It was an interesting talk – and brought up some interesting points. I think the most interesting one was not necessarily around SaaS, cloud or open source technology but rather about what the culture of “open” means in the age of the cloud and the age of social.

Really, I think more and more people are feeling less “locked-in” by companies like Salesforce.com or other older proprietary vendors. People are seeing the myriad alternatives and the emergence and growth of all of these companies in the cloud proves that there is opportunity and a clear migration path from proprietary and closed SaaS apps.

End user organizations of all types are starting to reject the notion of traditional SaaS – finding point products on a single server farm an untenable scenario. Of course, there are a ton of organizations out there that do not care about the limitations of traditional SaaS – but there are sooo many companies that need access, ownership, control, etc. – all the things that “open” offers. This is not a zero-sum game here: Salesforce.com can continue to grow even as open cloud companies like SugarCRM become huge as well.

I’ve seen a lot of ridiculous documents from competitors trying to bash Sugar as a product based on it being open source. They liken the application to a pile of car parts – claiming you have to assemble parts to make Sugar work. That is obviously a bogus analogy: in reality as Larry notes SugarCRM is more like any car you’d buy off the lot that enables you to open the hood, make changes to the cosmetics and/or drivetrain, etc. You OWN the car! Traditional SaaS in a lot of ways is like leasing a car, where the hood is welded shut and there is a gas cap that only the dealer can open to fill – at their rates. (I hope Larry doesn’t mind my extending his analogy.)

But ultimately – as Marten and Larry point out – by empowering customers and giving them control of their data – you enter an engagement lifecycle that provides value and a relationship built on real benefits – and that is more powerful than any artificial lock-in strategy out there today.

I don’t think anyone would disagree with these tenets of social CRM.

However, a lot of these points apply mostly (if not only) to B2C operations. In the B2C CRM world, the customer is an individual – someone who acts as a complete entity in the social world: easier to track, engage and maintain a relationship. Social does not offer up as many challenges in the B2C world as much as it solves them. Prior to the social revolution it was difficult for consumer products firms, for example, to engage directly with the buyers of their wares. There was wayyyy too much fat in the middle: brokers, distributors – and marketing was done in a broadcast manner. The sell through model made engagement nearly impossible – until the internet shattered these boundaries. Hooray.

But B2B is different. In B2B, while we “sell” to a person or decision-maker – the entity we recognize as the target of our activities is a business (or an “Account” to use B2B CRM terms). Engagement and social engineering for sales, marketing and support is vastly different. Companies themselves do not post on Twitter, the “company” cannot be reached on LinkedIn to get a foot in the door. This “once removed” nature of social CRM for B2B makes things a little sticky.

Or does it?  In some senses, B2B social CRM is easier, in that we as users of B2B social tools can simply consume data from social sites and leverage it for our own benefit. And this data can be pulled internally, without having to be placed back into the social realm. As an example, I can leverage data from many sites like Hoover’s, LinkedIn, Jigsaw, CrunchBase, Twitter etc. and see it neatly in my CRM through tools like InsideView – but have I actually performed any “social CRM” activity form a “customer engagement” standpoint?

It is more “take” than “give” right now – B2B CRM is the vampire of the social economy in a lot of respects. (Not entirely true – as many B2B providers make up for this by tweeting and blogging useful remarkable content – and even if this is done as soft marketing – there is some “giving back” here.)

So, enter Salesforce.com’s Chatter concept. It is simply a tool for internal collaboration – none of the transparency between company and customer as required by B2C social CRM. There are countless tools for doing this type of enterprise 2.0 collaboration – CubeTree, Bantam Live, Jive, Sugar Feeds, etc. – but very few enable a company to transcend the firewall between the “customer” as an individual and the CRM system. Salesforce’s Chatter is guilty of this gap. But so are most other B2B CRM systems.

Why is this? Perhaps our reliance on selling “seats” rather than total business value makes it hard to open the floodgates of customer activity into a CRM system. Maybe we haven’t figured out security concerns.

