First, they added some neat things to Chatter. Chatter itself is a collaboration tool in search of users; some of the people I talked to on the exhibit floor found it fairly useless and, worse, distracting, taking up space that could better be used on their CRM interfaces. Others were finding uses for it (hopefully, because it worked the way they worked, not because they found they could no longer ignore it). One of the glaring errors in my mind was its concept – as an enterprise social network, it didn’t take the customer into account – it was a business-centric feature in what is supposed to be a customer-centric application.

This year, Salesforce added the ability to invite customers into Chatter – an important step, but hardly a groundbreaking one. Jive was doing something akin to this three years ago. The conversation still takes place under the control of the business, so it’s hard to say this is really totally social, but Salesforce is sneaking up on it.

Also added to Chatter was the ability to share documents and to do other collaborative tasks (see! It IS a collaboration tool!), and the ability to use FaceTime on the iPhone and iPad in the Service Cloud. The idea of video service was aptly displayed  in the keynote by a mock service call in which the “agent” identified wires and cables in a “customer’s” computer hardware. It looked great until you realized that such visual service requires some significant technician-style knowledge in the call center, and at eight bucks an hour I’m not sure where that expertise will come from.

More significant was Data Residency Option – the ability for customers to house sensitive data on their own premises instead of in the Salesforce datacenter. This is a smart move – it allows Salesforce back into the game for companies facing privacy laws, like in Europe, or regulatory limitations, like in the financial services and health care industries, conditions that forced some companies to exclude Salesforce from the buying process What kind of management overhead or added costs DRO adds are not yet clear, but they may hamper its competitiveness as opposed to simpler solutions with multiple delivery options.

Perhaps the most significant news, long-term, was the series of partnerships announced on Thursday – ERP and marketing automation from Infor and manufacturing with Kenandy, most notably. Salesforce was rumored to be hunting for a marketing automation to acquire, but that would have deflated a significant part of Salesforce’s AppExchange – Pardot, Eloqua and Marketo were all staked out dead-center of the exhibit hall. The Infor partnership makes more sense because it allows Salesforce to offer an integrated option for higher-end customers wu=hile leaving smaller businesses to their AppExchange allies. The addition of ERP and manufacturing models looks to satisfy a perceived need for a suite of products (think NetSuite) providing front-to-back business software.

Now, will this work out? We’ll see. I think it plays to Salesforce’s continuing “Oracle-ification,” in which it continues to count itself as the driver in its relationships with customers, offering up applications that have its stamp of approval. You can use other applications, of course, but you’ll pay when you try to integrate them.

The other option is an approach that allows you to decide what best-of-breed looks like, with an assist from tools that allow you to integrate them easily. The winner  is going to be picked by business software customers.

The various pricing schemes can create confusion among buyers as they try to assess the total cost-of-ownership (TCO) of different CRM services priced under various schemes. For example, there are still several companies offering license-based pricing models. Also, some companies offer a subscription option in addition to a perpetual license option.

In July we did a comparative price analysis of four leading CRM solutions for mid-market organizations. Forrester Research defines mid-market organizations as any organization with revenues of less than $1 billion and/or fewer than 1,000 employees. The CRM solutions included in this TCO analysis are:

• Microsoft Dynamics CRM 2011
• Sage SalesLogix
• Salesforce.com
• SugarCRM

For this analysis we looked at the following costs and requirements: for premise-based solutions we included the server and end-user (named user) licenses and annual support and maintenance fees. For on-demand solutions we looked at the annual end-user (named user) subscription fees. Each solution had to include mobile access, integration with Microsoft Outlook, a customizable reporting engine and configuration and customization capabilities.

We looked at the three-year TCO (total cost of ownership) for a 10-user; 25-user; 100-user and 500-user deployment. We assumed the following storage requirements: 5GB for the 10-user; 10GB for the 25-user; 15GB for the 100-user and 25GB for the 500-user deployments. For this analysis, we used standard list pricing as available in July 2011. Term, volume and other discounts (such as discounts available under the Microsoft Enterprise Agreement) have not been considered.

You can download this analysis here.

Here’s a preview of the 3 year TCO for a deployment of 25 users:

That tendency is particularly troubling. In order to be successful in helping its customers understand what’s possible with CRM, vendors should model the behavior of a CRM company. After all, these businesses had to understand what that behavior looked like to develop products that worked, right?

A lot of CRM vendors (names not mentioned to protect the not-particularly-innocent) are, ahem, deficient in actually practicing customer relationship management. You see evidence of that in how they treat their customers come contract renewal time, the way they require customers to squeeze existing processes into the format their software requires, and even in the arguments they make about competitors during the selling process.

