Enterprise Software Chronicles: A synthesis of the rapidly evolving customer technology landscape

Over the past several weeks, I’ve had the privilege to have hundreds of conversations with technology vendor executives, resellers and system integrators, consultants and companies of all sizes (enterprise, mid-sized, and SMBs) across a variety of industries; high tech, professional services, retail, manufacturing, financial services, biotech, etc.

The common thread is that organizations of all sizes are building and evolving in order to adapt for the next era of commerce. Smaller technology vendors are racing to build point technology solutions that are easily consumable, deployable, and integratable, while major enterprise vendors are racing to add capabilities to provide a one stop shop for business applications.

Salesforce buys ExactTarget (not Marketo)

Yesterday, Salesforce.com shared that it intends to purchase ExactTarget for $2.5 Billion. It took about 18 months longer than expected, but Salesforce finally filled a hole in its marketing cloud with marketing automation capabilities. I didn’t necessarily see ExactTarget coming as Marketo was the obvious choice to fill the hole, especially since Oracle scooped up Eloqua last December.

ExactTarget brings with it a long history in email management, and the marketing automation capabilities of Pardot, which will need to be retrenched to enable its capabilities to be leveraged by enterprise customers, following the up-market path that Salesforce has already been on for the last several years.

With ExactTarget, Salesforce picks up a company with a large install base with at least twice the revenue of Marketo and for likely less than twice the multiple of trailing twelve months revenue. In short, it was simply a better deal.

The ExactTarget install base also likely leads to more new business opportunities as their customer mix is more diversified from a CRM perspective than Marketo is. A disproportionally large percentage of Marketo customers are also Salesforce customers. Marketo CEO Phil Fernandez wrote this response to the announced ExactTarget acquisition today.

The messaging from Marketo at its recent Marketo Summit seemed to be well positioned to make a run as an independent software vendor as they began to expand their messaging from being just a marketing automation vendor towards a complete marketing platform. They now own mindshare as the leading independent marketing automation vendor, and there is certainly market opportunity to create a more robust and integrated platform for marketers to manage their activities, especially if the forecasts that the CMO will control more technology budget than CIOs actually comes true in coming years. It will be interesting to see how Marketo competes with the larger vendors and more integrated platforms.

For more on the acquisition, Craig Rosenberg has collected some great input from the community over on the funnelholic blog.

Speaking of Oracle…

In late April, I spent some time with Oracle at Oracle Analyst World and heard and observed how they are working towards integrating their entire stack of offerings. It’s a herculean effort, and they are making progress across a number of fronts.

Oracle is very uniquely positioned. They have nearly 4,000 software products and introduced more than 270 new ones during the last 4 quarters alone. They’re breadth of coverage and depth across the entire technology stack is impressive and mind blowing. Their market cap is in excess of $160 Billion.

This creates a number of challenges: The technology challenge is a large enough one. Messaging internally and to the marketplace is still clearly a work in process, and held hostage to an identity that is simultaneous beholden to a large install base of enterprise customers that are 10 years behind and cloud innovators that require agile and hyperspeed change. A massive sales force who has predominantly sold “On Premise” software is having to be retrenched to speak the language of the cloud, and product domain expertise is still undergoing a large transformation, and is likely in the midst of a multi-year effort.

As deep as Oracle’s coverage is, they’ve been on a heavy acquisition spree in emerging spaces where they want to rapidly fill emerging capabilities holes. The following applications have been acquired in recent years to fill the functional requirements in a rapidly evolving business landscape that places a higher focus on data & analytics, social, and customer experience, respectively:

• RightNow – Customer Service
• Taleo – Recruiting and Learning Mgmt
• Eloqua – Marketing Automation
• Collective Intellect, Involver, and Vitrue – Social (trying to position the collective capabilities of each of these products as the only end to end digital marketing platform. Salesforce sort of just blew that up a bit.)
• InQuira and Endeca – Knowledge Management, Big Data & Analytics

Often, as these emerging technology companies get acquired into the massive technology behemoth, talent from the acquired organizations quickly leaves. We’ve seen this with the recent departures of former RightNow CEO, Greg Gianforte, Eloqua’s CEO Joe Payne. Several folks from Endeca have also left post-acquisition. Oracle also recently lost Anthony Lye, a polished leader who was leading Oracle’s positioning as a customer experience leader. The hole left is apparent. However, conversations with folks from Involver earlier in the year indicated that the opportunity to leverage the talents and expertise of Oracle, and the opportunity to sell in to the massive and well respected client base was a dream come true.