Or, maybe the nature of B2B selling, and where social CRM is right now in terms of B2B, dictates that we do not need this type of transparency. Is it enough to have all of your employees on the same page, provide a consistent response to any customer inquiry, and consume data from social media rather than engage directly inside the networks where they are created?

It is too early to tell. The success or failure of Chatter as a concept will be a bellwether. Do B2B CRM users want real social CRM?  Or is internal collaboration – while consuming static social media data – enough to enable B2B sales, marketing and support in the dawning age of social?

When discussing pricing for comparable CRM products, a partner made us wise to the fact that Salesforce.com is actually priced higher in Europe than it is in the US. This is not a currency conversion issue, the product is simply listed as higher ($125 per user vs. 135 Euros for their Enterprise edition for example).

Interesting.

Of course, my mind started racing after hearing this (but honestly I was more annoyed at my own laziness for not knowing this already – some competitive intelligence guy I am right?). Why would a company with so much perceived market visibility have such a higher price point in an emerging market? Why not come in lower, to completely shut out local or at least localized competition? After all, a lot of the EU is not doing so hot economically – yet Salesforce.com sees fit to overcharge potential EU customers. That is, charge them EVEN MORE than what I believe is an already too high price in dollars.

But, this inflation in price makes sense considering Salesforce.com’s model. As a primarily direct sales organization, Salesforce.com has a much higher cost of sales when it comes to going global: around product localization, hiring and maintaining a sales force, marketing etc. Thus, that high expense is being passed on to the customer. Bummer.

This is in sharp contrast to a model like SugarCRM – where we have great partners who take the product to the streets with localized product, domain expertise, etc. This enables SugarCRM as a product to enter more markets with less friction. And this lower cost model means that the end user organization pays less, and gets more.

And that is definitely not a bummer.

The conversations, all great and with very bright guys, got me to thinking. In so many ways, SugarCRM and Salesforce.com are alike. We both offer great CRM solutions and a strong platform on which to extend them. We both have some form of Cloud strategy. We both play more to smaller companies than many would like to admit (at least on Salesforce’s side).

But in a lot of ways the similarities end there. This is mainly due to two inherent factors in the SugarCRM model: open source and the channel-friendly nature of the company strategy.

What does this mean?

Ok, when I look at Salesforce.com, I can (in my opinion) safely say that Salesforce.com is a player in the CRM business.

…and in the Hosting business.

And in the middleware business.

And in the datacenter business.

And in the integration business.

And in the platform business.

And so on…

When you are “in the business” of something, it means you have competitors. And when I think about middleware, platforms, cloud infrastructure, data centers, integration, etc. – I think of HUGE companies like Amazon, IBM, Oracle, Microsoft, Rackspace, Informatica, to name just a few.

I DO NOT want to be competing with these guys.

I want to be partnering with them. And, guess what, SugarCRM does. In all the above areas, SugarCRM has awesome partners (Amazon, Rackspace, IBM, Microsoft, SnapLogic, Talend, Oracle) that has enabled us to give our customers choice, best of breed technology, and lower TCO. And on the flip-side, it has enabled SugarCRM to do what it does best – provide great CRM software at a great price, without a ton of infrastructure costs and other overhead that would divert attention away from that goal.

Whats more, these partners help create great options for our expansive VAR network – aiding our distribution model and putting more solutions out there to sell versus any type of competition. Cool.

Denis Pombriant makes a great point when he says “Don’t Forget About B2B CRM.“  We certainly have not…and I think it is why we have been so successful.

I am sure a lot of readers have an opinion one way or another here. I’d love to hear your thoughts…as this is a bit of thinking out loud to get a conversation started…

Instead, where I see CRM companies falling down from a  technology perspective is in being able to really promote cross-company, cross customer, and inter-customer collaboration around sales and support – as well as around the whole lifecycle of being a company (product development, corporate policy management, etc.)

