I’ve just had the opportunity to catch up on the events of Dreamforce, I must say i am surprised about the lack of attention that their announcements are getting in the blogging community. I dent get it because all of their initiatives are at the forefront of cloud computing. They also have significant ramifications for their competitors. (incidentally who ARE their competitors is a interesting questions.
Lets quickly recap what was announced. Firstly a mashup with Facebook. Secondly integration with Amazon so that SF.DC becomes the orchestration layer to E2C. And the Google Apps integration.
What’s really important to understand her is the evolution of SFDC business model. The facebook ( & LinkedIN) tie up allows them to move from a B2B business to a B2C. They are effectively providing their infrastructure policy & orchestration layers to their customers. This does several things. It makes them very sticky. It drives enormous scale. It gives them access to the mother of all Identity stores. Most compelling is that the viral nature of the social web enables them to make you, the FB user their headhunter, lead finder or product evangelist. It makes them a huge transaction hub , and once you’re there you effectively cant be displaced. The reason for that is you become the centre of gravity (or you get to dictate terms!) check this out for much more detail.
The second powerful theme is the evolution of PaaS. This is a much more mature play in that it effectively leverages the AAA, policy , rules and control layers that SFDC invested in for their own platform, to provision services in other cloud platforms. This is clever for a number of reasons. Firstly the customer is owned by SFDC in so far as they are the primary provider. Secondly it effectively relegates and controls where the other cloud play. Thirdly they *could* become the default start position for cloud services as ubiquitous as ‘Google’ is when you think of search.
This is a massively powerful position that SFDC are aiming for. If they are fast (and this is a race strategy) and don’t scare partners too much with the degree of control then this is a ambitious and winning play unfolding…
Phil Wainewright put up a very thought provoking post this morning, speculating if Zoho could outgrow Salesforce.com. A worthwhile read, the stand out bit being his summation.
A disruptive model? Just as Salesforce.com’s CEO Marc Benioff dismisses conventional software vendors such as Oracle and SAP as dinosaurs on the verge of extinction, so Vembu looks on Salesforce.com’s high-cost, premium-priced model (in comparison to Zoho’s) as a throwback to the days of old-fashioned enterprise software.…. Meanwhile, Zoho’s decision not to turn to advertising as a source of revenue is also appropriate for the business market and a useful differentiator against Google, the other big player making headway in that mass SMB sector. On balance, Zoho’s model offers enough value to an underserved market to qualify as disruptive and its state of preparedness for a difficult economic environment could well see it emerge the other side of the coming recession as a leading player.
This got me to thinking. So far most of the we dialogue on financial models has been based around a number of streams
There is another way to get scale, then monetise internet assets, funnily enough it’s a variant on the Google model and its being used by Zoho.This approach is to use an existing revenue engine to fund the growth of the start-up, in Zoho case its Adventnet who are funding Zoho.The interesting dynamic here is the financial impacts. No credit you see, organic growth but with no debt. I don’t believe people fully understand the economics at play here. The scale challenges a startup have to conquer are enormous, but when you get there your marginal costs plummet and accordingly your profits go up. Check this from Zoho. Google and Microsoft have clearly reached scale (in their own markets), Salesforce.com hasn’t… yet. I’m told that their PaaS play is starting to really reap benefits, huge customers signing up, customers putting Tb’s of Data thru a day. All driving EoS.
Back to Zoho, the more i look at it, the more i like the model. Self fund to scale, charge for premium services, consider a slow introduction of pay as you go later (i’d put in an easy migration path for those who aren’t ever going to pay). And keep in scaling. Its Amazon’s mantra all over again, ‘GBF’ “Get Big Fast”, but without the debt and a fairly logical path to monetisation.