Courting a customer with a litany of half-truths, distortions and misrepresentations about other CRM vendors is a terrible way to start a relationship with a customer. It assumes customers aren’t smart enough to research their major software purchases – a miserable foundation for relationship of any type. And these vendors’ are then going to help their customer build customer relationships?

If you believe, like I do, that trust and respect are the underpinnings of customer relationships, then this vendor is setting its customers up for disappointment and failure from the outset.

So what has caused them to forget the CRM behavior that led them to create their products in the first place? It’s as if they don’t believe in the underlying concepts of their own products. Could it be that selling CRM and the ideas around it is intellectually difficult, and it becomes easier and quicker (especially for larger vendors) to slip back into the software industry sales tricks that have worked in the past, but which also led to adversarial relationships between vendors and customers – and which stand in stark contrast to what CRM is supposed to represent? It’s either laziness or intellectual rigidity at work here – neither of which is particularly helpful in thinking about or deploying CRM.

So if you’re a buyer, what do you do? First of all, confirm what your vendor is telling you about the competition, especially when it seems particularly damning. If you discover that they’re twisting facts to obstruct your path to a purchase with fear, uncertainty and doubt, take a hard look at whether they’re going to be a viable partner in helping you transform your company. If they’re not customer-centric, it’s doubtful they can help you become customer-centric.

The other advice I offer is this: ask the vendor to show you how its using CRM to sell you CRM. This can be revealing: some vendors don’t use their own CRM products for CRM, which is telling. Others will hem and haw because of what the contents of their customer records say about you and their attitude toward you as a customer. If they’re doing it right, you should be both surprised by the depth of knowledge they’ve built about you and pleased by how deliberately and decisively they’ve used elements of that information.

IF your CRM purchase starts to smell like an ‘80s-style software sale, you can bet that your relationship with the vendor will have an ‘80s-style stink to it – and there’s absolutely no reason to subject yourself to that. We know what CRM is supposed to do – it’s supposed to help you build close relationships between buyers and sellers that last over time. If a vendor is willing to engage in activities that indicate he’s looking for an adversarial relationship and is only concerned about making the sale today for this quarter’s numbers, get away from that vendor and look for a CRM vendor who actually understands CRM.

The two main acquisitions by Salesforce that give me pause are its puzzling $250m+ acquisition of hobbyist Ruby platform Heroku that no one was actually paying to use in production. Now, Benioff and Co. are shelling out $276m or so to acquire Radian6, a social media monitoring and analytics company.

What the #$%& is going on here?

Salesforce.com has spent more than half a BILLION dollars on a) platform tools that no one really cares about and b) a “cool” set of tools that really doesn’t add anything major to its core offerings (where, I should point out – Salesforce.com makes all of its money).

I think Radian6 does some cool stuff, really I do. But this multiple is ridiculous – and dangerous for the industry. It was bad enough hearing everyone freak out about Color getting a trillion dollars in funding (OK, maybe I’m off by a hair or two here) – but this type of overspending makes those shouting “BUBBLE!” seem like wise sages right now.

Salesforce paid a ridiculous multiple for a company probably struggling to grow profitably in a space that has not matured into a “must have” portion of the app stack for small and mid-sized businesses and may not for several years. While it is great to get insightful data from social channels, what companies have proven to have the right actionable processes in place to leverage this data in any valuable way?

Agin, social media monitoring is a useful tool – BUT – Radian6 was already tightly integrated into Salesforce.com. AND – I imagine that only about 15% TOPS of Salesforce.com’s user base really gives a damn about the kind of social media intelligence that Radian6 provides. Remember, Salesforce’s bread and butter is still the SMB and midmarket – areas where “brand monitoring” are not as critical as in, say, the Global 2000 (where Salesforce.com pretends to be a big player).

So, to recap, Salesforce.com has spent upwards of $500m+ to bulk up a platform that does not serve its core user base, and for a social media monitoring tool that its core user base has no desire or need to use.

Wow.

Just imagine, if Salesforce.com spent that money making its core CRM product actually easier to use, contain a less “Siebel in a browser” look and more of a modern web app feel, more reliable and less vulnerable to universal outages, etc. Imagine if they kept their actual core user base happy and actually still built CRM tools?

I guess we’ll never know…

Yes, Tibbr.

While Tibbr may do a lot of what people might expect from a status-update focused tool, in my opinion it fails to do anything actually benefitting a company’s attempt to be more social. Well, at least in ways that can’t be done better by other products or for free with cloud-based tools.