Esteban Kolsky does a great job of summing up how E2.0 and SCRM come together (I wont re-post his cool graphic) – but just as we need to be together as organizations: work together seamlessly to collaborate ion all phases of the business – the same is true for our customer-facing operations. Our customers need to have the same information, and access to people and data – as internal employees.

In the CRM world, this can pose a problem. The reliance on per-seat sales models perpetuates this. The more we size deal vale on the number of seats we can sell – the more we sell the true value of social CRM short – or at least lock ourselves out of truly offering huge value opportunities to our customers.

Take Salesforce.com’s Chatter concept – in theory a potential game changer in terms of bringing employees together with customers. BUT…Salesforce does not seem to be making this readily available as a free addition that brings customers in the loop but rather this is a way to sell more seats in the old model. Bummer.

I do not have all the answers.  heck…I don’t have any answers, other than to hope that we all as CRM vendors begin to think about more innovative methods of bringing our users’ customers inside the CRM system without feeling like we are leaving money on the table.

I think by loosening the artificial firewalls, creative some cool access control tools, and simply putting ever more “C” into CRM, some of us might just have the opportunity of a lifetime to break new ground here…

Anyway…Sage Software has just announced that they are going to make their applications available in the cloud on Amazon Web Services (AWS).

Hmmmm…

To me, what Sage has done here is essentially skip a major phase in the evolutionary cycle of application design, development, deployment, management etc. needed to fully excel in the cloud. That stage is SaaS.

Look, it may seem nit-picky. After all, spinning up applications on a one-off manner on Amazon is in a way very similar to what Sage does now – in terms of its partners selling and managing app stacks on a 1:1 basis. (In short, in an out-dated and increasingly inefficient model.) But, there is a major benefit one learns in managing SaaS applications – that of scale, how to share resources effectively, manage remote upgrades, etc.

(Here is where the political history buff in me would love to go on a diatribe about how important it is to fully realize evolutionary cycles in order to completely reap the benefits of mature development – and cite the fall of totalitarian communism as a clear end result of not fully realizing Marx’s dialectic. But I won’t go there…)

Sage has talked about SaaS a lot, but as an analyst I never really saw much come out of it. It’s SaaS products acquired in the Accpac acquisition years ago were OK – but that was early SaaS. A lot of vendors, Sage included – have yet to impress me with any sort of scalable, highly available web architecture.

I am curious as to how much had to be altered to some of Sage’s older CRM products (specifically SalesLogix) in order to port them to the cloud. I gather not much – part of the beauty of AWS is that you can pretty much support any environment up there – as long as you build that stack and maintain it yourself or instruct partners how to maintain that very specialized stack. Compare this to a standards based model where your app can run in any cloud environment that support – say Linux, Apache and PHP (in short – every cloud environment you can think of).

I wonder how this will play out… Will the absence of SaaS really matter in the long run, if we are truly moving to the cloud? After all, isn’t the cloud where everything is happening? It is if you ask a company like Salesforce.com.

But wait, their core app is SaaS, and not cloud…so… maybe there is something important about hitting your SaaS stride before bringing a strong web architecture into the clouds. Again, a hearty “hmmmmm…”

The potential here, to be honest, was huge. Was Salesforce.com FINALLY going to let people host their own version of their CRM apps on premise, in virtual private clouds, on VMWares Express cloud…in short, ANYWHERE but in is own restrictive datacenter?

The answer, it seems, is a resounding NO. Salesforce’s core CRM apps – yes, the stuff that makes it billions of dollars a year in revenue – is still locked into a multi-tenant, limited architecture.

Salesforce.com has obviously done well with this model, even if it does not fit the needs of all businesses in the world (heck, more opportunities for players like us, I say). But, when it comes to talking cloud and all that SHOULD come with it – I believe the company has fallen short. SaaS in itself is not synonymous with Cloud, period.

BUT…there is a huge market for reseller partners, ISVs, user companies, developers etc. to build ancillary applications that plug in to Salesforce.com. In the past, this process was tedious, and there was little value in doing so.  Salesforce locked you in with a proprietary code model (apex, later Force.com), and charged ridiculous partner fees of up to 45% of any transaction. UGH.

