Salesforce.com Less Exciting, More Incredible, Amazing

Salesforce.com released its second quarter earnings this week, followed by its quarterly earnings call. To provide a deeper analysis of the state of Salesforce.com’s business, we are pleased to release our SFDC Superlative Index™ for the latest quarter.

Developed by the Enterprise System Spectator, the SFDC Superlative Index is a proprietary metric that quantifies the enthusiasm of Salesforce.com’s executives, by counting the number of superlatives used in their quarterly earnings calls and analyzing the changes in their use of these superlatives over time. Our proprietary list of 12 superlatives currently includes: exciting, incredible, huge, amazing, outstanding, terrific, awesome, phenomenal, fantastic, tremendous, extraordinary, and spectacular.

Dramatic Decline in Superlatives

Salesforce executives used tracked superlatives only 71 times in their conference call this quarter. This is a significant drop from the 97 tracked superlatives used in the previous quarter, which was the highest number over the prior five quarters.

After the call, Salesforce.com’s share price fell sharply in trading overnight and the next day. Many analysts attributed the decline in the share price to the firm’s revised forward guidance and the level of new bookings. But we attribute it mostly to Salesforce executives' declining enthusiasm, as shown in Figure 1.

Analyzing the individual superlatives that make up the Index provides deeper insights.

Excitement Takes a Hit

SFDC executives appear to be losing excitement, using the word "excited/exciting" only 14 times in the most recent earnings call, less than half the number of times used in the previous quarter, as shown in Figure 2.

Nevertheless, CEO Marc Benioff reported that he was “so excited and …  everyone in Salesforce is so excited” about the firm’s new artificial intelligence platform, Einstein.”

He was also enthusiastic about the firm’s recent acquisitions of Demandware and Quip. “But it's been an incredible time for us to acquire some phenomenal assets and I have never been more excited about Salesforce and our product line and coming into Dreamforce, like I said is, just awesome.”

Yet, new deals failing to close before the end of the quarter seemed to take a little off the edge of Benioff’s excitement. “So there [are] a lot of exciting things coming for Dreamforce, and nobody likes to see softness in any particular region…. Like I said, we really saw some great growth and deal flow in the United States, but we did get a bit of softness at the very end of the quarter,” he said.

For his part, any softness at the end of the quarter didn’t seem to dampen the enthusiasm of COO Keith Block, who was still excited to be part of Salesforce.com. “As you know over three years ago Marc and I had many many conversations about coming onto Salesforce which I was super excited about and I continue to be super excited about being here.”

Nevertheless, Business Is Increasingly Incredible and Amazing

The decline in excitement, however, was partially offset by an increase in the use of the superlatives “incredible” and “amazing.” In fact, “incredible” took the top spot from “exciting” this quarter, with “amazing” jumping into the number two spot, as shown in Figure 2.

These two superlatives were especially pronounced in Benioff’s comments about recent acquisitions.

“And as you know, over the last few years we have acquired a number of AI companies. Incredible companies like RelateIQ, MetaMind, Implisit, PredictionIO, Tempo AI and more with amazing, amazing people and technology. We have been able to stitch all this together into this incredible AI platform and this focus on AI and on the critical aspects of AI as the next wave of our industry has resulted in a machine learning team of more than 175 data scientists who have built this amazing Einstein platform. And that’s really why I am so excited and why everyone in Salesforce is so excited.”

He continued, “It's been an incredible time for us to acquire some phenomenal assets; and I have never been more excited about Salesforce and our product line. And coming into Dreamforce, like I said is, just awesome.”

In response to an analyst question, even the normally-reserved CFO, Mark Hawkins, shared some of Benioff’s enthusiasm for recent acquisitions. “By the way, I just want to call out, we are super pleased to have Demandware,” he said. “It's just an exciting [acquisition], adding functionality and a unique asset, as Marc called out, that we are super happy to have.”

Of course, nothing generates enthusiasm like the firm’s annual user conference, Dreamforce. Benioff said:

We have never been better positioned for the future. You are going to see that at Dreamforce. It is going to be a rush of innovation. There has never been more new products and more capabilities released at Dreamforce, and you are never going to see a better place to see how all this amazing innovation and products comes together. This is our biggest customer event of the year. Coming very very soon, October 4 through 7. We have got more than 2300 customer speakers inspiring, motivating, empowering, educating our amazing community of customer trailblazers. We also have an amazing lineup of speakers including Melinda Gates, and General Motors' Mary Barra, Congressman John Lewis, and many many more.

Benioff also advised the financial analysts that they were "not going to want to miss" the band U2, which would be performing at Dreamforce, adding, "It's going to be an unforgettable event." 