Oracle also continues to make slow but steady progress with their Fusion applications deployments, primarily in the world of CRM and HCM, acquiring over 100 new customers last quarter, the vast majority opting for SaaS deployments.

Lithium

While Oracle races to develop and integrate an entire portfolio of offerings, other players race to develop core competencies in emergent white spaces. Lithium is one such company. At their Linc conference, Lithium highlighted customer stories of the emerging digital peer to peer economy. Lithium recently positioned themselves as leading providers of social software that powers the social customer experience. Essentially, what this means is that they help power customer community platforms that enable brands to provide savings in customer support, crowd powered innovations, digital word of mouth marketing, and in some cases, even enable new business models to be pioneered. At Linc, Lithium did a great job of highlighting customer stories like Barclay’s Ring Credit Card and Australia’s Commonwealth Bankfinancial services innovation products, as well as customer support innovations from organizations like Time Warner Cable. They also announced forthcoming innovations in data analytics and insights that enable organizations to sense, respond, and share with greater effectiveness. While Lithium executives shared that they intend to go IPO in the near future, they appear to be a good acquisition target for a certain German enterprise giant who is also racing to fill in holes in its offering.

Speaking of analytics

SAS Institute held their Global Forum in San Francisco. SAS Institute has an impressive resume. They are repeatedly mentioned as one of the top places in the world to work. They have increased their revenue for 37 consecutive years. They have a dominant market position when it comes to analytics and a customer base that would be enviable to anyone. SAS highlighted their continued foray into predictive analytics, and the capabilities they have to process huge amounts of data in record speed. By the way, they also hold top notch events. As great as SAS is, while I don’t have any hard data that I can present here, I get a sense that SAS can be disrupted by analytics vendors who can provide a cleaner, more user friendly interface that is quickly deployable.

SAP also filling in Holes

SAP announced today their intent to acquire e-commerce player Hybris, further adding to their commercial offering. SAP has a ton of innovative initiatives at present and is betting big on HANA in memory database as a unifying layer to speed transactions and access to information. SAP’s answer to the social collaboration question is SAP Jam, which is making steady progress and is being positioned not as a standalone product, but as a communication layer that intersects more common functional systems. SAP is touting 360 customer, but still has a ways to go in creating clear differentiation to the markets of which products or mix of products fits for certain use cases and scenarios.

SAP is a constant competitive target for Oracle, and has been for a long time, but I was surprised at the frequency and depth of attacks that SAP received at SuiteWorld in San Jose just a few weeks ago.

NetSuite

Rising from the Mid-Market is NetSuite, who continues its desired ascent into the enterprise. NetSuite founder Evan Goldberg left Oracle about the same time as Marc Benioff, with a fundamental belief that organizations should run their entire infrastructure in the cloud, not just their sales organization. As Salesforce continues to build their platform to meet the needs of CMOs and customer facing personnel, NetSuite continues to build an integrated platform to meet the needs of fast growing organizations.

NetSuite has a deep history working with small to mid sized enterprises and they’ve carved out a niche without many competitors. Evident at SuiteWorld 2013 was their attempt to continue to move upstream as multi-billion dollar global customers Qualcomm and Williams-Sonoma talked about how they had leveraged NetSuite to rapidly evolve their businesses in the cloud.

New partnerships with AutoDesk and CapGemini also help to add validity to their Enterprise capabilities.

The addition of greater e-commerce capabilities, improved customization and development tools, discreet manufacturing capabilities, and deeper vertical offerings will continue to make them a viable contender for both fast growing SMBs and divisions of large global enterprises.

As an 8 year NetSuite customer told me yesterday, however, “NetSuite is not necessarily best of breed at any one function. However, they are best of breed as an integrated platform to run your business on.” That’s a compelling value proposition for many organizations and is a clue why NetSuite continues to grow at a healthy pace.

In Summary

While the technology vendors were highlighted in this post, companies in all industries are trying to adapt to a new speed of business and are looking for answers on how to prepare their organizations to compete and win in an environment that is increasingly digital.

Trials and experiments are slowly paving the way for emerging best practices, but the paths to a common destination are still being defined in a race towards relevance and market leadership.

To discuss the right strategies for your organization moving forward, please drop me a note.

Disclosure: My travel expenses and conference registrations were paid for by Oracle, Marketo, NetSuite, Lithium, and SAS, respectfully. I have received no request or remuneration for this post and these are my candid views based on my research, observations, and personal experience.