSIWYG way of kind of way to say I want to integrate this with this, is that what’s really unique or differentiating or are there other things?

Peter: Well there are other products out there that are beginning to do this, I think probably the most unique differentiator that we have is that we work with so many systems integrators and value added resellers that so many of that and big organizations rely on because they don’t have the ability to have all those skill sets, and one of the things we built right into the product is a social capability where using social media type approaches where companies can collaborate with their systems integrators and their VARs and now whether that VAR, they could even have the VAR sort of manage all of that and do a turnkey, or they could collaborate on it, or they could just bring them in when they need them on specific issues. So that sort of building a technology platform that enables that to be an efficient process is so critical.

Laurie: Well that sounds like it would be a huge help because even if small and medium businesses have IT resources they’re often times generalists, so they’re still looking to the partner to help them.

Peter: Yeah, and there are some products out there that are very sort of simple where I can say if this happens then edit then send it here, but most companies need more than that, their systems are very unique to what they do, and their workflows are unique, so in the past they would have to go to either custom programming or very expensive platforms and tools. We sort of bring enterprise capable quality integration availability to small and medium business and that’s what makes us unique.

Laurie: So where can an SMB that hears about this, that wants to learn more, where can they go to learn more and get some way to evaluate the solution and see if it’s a good fit.

Peter: The simplest thing is to go to scribesoft.com. We have plenty of resources around videos and different information about what types of scenarios they can integrate easily, what applications they can integrate easily, but we also have free trials. Whether you want to trial our on-premise installed software product or you want to trial our cloud-based platform you can trial either one of those. We have a customer success set of resources in our company that will actually work with you through your trial if you have questions or if you’re looking for some best practices they can help provide those best practices and enable you to really prove out that you can do it effectively and get what you want.

Laurie: I’m sure you can also help them connect with a partner, right?

Peter: Oh well that goes without saying. We have hundreds and hundreds of partners across the world and we can connect them with them. If they’re partner is not our partner and they’d like to get enabled we have an on-boarding program for partners that’s very rapid, so we are all about enabling not just the small/medium business but the entire ecosystem that they rely on to be able to help them and collaborate together efficiently.

Laurie: Peter, thanks so much for joining me and it was very informative to learn about Scribe and it sounds like a great way for a lot of SMBs to integrate their business applications, so thanks again.

Peter: Well thank you, and we’re looking forward to helping companies make that happen. Thanks.

Laurie: Great, thanks.

My Top 10 Posts from 2014

december-2014-calendarWow, December really came quickly this year! So I figured that I would post my most popular blogs from 2014 now, before people are devoting all of their online time to holiday shopping!

 

Cloud Is The New Normal for SMBs—But Integration Isn’t
SMB Group Top 10 SMB Technology Trends For 2014
Nine Signs Michael Dell Will Be the Comeback Kid
IBM Reimagines the Email Story With IBM Verse
Six Technology Resolutions for a Happier and Healthier SMB New Year
SMB Technology: Mind, Matter, Money–and the Cloud
A New Cloud Formation: Dell Cloud Marketplace
Microsoft Lumia 1520: A Millennial Perspective
ReachLocal: One Stop Digital Shop for Local Small Business
Five Things SAP Needs To Do To Make “Simple” Real

SuiteWorld 2014: NetSuite Hits Its Stride

suiteworldI recently had the opportunity to attend SuiteWorld 2014, NetSuite’s annual user conference—along with about 6,500 attendees including customers, partners, journalists and analysts. The event provided us with a good mixture of history, progress, new announcements, and future directions.

Memory Lane–A Somewhat Bumpy Road to the Cloud

I’ve been following NetSuite as an analyst since 1998, when Evan Goldberg (still serving as NetSuite’s CTO) and Mei Li (now SVP NetSuite Corporate Communications), first came to Summit Strategies, where I worked at the time. Early on, NetSuite was NetLedger, offering a simple accounting solution geared towards small and medium businesses (SMBs). The term “cloud” hadn’t yet been coined to describe the model of delivering software as a service (SaaS). In fact, even the SaaS term hadn’t surfaced. Back in the day, we called them Application Service Providers (ASPs) or just online solution providers.

NetSuite was one of a just a handful of vendors that came to pitch this new software delivery method to us in 1998. Salesforce and Employease (long ago acquired by ADP) and maybe a few now defunct vendors probably rounded out this tiny group. Of course, in the next couple of years, we were flooded with visits from seemingly anyone with a similar ideas that could create a PowerPoint presentation.

Over the past 16 years, many cloud vendors have come and gone, as for the most part, the road to the cloud has turned out to an evolutionary–not revolutionary–journey. Mainstream customer adoption of cloud solutions only started to become a reality in 2008, when the “great recession” hit, and the OPEX cloud model became much more attractive to cash-strapped companies. Looking at NetSuite specifically, I remember that for quite a few years in there, the vendor seemed stuck at a count of 5,000 active customers, and some wondered if it could ramp up to the next level of growth.

Fast Forward 

Today, while some roadblocks remain, many companies view the cloud as a mainstream approach to get the solutions they need to run their businesses. In fact, in some areas, such as collaboration and marketing automation, SMB plans for cloud adoption are higher than for on-premise.

