THINK IT Services

Salesforce.com yesterday unveiled its first concerted effort to focus the power of its AppExchange partner network and Apex programming platform at a specific vertical market opportunity. Salesforce.com’s new initiative targets the financial services sector, in general, and the wealth management segment, in particular.

The new on-demand services come at a time when THINKstrategies’ research indicates that companies of all sizes are not only becoming more receptive to Software-as-a-Service (SaaS), but are increasingly looking for industry-specific solutions.

The new wealth management offering combines Salesforce.com’s core customer relationship management (CRM) and salesforce automation (SFA) software solutions with a set of third-party applications and business services focused on financial advisors who want to better serve their customers. It includes a set of standard features and functions upon which business partners and corporate customers can add their own components and capabilities.

The new wealth management service leverages Salesforce.com’s application dashboard and partner relationships to create a new financial services portal which will compete with Bloomberg, the dominate player in the sector.

Bloomberg has built a virtual monopoly with its information service terminals which have become a pivotal part of the day-to-day lives of money managers who depend on an integrated view of realtime information to make their investment decisions and effectively advise their clients.

As with any monopolist, Bloomberg users have a love/hate relationship with the information services company. They’ve grown dependent on the convenience of Bloomberg’s platform, but frustrated by its costs and limitations. The cost factor has also confined its market penetration to only the largest financial service companies, which can afford the hefty fees for its services. While Bloomberg has grown rich serving a quarter of a million users, it has left another 3.8 million financial advisors without a comparable information and client management source, according to statistics provided by Salesforce.com during its new launch briefing in NYC.

Salesforce.com is stealing a page from its past by focusing on the masses of unserved financial advisors with its new on-demand wealth management services. This is the same strategy Salesforce.com adopted with its original on-demand CRM and SFA solutions that were aimed at salespeople who were either unable to take advantage of enterprise applications from Siebel, SAP and others, or unhappy with the clumsiness and costs associated with these traditional on-premise applications.

Not only is Salesforce.com’s new wealth management service retailing at a fraction of the cost of a Bloomberg subscription, it will also provide users with an important new level of value—integrated CRM, SFA and other business applications. While the Bloomberg service provides users with plenty of information, it doesn’t come with built-in integration to important account management and business process-oriented functionality. This is where the new Salesforce.com wealth management service will shine.

It is also the reason why I think Salesforce.com poses more of a threat to Bloomberg than other industry observers may recognize. Although the obvious target for the new service of small to mid-size firms is beyond the reach of Bloomberg’s service, Salesforce.com’s Chairman and CEO, Mark Benioff, didn’t shy away from attacking the shortcomings of Bloomberg’s solutions in larger financial service companies during his introductory comments at the NYC unveiling. As he’s done with Siebel, SAP, Microsoft and Oracle, Benioff cast Bloomberg as a dinosaur that has outlived its usefulness.

To reinforce this point, Salesforce.com also announced during the launch event that it had recently won its largest contract to date, expanding a pilot program within Merrill Lynch from 4,000 to 25,000 employees. In addition to Salesforce.com’s growing base of large-scale enterprises, THINKstrategies’ research has found significant adoption of a broadening range of on-demand solutions within this market segment. This is another reason why Salesforce.com’s new wealth management service also boasts Dow Jones, Thomson Financial, Cisco, Dell and ten other charter partners.

Salesforce.com is promising that the new service is just the start of a stream of similar industry-specific solutions aimed at the Financial Services market, including Banking, Capital Markets, Insurance and Mortgage editions.

The company is also planning to attack other industries, according to my sources, starting with the Media industry.

While Salesforce.com continues to push the envelope and set a pace which no other SaaS vendor has been able to match, it is also making sure that no one takes the company’s accomplishments and capabilities for granted. At yesterday’s briefing, Benioff dedicated a major portion of his presentation to highlight the tremendous investment his company has made in building its service delivery infrastructure and business process management capabilities. His comments were intended to encourage more companies to leverage Salesforce.com’s platform and take advantage of its best practices, and also discourage potential competitors from trying to replicate Salesforce.com’s success.

