THINK IT Services

Despite the growing examples of organizations gaining tangible and measurable business benefits from Cloud-based, Software-as-a-Service (SaaS) solutions which THINKstrategies profiled in its recent report entitled, “Measuring the Business Benefits of Today’s Software-as-a-Service (SaaS) Solutions”, many corporate decision-makers remain apprehensive about adopting these Cloud-based services because of data privacy and security concerns.

Companies outside the U.S. are particularly concerned about using services delivered by U.S.-based providers because of the ominous language contained in the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, commonly referred to as the U.S.A. Patriot Act.

This regulation appears to permit U.S. law enforcement agencies to unilaterally access private customer records stored on corporate servers worldwide if they are suspected of holding data which could pertain to terrorist threats or other criminal activity. These fears have made organizations especially hesitant to consider SaaS-based Customer Relationship Management (CRM) software and services offered by U.S.-based SaaS vendors.

THINKstrategies believes these risks have been overly exaggerated and raise unfair questions about doing business with U.S.-based companies. Ironically, we believe companies who avoid contracting with leading U.S. SaaS providers may be at greater risk of data privacy breaches by continuing to rely on traditional, on-premise software applications and locally hosted servers.

We have published a whitepaper which examines the myths and realities of SaaS/Cloud Computing, the U.S.A. Patriot Act, and data privacy, with a focus on the CRM arena.

Click here to download a copy of this whitepaper. I hope you find it useful and worthwhile.

As I recover from yesterday’s Thanksgiving festivities, I’ve been struck by two thoughts regarding last week’s Dreamforce conference,

• Salesforce.com’s new Chatter social computing functionality may be a defensive as well as proactive move.
• An acquisition of Salesforce.com by Oracle may be a friendly maneuver rather than a hostile takeover.

As I reported in my previous blogpost, Salesforce.com’s introduction of Chatter last week at Dreamforce was met with mixed reviews. Many customers, partners, analysts, press and even internal staff and salespeople were uncertain about the company’s goals and capabilities in this new area.

I believe that building an ‘enterprise-class’ social networking component makes sense and adds a timely new dimension to salesforce.com’s fundamental functionality.

Marc Benioff justified salesforce.com’s move by claiming in his keynote address at Dreamforce that neither Facebook nor Twitter were willing to fortify their services to meet the needs of enterprise users.

But, what if this isn’t true? What if Facebook and Twitter could add a contact database, tracking mechanisms and other features to their services in the future to meet the needs of enterprises? Would today’s consumer-oriented, social networking sites become tomorrow’s corporate customer relationship management (CRM) systems?

Changing the focus of a consumer-oriented online service is possible. Apple is quickly converting its consumer-oriented iTouch into a powerful business-oriented iPhone with thousands of add-on apps from a widening array of third-party developers.

And, IBM is also moving in this direction with LotusLive, transforming the company’s pioneering but dorment on-premise collaboration application into a viable on-demand business service.

So, salesforce.com may not only be responding to growing demand for social networking tools among corporate end-users, but also demonstrating its astute competitive instincts by quickly strengthening its defensive position against future attack from Facebook, Twitter or others in this realm.

On the acquisition front, I’ve been predicting for a couple of years that Oracle would make a hostile bid to takeover salesforce.com to capitalize on the company’s rapid growth and commandeer the growing SaaS movement. I also predicted that Google would be the ‘white knight’ who would come to salesforce.com’s rescue to preserve this important path to the enterprise market.

However, my views have changed over the past month with Marc Benioff’s invitation to speak at Oracle OpenWorld and the publication of his new book, “Behind the Cloud”.

Having Benioff speak at OpenWorld clearly showed that Oracle doesn’t view salesforce.com as a simple competitor. Instead, it illustrated the more complex relationship between the companies.

While Larry Ellison has enjoyed making disparaging remarks about the long-term profitability and viability of the SaaS business model, he has also been very happy to accept salesforce.com’s money as one of Oracle’s biggest database customers.

At the sametime, Benioff is recognizing that he no longer has to play the role of revolutionary to evangelize about the business benefits of SaaS and ‘cloud computing’. Instead, he now knows that it is more important to convince a broader cross-section of enterprise decision-makers – both IT and executive – that SaaS and cloud computing services are not radical ideas and can easily integrate into their legacy environments and enhance their current operations.