Rounding out the top five superlatives, SFDC executives went even further in describing developments during the quarter, using words such as huge (6 times) and phenomenal (3 times).

For a complete transcript of SFDC's recap of its incredible, amazing, and exciting quarter, check out the full transcript on Seeking Alpha.

Announcing the Salesforce.com Superlative Index

We often hear that Salesforce.com is an amazing company. But how amazing is it? The Enterprise System Spectator is proud to announce today a new metric that will be incredibly important for investors, customers, and fans of Salesforce.com everywhere: the SFDC Superlative Index™.

Through the SFDC Superlative Index, we can now quantify the awesomeness of SFDC. We do this by counting the number of superlatives used by SFDC executives in their quarterly earnings calls and analyzing the changes in the use of these superlatives over time.

Our proprietary list of superlatives currently includes the following: exciting, incredible, huge, amazing, outstanding, terrific, awesome, phenomenal, fantastic, tremendous, extraordinary, and spectacular. 

Superlatives per Quarter Reaches High Water Mark

These are fantastic days for SFDC, terrific days indeed. As shown in Figure 1, SFDC executives used tracked-superlatives 97 times in the firm's most recent quarter, the greatest number in the past five quarters.

Analyzing superlatives that make up the SFDC Superlative Index provides deeper insights.

Excitement is Rising

SFDC executives are truly excited about the most recent quarter. As shown in Figure 2, we find that "excited/exciting" has now returned as the top superlative in the first quarter, after a sharp decline in the fourth quarter of FY 2016. 

CEO Marc Benioff reported that he as "really excited to be here, really excited for the first quarter" and he was "really excited" about raising the company's full year revenue guidance. "This kind of accelerated revenue growth [is] something that we’re very, very excited about," he later added.

Benioff's excitement also extended to up-coming events, such as World Tour New York, which he said is already sold out. "So we’ll be excited to see you there," he added. He also said that he was "really excited to visit with all the Salesforce customers and developers who are coming Trailhead DX."

But Benioff saved his greatest excitement for the upcoming Dreamforce conference in October.

"I know the bands that are playing. I know what’s going on and I’m [not] going to give you too much of that yet," he said. "I can just tell you it’s going to be the biggest and most exciting Dreamforce ever."

COO, Keith Block, also shared Benioff's enthusiasm, especially about the firm's moves in Europe. "Obviously we’ve made investments with data centers in Europe which we’re very, very excited about, our customers are obviously excited about that," he said. 

Business is Beyond Exciting

As shown in Figure 2, SFDC executives went even further in describing developments during the quarter, using words such as incredible (23 times), huge (16), amazing (8), and outstanding (5) to round out the top five superlatives.

Early in the call, Benioff described the first quarter as the best that the firm has ever seen, "There is [sic] some incredible numbers you’re going to see including the cash flow number," he said. "We’re well positioned for another great year. This is amazing."

Block confirmed Benioff's enthusiasm. "I mean, this is an incredible company with incredible people and an incredible set of products and customers," he said. 

Not only is SFDC incredible, SFDC customers are also incredible. For example, Benioff said, "Uber, one of the world’s great innovative companies, another expansion in the quarter, they’re an incredible innovator with off-the-chart growth." Regarding a new deal with Amazon in the quarter, Block said, "We love Amazon, we’ve got a great relationship with Amazon, they are a huge user of Salesforce and that certainly has been a huge part [of] this quarter as well."

In describing the firm's Sales Cloud, Benioff let loose with a string of incredibles:

"I mean we know that there is not just a cloud, there is not just a incredible cloud vision for Sales Cloud, not just incredible, social vision. You all know it has been built on this incredible engagement platform built on our Chatter core and then extended into Salesforce1. Of course it has incredible mobility, the best of any enterprise application in the world with more mobile users gone up than any other application that I’m aware of."

We can only scratch the surface in this short post. For a complete transcript of SFDC's amazing, incredible, outstanding quarter, check out the full transcript on Seeking Alpha.

The Maturing of ERP on the Salesforce Platform

Salesforce.com held its monster user conference, Dreamforce, last month in San Francisco, and there were plenty of new announcements. For example:

• A new analytics cloud, dubbed Wave, which fills out Salesforce.com's offerings to include native business intelligence and analytical capabilities
   
• A new version of the Salesforce1 platform, Lightning, for developing mobile apps
   
• An expanded partnership with Microsoft for Windows mobile devices and new integrations with Microsoft Office, Office 365, Power BI, and Excel

But Dreamforce is not just about Salesforce. It's about the Salesforce ecosystem—hundreds of partners building complementary and in many cases completely independent solutions on the Salesforce platform.