This model seems to be changing. On the plus side, leveraging the SpringSource platform (let’s face it – this is really all that VMForce is – branding VMWare’s recently acquired SpringSource tools as VMForce) which runs on Java means a more open development model. One would also hope developers will be less restricted in terms of integration/API capabilities and simply where their developed code ends up (ie – NOT in Salesforce.com’s datacenters).

This is important, because right now – if you build using Force.com – you are essentially a contractor for Salesforce.com in that your work is locked into their platform. Building on an open toolkit, and on a separate cloud model may give developers more rights of ownership, as it were, when building complementary apps. And, dare we say it, developers may be able tow rite applications that run on VMWare and tie directly in to Salesforce.com, but also SugarCRM, Zoho, Microsoft Dynamics Live, etc.

But ultimately – this changes very little about Salesforce.com’s core product. And this has little effect directly on any end-user’s deployment – save for the fact that they will hopefully have more choice and control over third party apps they decide to tie into their CRM deployment.

I wanted to say a few more things – maybe clarify my points here. Again – in theory I think the concept behind Salesforce.com combined with Jigsaw’s cloud-based data service makes total sense. The ability to augment data sets, and the crowd-sourced notion of Jigsaw is very cool. It gives a CRM system another level of power – making it a more “living” system rather than a static or mildly stale data repository that sales reps hate using.

But…and this is a big but…Salesforce.com is a HUGE company, with a ton of different types of customers from all over the world, and across all industries. The issue with Jigsaw’s free and open data model (remember, they along with SugarCRM were part of the open data initiative) might mean that some of their operations may not exactly jibe with the privacy mandates of these geographies, industries, etc.

Now, that does not mean that Salesforce.com is doing something bad. The issue is, that Salesforce simply has to be very careful about how it leverages the complementary nature of its huge customer database, and the crowd-sourced data service of Jigsaw. What feeds which system, so to speak, could have huge consequences.

I can only assume a company of Salesforce.com’s size and stature has thought about this, and is developing controls and other methods of allowing those who do not wish to have their data added to the Jigsaw system to easily opt-out.

The issue here is choice – Salesforce.com HAS to offer choice in this manner. While choice is sometimes a privilege – here it is a must. And ultimately, I think that is the only potential snag in what on paper is an interesting value proposition – one we have long held and which resulted in our data Cloud Connectors.

Today Salesforce.com announced it will acquire business contacts data service Jigsaw for $142m. The move leaves Salesforce.com with the ability to pre-load CRM accounts with data – OR – which is more likely, charge a premium for that type of data service. Whether it is pre-loaded leads, or data quality, Salesforce.com adds a nice service, with a ton of great data in its service base, to its arsenal.

::Golf clap::

Why such muted applause? Well, on the one hand I agree totally in terms of what Salesforce is doing here. End users could LOVE the idea of not having to add a lot of data – simply having it pre-loaded on their accounts could be huge. The ability for marketing to have lads and other targets in the system without a lot of demand gen work could be a great asset as well. Biz Dev types will love this – and this adds stickiness to the Salesforce app. Good thinking by Benioff and Co.

But, this deal reeks of old style, proprietary computing and business.  Why buy one data service, when if your product is open enough (as Salesforce always claims it is) you can consume any data service? I guess the answer here is – Salesforce has the size and influence to make people think that paying for Jigsaw services is worth whatever they decide to charge, versus simply doing a little tweaking to consume Hoover’s data right in your CRM, for example.

But, I guess that is why Salesforce is so impressive. Only Salesforce can take a proprietary road in the midst of an open, social revolution, and probably do a good job of making this seem innovative and user-focused – not a money grabbing plan. It’s an amazing feat. I mean, Salesforce took simple RSS tools and turned it into Chatter and claimed to change the CRM world…and chatter isn’t even cross platform nor can it be used to leverage customer conversations.