This tact exponentially increases salesforce.com’s addressable market opportunity by appealing to a broader array of organizations who may have been too risk-adverse to accept SaaS and cloud computing alternatives if they viewed them as an ‘either-or’ proposition.

With Oracle on the cusp of acquiring Sun Microsystems (depending on the disposition of various regulatory hurdles), it may be ready to make a more aggressive move to consolidate its position in the SaaS and cloud computing marketplace by moving ahead with a salesforce.com acquisition.

I no longer believe Benioff would resist such a move. Throughout his new book, Benioff repeatedly gives Ellison credit for his personal success and the success of salesforce.com. He refers to Ellison as his personal mentor and describes instances in which Ellison’s decisions helped salesforce.com overcome critical challenges.

So, if Benioff doesn’t view Ellison as an adversary will he be willing to risk the future success of salesforce.com by accepting an Oracle acquisition. It won’t be his decision. If Oracle offers a good enough price, Benioff is obligated to accept it.

The question is now whether Google, Cisco Systems or another company will try to outbid an Oracle offer to enhance their own position in the SaaS and cloud computing market.

I was astonished to learn that salesforce.com’s founder and CEO, Marc Benioff, is speaking at next week’s Oracle Open World customer/partner conference.

Although Benioff is an alumnus of Oracle and Oracle’s founder/chairman/CEO Larry Ellison was an initial investor in salesforce.com, there has been no love lost between them publicly because salesforce.com was conceived to compete against Oracle’s Siebel division long before it became a part of Oracle.

Benioff has spent the past decade ridiculing the inefficiencies of on-premise customer relationship management (CRM) software and other legacy enterprise applications, along with traditional hosting models associated with Oracle. Ellison has returned the fire with his own tirades about the impossible economics of the Software-as-a-Service (SaaS) model. And, Ellison’s lieutenants in the Siebel On-Demand division have made increasingly aggressive efforts to undercut the success of salesforce.com over the past year.

Yet, folks I know who are a part of the Oracle inner-circle have said that Benioff and Ellison have been able to maintain a warm personal relationship despite their public saber-rattling. And, Oracle has benefited from the fact that salesforce.com’s has relied heavily on Oracle database solutions since its inception as a key component of its service delivery infrastructure.

I always viewed Ellison’s diatribes against SaaS, and more recent rants about the cloud, as a subterfuge aimed at deflecting attention from this fertile marketplace.

But, Benioff’s appearance at next week’s Oracle Open World conference may represent more than an appeasement against these ideas and political detente between the companies. The title of Benioff’s talk is, “The Best of Both Worlds: Customer Success in the Cloud with Oracle and salesforce.com.”

While Ellison was not a fan of SaaS in public, Oracle has fully embraced the concept of cloud computing from a marketing perspective, especially since announcing its intention to acquire Sun Microsystems.

My guess is that folks in Oracle’s On-Demand Siebel division are pretty upset about Benioff’s Open World appearance because they figure they can also pitch the benefits of the cloud, without inviting a competitor to talk to their current and prospective customers.

The same is probably true for the senior executives and staff at NetSuite, another Oracle spinoff and Ellison SaaS investment, which has always viewed salesforce.com as a sibling rival but hasn’t been invited to the Oracle party even though most industry observers believed it is more closely aligned with Oracle.

Two and a half years ago, I suggested that Oracle would buy salesforce.com in a hostile takeover to derail its success in the SaaS marketplace. Now, I’m beginning to wonder if it may be a friendly acquisition to capitalize on its escalating success.

After I initially speculated that Oracle would make a hostile takeover bid, I suggested that Google would be the white knight who would come to salesforce.com’s rescue because it couldn’t afford to lose this valuable partner and channel to the enterprise market. I’m not sure if Google would make the same move if Oracle initiates a friendly takeover bid.

The bottomline is that Benioff’s appearance at next week’s conference, and the topic of his talk, is another indication that SaaS and cloud computing are becoming more mainstream ideas and more viable methods to increase the effectiveness of enterprise applications and data centers.