For one, Tibbr is all about filters and categorization – placing labels and objectifying relationships. While there is value in this – for analysis and alerts etc. – how does this really allow me to better see how my customers are aggregating and talking about my brand or services?

And really, like with Chatter and other internally-focused tools, this is more about empowering employees than connecting with customers. Again, this is an important step towards companies being more social and breaking down silos – but we have seen it all before. Tibco seems to be afraid of issues like security instead of trying to change the way companies think of internal/external information flows.

Ultimately, Tibbr is not a true social platform – it is just a nice to have tool. Like Chatter or Yammer – there is nothing really here that I would say a company can build upon to reach out, listen and improve a customer’s experience in the social realm.

Maybe I’m missing the point. Maybe Tibco thinks internal collaboration is enough. I am just waiting for more companies to understand that in order to be customer-centric, the customer needs to really be at the center of everything – not on the fringes and locked out by cultural and technological firewalls.

Many have probably seen that Salesforce.com has acquired web conferencing tools provider DimDim for $31m. (The rumors of this deal had been percolating since before Dreamforce so for many this was no surprise at all.)

The deal pits Salesforce.com in many ways against some big companies and very popular products – Citrix’s GoToMeeting and Cisco’s Webex, in addition to IBM’s Lotus Live set of offerings. With its recent platform buy in Heroku, and this new move, it is funny to see Salesforce continue to add competitive concerns and look to enter in large markets where it has no clout, rather than look to live above the competition in one market where it already does well. Confident move?  Yes. Smart move?  Well, we’ll just have to wait…

And while the DimDim acquisition clearly places SFDC in competition with the likes of WebEx and GoToMeeting, Salesforce would like to look at this differently. Salesforce instead sees this as a pocket acquisition to bolster its Chatter functionality – a tool it is already basically just giving away to gain some stickiness for its actual paid apps. So, if SFDC does not really see much future for DimDim save for part of what is now a free add-on, then the $31m price was not a huge price to pay to make a cool new collaboration feature a little more robust.

But again, if Chatter is basically free at this point, why buy DimDim? The product was open source under the GPL. Couldn’t SFDC simply create an integration to the free tool and offer up that integration along with a simple installer to add video and screen sharing tools to Chatter?

I think the answer here is two-fold. One, I have not yet seen SFDC do anything that resembles open source. Yes, they have opened up their toolkits and platforms for developers, but everyone does that. There is just not that type of culture alive at SFDC in my opinion. This is a company steeped in the grand history of proprietary software.

The second reason (which is definitely intertwined with the first) is that due to SFDC’s multi-tenant model, adding DimDim-like resources without wholly owning the code would be problematic. As we know, in order for SFDC to really have a tight handle on anything its users touch, it has to run on its monolithic platform. This makes upgrades and other things easy, but does set limitations on how SFDC can go to market with technology it doesn’t own.

It will be interesting to see if the nature of a GPL licensed piece of software sitting inside a huge multi-tenant database has any effect on the way in which Chatter users are empowered to make, own and redistribute changes.

All in all, this is chump change for SFDC, and while it plots them theoretically against big names like Webex, I can’t see Salesforce actually making any huge headway into standalone video conferencing with the DimDim technology (After all, Cisco’s Unified Communications suites are pretty awesome and light years ahead of where a DimDim-powered Chatter tool is today). Most likely, Salesforce.com will only relegate the functionality as a nice add-on to Chatter.

Well, I thought – since it ’tis the season of giving and carols – let’s have a contest to see just how creative our Sugar community can be!

So – we are kicking off a quick contest to see who can write and/or record the best SugarCRM-themed holiday carol. Points will be given to creativity, humor and presentation. And, don’t be afraid to take aim at our competition as well .  And, if you can actually RECORD you singing the carol (audio is cool, video is even better) – well that just might give you an edge.

The rules and regs can be found at the “Night Before Dreamforce” page.

All you have to do is post your lyrics and/or audio/video to the SugarCRM facebook page to be eligible for the iPad. Hey, you might just get an extra holiday present, and awesome one at that! Winner will be announced Dec. 20.

Good luck!

So, the marketing team got together and penned some “holiday carols” that tell our side of the CRM story, as well as throw some light-hearted barbs towards salesforce. All in fun, right? You can check out the complete carol book and lyrics here.

The main thrust of the campaign was to guarantee salesforce.com users at least 50% off their CRM subscription fees by switching to SugarCRM – and to make the switch seamless, we will waive the data migration fee.