At the moment, it will be hard for another emerging or established software vendor to challenge Salesforce.com’s stature in the industry. However, the company’s latest initiative reminds me of the frenetic expansion efforts which led to Novell’s collapse in the 1990s. Just like Salesforce.com, Novell was the gold standard for the rapidly growing networking market at that time and decided to use its wealth and power to expand into desktop applications and other areas which pitted the company against a wider array of major competitors. As a result, the company lost site of its core competency and lost control of its primary networking business to Microsoft and Cisco. Novell is still trying to recover from this strategic error.

Unlike Novell, Salesforce.com is not moving far from its core business. Instead, it is smartly leveraging its core competencies and partners to repackage their combined capabilities into a new set of on-demand services. As a result, Salesforce.com is in a good position to capitalize on the immediate vertical market opportunity and broader industry-oriented strategy.

This week, NetSuite, Inc., strengthened its position in the on-demand software market by announcing a new set of eCommerce solutions to manage eBay online sales.

The new alliance capitalizes on one of the largest pools of small- and mid-size businesses (SMBs) in the world. eBay is a channel to market which I’ve been telling many Software-as-a-Service (SaaS) companies should be a key component of their go-to-market strategies.

NetSuite’s expanded on-demand business management capabilities will enable millions of businesses selling goods and services via eBay to leverage a single, integrated platform to handle their inventory, warehouse management, accounting, sales, marketing and hosting requirements.

NetSuite’s multi-lingual and multi-currency recognition system will also enable eBay businesses to manage their international listings including scheduling, order management, fulfillment and shipping processes.

The turnkey, all-in-one package should appeal to many eBay sellers who are quickly growing from home-based endeavors to SMBs that must convert their manual processes to more sophisticated systems which can ensure reliable and profitable business processes. The NetSuite solution manages eBay listings centrally, and includes built-in UPS and FedEx shipping tools.

The new NetSuite/eBay solution comes on the heels of Salesforce.com’s recent introduction of its AppStore which is also aimed at providing a seamless method of performing online transactions. However, Salesforce.com’s AppStore is only aimed at supporting its AppExchange partners and their customers, while NetSuite’s new offering is targeting eBay’s vast community of 222 million buyers and sellers.

This isn’t NetSuite’s first initiative to open a new channel-to-market for its SaaS solutions. Last June, the company teamed up with CompUSA to leverage the retailer’s access to SMBs.

Interestingly, NetSuite describes its new capabilities as being “Amazon-like”. I’ve been telling clients and various other audiences that Amazon, Apple, Yahoo, Google and other online outlets, along with eBay, will become important channels to market for SaaS. Over time, I think these outlets will play a similar role for managed IT services, such as managed messaging, security, storage and back-up services.

SaaS vendors and managed service providers (MSPs) shouldn’t focus on these online outlets alone to distribute their on-demand solutions. Business service companies, such as ADP and American Express, have clearly indicated an interest in on-demand solutions with their acquisition of Employease and alliance with Reardon Commerce respectively. You should also expect business process outsourcers, especially the offshore-based companies, to buy their way into the SaaS and managed services business, as Cognizant did in September with its acquisition of Aimnet Solutions.

In the meantime, NetSuite deserves credit for being the first of the SaaS providers to capitalize on the eBay channel. The timing of this event should enhance NetSuite’s standing as a SaaS leader and its preparation for an IPO later this year.

On February 14, Valentine’s Day, Verizon Business—a unit of Verizon Communications—announced the expansion of its business continuity services portfolio that illustrates how major telecommunications carriers are broadening their capabilities and reshaping the competitive landscape.

While most people who follow the telecommunications market refer to the ‘triple-play’ being offered by the leading ISPs as a bundle of telephone, internet and TV services, Verizon Business’ latest announcement shows how the carriers are also creating another form of triple-play which includes consulting, hosting and software services.