For those that follow ERP, this post outlines the latest developments with four ERP providers building on the Salesforce platform: Kenandy, FinancialForce, Rootstock, and AscentERP along with my takeaways from each of them. I'll end with one small caveat for buyers.

Kenandy Goes Up-Market

I first wrote about Kenandy after its introduction on stage at Dreamforce in 2011, and I’ve kept in touch with its management team for regular updates. The big news this year is the success Kenandy has had in selling into large companies.

Exhibit 1 in Kenandy’s march up-market is Big Heart Pet Brands, a distributor of pet food and pet supplies, which was formed by the carve-out of the pet food business from Del Monte Foods earlier this year. Milk Bone, Kibbles, Gravy Train, and 9Lives, are just a few of its well-known brands.

I had an opportunity to interview Dave McLain, the firm’s CIO, who made it clear that this is no two-tier ERP configuration. Apart from a handful of point solutions and an on-premises warehouse management system (Red Prairie), a single instance of Kenandy will be providing all ERP functionality when fully rolled out. With $2 billion in annual revenue, this may well be the largest company running a cloud-only system as its only ERP system.

(If readers have heard of a larger example, please let me know--but before responding, please reread the preceding sentence slowly and note the words “cloud only.”)

Why would McLain trust a young vendor such as Kenandy with such a tall order? First, McLain was attracted to the Salesforce platform and its promise of rapid development. In other words, he was sold on the platform and then looked for an ERP provider that was leveraging it. In my view, it helps that McClain is not your typical CIO. He’s worked in the enterprise software industry, with stints at Aspect Development, back around the turn of the century, and at i2. He is not only comfortable working with a young vendor, but he viewed Kenandy’s youth as an advantage, as he felt he would have more influence over the product roadmap. So far, he’s happy with his choice.

Big Heart Pet Brands is only the first and most visible example of Kenandy’s move into larger companies. In a briefing, Kenandy executives shared with me several large deals they have in implementation and several that are in the pipeline. Although the names are still confidential, they are large and in some cases very large, well-known, global companies.

One point that may keep SAP executives awake at night: some of these prospects are reportedly approaching Kenandy because of a determination to halt further implementation of SAP’s Business Suite in new regions of the world.

My takeaway from Kenandy is that cloud ERP is not just for small and midsize businesses.

FinancialForce Goes Deeper

FinancialForce is another young ERP vendor, founded in 2009 as a joint venture between UNIT4 and Salesforce (UNIT4 is the majority shareholder). I wrote about FinancialForce last year and commented on its acquisition of Vana Workforce and Less Software. These acquisitions expanded FinancialForce from financial systems and professional services automation into HR systems, order processing, inventory control, cost accounting, and functionality for product-based businesses.

This year, in a briefing with FinancialForce executives, I heard about the firm’s work to embed HR activities within operational transactions. Users can give other employees feedback on their performance right within the context of a project in the professional services system, for example. The feedback is then recorded in the HR system so that employee performance data is gathered throughout the year instead of during an annual performance review only. FinancialForce refers to this approach as “Everyday HCM.”

The firm also reports good uptake of the “supply chain management (SCM)” capabilities that it acquired from Less Software, tripling its number of customers for this functionality. As I pointed out last year, the term supply chain management is something of a misnomer. There is no real warehouse management, transportation management, or supply chain planning. Rather, SCM in this context really refers to the detailed tracking of physical and intangible products from supplier, through inventory, to customers.

This can best be seen with the large percentage of deals that Less Software, and now FinancialForce, have done with VARs, resellers, and other tech industry channel partners. FinancialForce can now track and process OEM rebates (a long-standing practice in channel businesses). Product costing allows costs to be accumulated by serial number (specific identification) and can include landed cost (i.e. allocated inbound freight cost). This is a huge need for solution providers that import OEM products. Filling out the needs of today’s channel partners, FinancialForce also has a full professional services automation system, and it supports subscription billing along with management of recurring revenue.

These are not trivial product features. It is a testimony to the rapid development capabilities of the Salesforce platform that FinancialForce has been able to build out these features in such a short time.

Like Kenandy, FinancialForce is also getting into larger deals, although the names are not yet public.

My takeaway from FinancialForce is that in some cases the functionality of these young cloud-only vendors now rivals that of the traditional vendors.

Rootstock Expanding Its Footprint and Presence

The founders of Rootstock have the advantage of having developed a cloud ERP system twice. The firm first developed its manufacturing system in 2008 on the NetSuite platform. In 2010, however, Rootstock disengaged from this partnership and rewrote its ERP system on the Salesforce platform. As a result of the replatforming, Rootstock developed its own customer order management product and partnered with FinancialForce for its accounting systems.