I am always of the notion that “more is better,” especially when it comes to social media, data feeds, etc. I won’t make assumptions as to how Salesforce.com will play out its total social and data services strategy – but $100+m acquisitions are not the best way to aggregate content in my mind.

All in all, the Jigsaw deal will probably be a net positive for Salesforce.com. After all, they do a great job of marketing to business users – those people who are either too time constrained or inexperienced to set up their own data feeds into a CRM. So, instead of doing it for free, the nominal fee just might be worth it to them, and it just might not. We’ll see.

If I had more time and moxie, I’d write about how this potentially screws long time Salesforce.com partners like InsideView (even though what they do is vastly different in terms of value and scale from Jigsaw) – but perhaps I’ll save that for another post…

1. Marc Benioff wrote a great article, and the consumerization of the Enterprise is certainly upon us – a position that I agree with
2. Paul Greenberg  wrote a great post, which hit home on a few fronts – this article is a way to show respect for the thoughts

Starting with Paul’s post first, he raised several issues, but the one that hit home is that there is too much “Jockeying for position”. The reference was not specific to any particular vendor, but the point was made.  Paul stated the following: “When this manipulating jockey decides to differentiate to get “position” they denigrate what others do.” Paul is correct, and it is rather interesting as well that we are in the CRM business. While we certainly would like to do well, there are certain topics where that agreement leads to simply a better product.

Paul went on to say “Compete by the strength of your offerings”. The core of the offerings of any company goes beyond the products that are built, but are also the people behind the products. I would like to further point out that in the future of…well, the future of just about everything, the differentiators will increasingly be the people. As friend and IDC analyst, Mike Fauscette, likes to state, “People are the platform”. My simple conclusion on this topic is that the boundary between work and non-work is getting fuzzier by the day. Making the next part of this post that much more interesting.

Why I believe Marc Benioff agrees with me

Now, not to upset the apple cart by trying to play nice, and then jockey for position. A wording trick suggested to me by a friend, changes the positioning, doesn’t it? In many recent conversations and even comments on other’s blogs I have made the case that there has been a large shift in expectations by people regarding Computing and Access. Until around 2002 – 2004 or so, the faster computer you had access to was at work, and the fastest data pipe you had access to was also at work. Is this true anymore?

If you combine that phenomenon with the availability of cloud based applications, both consumer and enterprise, consumer is growing faster. (Sidebar – anyone who thinks that Gmail, LinkedIn or Facebook are not cloud apps, friend me and we can chat about it).  Ok, enough setting up the scenario, what exactly are we in agreement on? Here is a quote from the article (actually the prequel) “We need to transform the business conversation the same way Facebook has changed the consumer conversation. Market shifts happen in real time, deals are won and lost in real time, and data changes in real time.”

But, it is about usability, not technology

I am not going to try and say “I agree, but” (that is like saying “I’m sorry, but”). I will however extend the thought, in the following way – So, for all 90% or more of you who have one or more of the applications I just mentioned in the sidebar above, how long did you spend reading the manual for any of these applications? Facebook even changed the application 2 or 3 times (depending upon when you joined) and even after the yelling and screaming and the joining of the ‘no do not change FaceBook’ fan page – 350 million of us are members and 175 million log in each day. Facebook did more than change the consumer conversation, it changed the enterprise conversation as well.

Ok, I lied, it is not only about usability, it is about the fact that we enjoy the social dynamic these applications provide. It is also no longer a technology play; that is simply accepted. I am probably the only one who takes a break from Facebook and Skype at home by checking my work email. The boss (my wife) tried to block access to work from home, but the IT department (me) pushed back. If she was successful (unplugging the router) then I just access work via my iPhone and 3G. While this sounds a bit backwards, how far off am I? It is about usability and culture. People, Process and Technology – help people to succeed and we will all succeed. If people enjoy where they spend their time (online and offline) they will spend more time there.

This is the first part in a series where I will explore other topics on the consumerization of the enterprise, data and cultural silos.