Figure 1: Current and Planned Solution Deployment Methods Business Applications

Slide1

However, financials and ERP—NetSuite’s flagship solutions—have moved more slowly to the cloud than other types of applications. There are many reasons for this, including:

  • Deeper existing market penetration of financials, accounting and ERP. Financial and accounting software has been around a lot longer than many other types of software. So especially in the early days of the cloud, NetSuite (and other cloud-based financial/ERP vendors) needed to convince companies to replace incumbent on premise financials and ERP systems with a new cloud solution. In contrast, vendors outside of the core ERP and financial realm were selling solutions to automate functions that many companies had not yet automated—a much easier pitch to make.
  • Fewer users. Fewer people within an organization typically use financials and ERP systems than, for instance, CRM or collaboration tools. For many companies, the cloud model becomes more compelling as the number of users increases.
  • More regulatory and security requirements. Financial information is subject to many more regulatory concerns than many other functional areas. This, combined with many companies’ reluctance to house the company’s “crown jewels” with a third-party, have slowed the pace of financials and ERP cloud adoption.

Furthermore, the cloud has made it easy for business decision-makers to adopt new apps as needed, without IT involvement or even centralized corporate oversight. NetSuite has always focused on the value of a single, integrated system of record—certainly a longer, higher up the food chain sell than buying other types of solutions.

NetSuite’s Integration Value Proposition Comes of Age

men with puzzle piecesDespite these challenges, NetSuite has successfully stayed the more challenging course, and more companies are coming around to the value proposition that integrated solutions help remove friction and streamline business processes. For Q1 2014, NetSuite announced a record $123 million in revenue, up 34% year-over-year, and more than 20,000 organizations now use NetSuite to run their businesses.

At SuiteWorld, NetSuite showcased its 2014 Transformer Award winners, including Tableau Software, Jive Software, Shaw Industries, Williams-Sonoma and MusclePharm, to illustrate how NetSuite helps them grow and manage change more effectively. But their stories reflect a broader phenomenon. I’ve personally talked to many customers—and not only from NetSuite’s ranks—about how much better business runs when everyone views and works with the same, real-time information.

NetSuite’s Next Phase

Over the years, NetSuite has added integrated CRM, Ecommerce and other areas to its unified platform. At SuiteWorld 2014, NetSuite not only announced a new, improved user interface, but additional integrated offerings including:

  • B2B Customer Center built on NetSuite’s SuiteCommerce platform, to provide B2B merchants a platform to deliver a seamless, efficient B2C-like online shopping experience, with the ability to view order status, details and history, track shipments, reorder goods, and more.
  • A new services resource planning (SRP) solution, that provides integrated ERP, CRM and professional services automation (PSA). The offering includes client management, project and resources management, time-and-expense management, and project accounting in a single solution, designed to enable both product- and project-based businesses to modernize and transform operations the way manufacturing resource planning (MRP) did for manufacturing businesses.
  • The TribeHR SuiteApp. After acquiring TribeHR (a social human resources management suite) last year, NetSuite has migrated tight integration with TribeHR to the NetSuite platform. This brings HR capabilities to NetSuite and provides native integration across TribeHR and other NetSuite solution components.

NetSuite has also come to terms with the fact that one company can’t possibly develop ALL the functionality every company will need, or sell and service all of its potential customers. To that end, NetSuite is bringing more partners into its fold to fill in the white space and provide its customers with a richer ecosystem.

For instance, over 100 developer partners had booths and/or conducted sessions at SuiteWorld. The mix included established vendors such as Avalara, DocuSign and Kronos, to newer entrants such as FieldAware and VertexSMB, all of whom have developed integrations with NetSuite.

On the sales channel side, partners ranged from enterprise-focused players, such as CapGemini and Accenture, to smaller ones such as Cloud ERP (which has built its Australia/New Zealand-based business around selling and supporting the full range of NetSuite solutions), and FHL Cloud Solutions, which has developed a successful micro-vertical approach to marketing and selling NetSuite in industries such as wine, medical devices, and furniture wholesale and distribution.

NetSuite also launched the NetSuite BPO Partner Program at SuiteWorld. Through this program, NetSuite and its partners intend to simplify the outsourcing model and help drive costs down and better server smaller customers. Partners who provide Business Process Outsourcing (BPO) or Business Process as a Service (BPaaS) use NetSuite’s unified solution platform to provide services to their clients. Partners get access to SuiteCloud, NetSuite’s development platform to tailor their NetSuite offerings to industries or client-specific needs. Early partners include Capgemini, McGladrey and Accretive Solutions.

Perspective

Integration helps bring order to chaos–and helps companies reap more value from their application investments. But let’s face it, integrating applications after the fact is a difficult, messy and expensive affair, and one that many SMBs struggle to get done.

In today’s social, mobile and multi-channel world, consumers—whether B2B or B2C—have more power, and all vendors face increasing pressure to provide better, faster, and more user-friendly products, services and engagement to attract and retain customers. Having a unified system of record enables companies to have a more knowledgeable view of customer behavior, and to present a more unified face to customers, whether they’re engaging in marketing, sales, billing or service transaction. This means that the appeal and value of taking an integrated approach will only rise—as will NetSuite’s fortunes.

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