To top it all off, we hired some professional “carolers” to sing selections from the song book outside the Moscone center as the attendees of Dreamforce piled in for the kickoff keynote. The crowd loved the carols, many chimed in, and tons of people snapped photos and videos and took home souvenir carol books for themselves.

Here are a few clips of the singers singing:

Click here to view the embedded video.

Click here to view the embedded video.

All in all, it was a fun event and we had a great time with all the singers and all the people who stopped by and chatted with us about SugarCRM.  Thanks to everyone who helped make the caroling such a fun and successful event!

What I mean is that while the cash is certainly good to keep a company running, VCs tend to invite the dreaded enterprise sales conundrum. While “social” apps are best when they grow virally and through a natural adoption pattern or “ground up” approach to use inside the enterprise – selling usually takes a “top down” approach.

In my opinion, the best applications will have a freemium model of sorts – creating amazing market penetration and relevancy simply by the fact that they work, are easy to use and generate value for employees. I think InsideView has a great application of this model. This concept rings true in my opinion for all internal social apps, and even for some external-focused applications. Lithium, for example, sells by an enterprise sales model – but succeeds because the actual platform is easy and intuitive for customers in the community, and generates clear value for Lithium’s customers.

I even think Salesforce.com gets this – as it has started to make noise around a freemium version of its Chatter social tool. And when the one company that has probably mastered the art of the modern enterprise sales model thinks freemium…well, then you know there is something to the concept.

Just as open source allowed smaller players and upstarts to enter the market in the past, small and nimble social players must have great ideas, super usability and a clear value proposition to the enterprise – NOT a slick team of sales people banging on the doors of CIOs and VPs of Sales and Marketing.

I hope Yammer keeps these ideas in mind as it expands its market reach with its new funding.

One of the curious things I have seen, however, is that Salesforce.com continually seems to be moving away from its core product message. While SaaS and “the cloud” have permeated the company’s message to date – at least in the early years when the company was ramping up we heard a lot about the actual business software it was developing.

Now, apart from Chatter, I have not heard much about actual CRM features from Salesforce.com in what seems like years. Now, I am sure they are developing the apps – don’t get me wrong. It just does not seem a focal point anymore.

Why? Well, there are a number of possibilities. I’d like to explore two potential options. (Both, one, or neither could be true as I am just postulating here.)

One explanation about the perceived lack of actual feature/CRM development is that the actual Platform capabilities of Force.com are a reality. (And not, as one observer called it – “Farce.com.”) What I mean is that if Force.com is even half as easy to use as say Sugar Module Builder and Sugar Studio – customers can build features they need so that Salesforce.com does not have to do so. This is a possibility – but the limitations of the multi-tenant model make truly deep code-level customizations hard to perform and manage in terms of upgrades etc.

Another option, and this one is far fetched I admit, is that Salesforce in time will shift its revenue model away from application subscription fees and into data services fees of various types.

Huh? You mean Salesforce.com would STOP charging for what has proven a potential multi-billion dollar business?

Well, yes and no. Salesforce.com has created a huge revenue stream for itself, granted. However, it’s prices are proving too high for the market in terms of value received. Even Microsoft is coming down to SugarCRM price levels. For Salesforce.com to compete effectively against better engineered CRM software and highly competitive pricing – it needs to innovate in new ways.

Salesforce.com’s multi-tenant model makes it difficult for the company to offer a lot of different vertical, geographic, etc. solutions, since there is technically “one version” of the system. But – Salesforce.com’s multi-tenant model makes it perfect for another concept – data collection, segmentation and other data-centric services. Having one HUGE database of customer, product, sales information, etc. about thousands and thousands of companies – coupled with data from it’s Jigsaw acquisition and the type of customer sentiment data from Chatter – and that becomes a valued asset.

Salesforce.com seems to be on some sort of track around this, with plans to offer  a free, stripped down version of Chatter to any interested party in the coming weeks. This would allow non-Salesforce.com users to enter data into their huge environment and allow Salesforce to leverage that data in any number of ways. I think of Salesforce taking the cue from Google – understanding thew value of data and information, not plain out of the box apps.

I do not think Salesforce.com would abandon what is a highly valuable revenue-stream any time soon.  But it does seem to have an innovation gap happening in CRM. And if it were to couple seriously interesting (to marketers especially) data services with its core CRM tools, it might be able to at least sustain its bloated pricing rates for the time being.

I have railed against the company’s multi-tenant architecture as limiting for some time. But here I think its huge database might be how it remains a relevant company in the future.