In the case of Verizon Business’ business continuity services, the first part is a set of consulting services that includes business impact analyses, gap analyses, strategy workshops, asset inventories and vulnerability assessments.

The second component is the company’s hosting portfolio which leverages its global network of data centers and includes a virtual file sharing service—Resilient Network Attached Storage—with centralized file management, security, business recovery and remote access.

And, now Verizon Business is adding software services as the third element in the form of a redistribution agreement with Strohl Systems to supply customers with Strohl’s business continuity planning software which includes three components:

1. BIA Professional, a business impact analysis survey tool.
   LDRPS (Living Disaster Recovery Planning System), a central repository of complex business continuity data.
2. Incident Manager, an online command center that administers and monitors business recovery activities.
3. The software is currently sold as a traditional, packaged, on-premise product which Verizon Business intends to help Strohl convert into a Software-as-a-Service (SaaS), hosted solution.

After recently announcing a SaaS enablement deal with NOW Solutions in December, Verizon Business is becoming an interesting new player in the rapidly growing SaaS market.

While most SaaS vendors looking for a hosting company would focus on IBM, OpSource or some other recognized provider in the past, Verizon Business is beginning to assert itself as a viable alternative. It has a solid delivery infrastructure, an experienced staff, a combination of professional and managed services capabilities, and a vast installed base of customers.

Two announcements last week served as reminders that, despite growing interest in on-demand solutions, professionals services remain an essential part of the technology landscape.

On January 30, Salesforce.com announced a strategic alliance with Deloitte Consulting to extend the Software-as-a-Service (SaaS) leader’s reach into the enterprise market. Salesforce.com already has a similar agreement in place with Accenture. But, the Deloitte alliance confirms the growing interest in SaaS among large-scale enterprises and the desire of a growing number of established consultancies to join the SaaS movement.

As I’ve stated many times, any suggestion that SaaS will eliminate the role of channel organizations in the software industry is ludicrious. However, there is no question that many value-added resellers (VARs) and consultancies will need to shift their focus from technology integration to process or change management projects. A clear example of this shift, as well as the attractive opportunities in the SaaS market for consulting companies is Bluewolf Group who boasts the largest number of Salesforce.com deployments despite its relatively unknown name.

Now that Salesforce.com is pushing its application development platform, Apex, to third-parties there will be even greater opportunities for consulting companies, like Deloitte, as well as VARs to provide a new layer of integration and customization services to end-user organizations.

Although SaaS will definitely make it easier for many organizations to deploy and administer enterprise applications, there will still be plenty of opportunities for professional services and consulting to continue to flourish in the on-demand world.

Although the network professional services has experienced a contraction since the dot.com bust and telecommunications industry downturn, the need for specialized planning, design, project management and infrastructure support consulting skills have not gone away. This ongoing need led British Telecom (BT) to acquire International Network Services (INS) on February 1.

As a former marketing guy for INS who suffered through its first painful acquisition by Lucent in 1999 and watched the company shrink within the withering telecom equipment vendor for three years before being spit out for a penny on the dollar, I’m very pleased with the BT announcement.

I’ve always viewed BT as being far more advanced in its systems integration and outsourcing capabilities than the U.S.-based telcos. And, I’ve always felt that the telcos, along with many other companies vying for a piece of the IT management services market, must offer a combination professional and managed services to win and retain long-term customers.

BT is on its way to building that integrated portfolio of services while also establishing a strong presence in the U.S. with its acquisition of INS and Counterpane, a managed security services provider (MSSP). In addition to INS’ overall network professional services experience and proven processes, it also has a particularly strong security consulting team and experience in the MSS business, having previously acquired Predictive, an INS wannabee with a MSSP capability.

In addition, INS has a software business which BT might also chose to expand into a broader set of SaaS or managed service offerings. It is the combination of strong professional services and intriguing software capabilities which led to BT to acquire for a >2x premium on current revenues.

For INS it is the deep pockets, access to a larger customer base and broader geographic reach which made BT an attractive suitor.