Rootstock scales well to larger companies. It claims to be the largest system on the Salesforce.com platform in terms of the number of objects,pushing the boundaries of what the platform can do. All Salesforce partners, of course, benefit from the scale-out capabilities that Salesforce is building into the platform.

In terms of functionality, Rootstock has good capabilities for purchasing, production engineering, lot and serial tracking, MRP, MPS, and capacity planning, shop floor control, manufacturing costing, and PLM/PDM integration. The system can support multiple companies, multiple divisions, and multiple sites, all within a single tenant on the Salesforce platform. It also announced this year the development of a product configurator, a module where most cloud ERP systems are still relying on third-party solutions.

The build out of functionality is making Rootstock more attractive to larger companies as well as the midsize organizations it has appealed to in the past. In a briefing with Rootstock senior leadership, they pointed to their win at CSG, a provider of print and managed services, and enterprise solutions in Australia and New Zealand. In New Zealand, it is the exclusive distributor for Konica Minolta. When fully deployed, Rootstock will be serving “hundreds” of users at CSG.

Other wins this year include Northeast Lantern, a maker of high quality brass and copper lighting fixtures; Wilshire Coin Mints, a retailer and wholesale distributor of coins for collectors and investors; Proveris Scientific, a manufacturer of test instrumentation for the pharmaceutical industry; Pioneer Motor Bearing, a maker of high performance industrial bearings; Pacer Group, a wire and electrical cable manufacturer; Plumb Sign, a job shop producing signage for businesses across the US; and Oberfield Architectural Precast, a manufacturer of precast concrete and other custom-built precast products.

In another development, Rootstock added some muscle to its advisory board this year with the addition of Jan Baan, the former founder and CEO of Baan Software, Jim Bensman, former president of SAP North America, Bill Happel, former VP of General Motors, and Lee Wylie, former CIO of Gartner.

My takeaway from Rootstock is similar to that for FinancialForce: the functionality gap in some areas is closing between the cloud-only ERP providers and traditional vendors.

AscentERP Raises Its Profile

I was not able to meet with AscentERP during Dreamforce, so I arranged a call after the show with Shaun McInerney, its co-founder and President. McInerney was positively excited about his firm’s latest developments:

• The launch of Ascent Rental, a native Force.com application for companies that rent or loan out equipment. He’s already seeing interest from current customers in the construction industries. Event organizers and medical equipment rental businesses are also targets.
   
• An iTunes app that turns Apple iOS devices (iPod Touch 5th Gen, iPhone 5, and iPad Mini) into true high-speed bar code scanners, through use of a scanner sled available from Honeywell. This plays well with AscentERP’s roots in warehouse data collection and is a key element in the case study I highlight below.
   
• Integration with Magento for e-commerce, allowing customers to take orders from the web, fulfill them and push shipment information back to customers. McInerney claims over 15 customers already for this functionality, which was only launched two or three months before Dreamforce.

McInerney reports an increase in new opportunities coming from Salesforce, with about half from outside the US. The system supports multiple currencies and base languages of English and Chinese. Like the other three vendors outlined in this post, AscentERP is also seeing its share of larger deals, which includes several in the range of 200 users, a jump from its typical user count in the past.

In my opinion, AscentERP gets the award for the most inspiring customer story. It put together a short video about its client Bosma Industries, a $55 million non-profit distributor of medical supplies, which also happens to be Indiana’s largest employer of people who are blind or have vision loss. AscentERP worked with Bosma to customize its system and to make it fully accessible to Bosma’s visually impaired workforce. This is where that iTunes app for warehouse data collection comes into play.

The best quote is from Bosma’s Adam Rodenbeck, who says, "If Siri can look at Facebook and help us get around on Twitter, why can't it help get us around the warehouse?"

Click the image below to watch the 3-minute customer story.

My takeaway from AscentERP: don't underestimate the marketing value of being part of the Salesforce ecosystem.

Buyers Should Ensure Adequate Implementation Support

One thing that none of these four vendors mentioned: a lack of new sales opportunities. In fact, they all indicated that they were awash in new prospects. This is in contrast to some of the traditional ERP vendors who periodically call me to check whether I’ve “heard of anyone looking for software.” It’s always a good sign when a vendor can afford to be picky about the opportunities it chases—it lessens the likelihood that the vendor will get into situations where it cannot compete and improves the chances of success.

But the the flip side of all these new deals can lead to problems if vendors are not adequately staffed to support them. Generally speaking, I caution clients to be sure they get adequate consulting help when they are considering these vendors. True, these new cloud-only systems are generally easier to implement, but still, they don’t implement themselves. You don't need system admins or DBAs. But you do need consultants who understand how to configure the system and help you implement your processes within it. In some cases, these vendors may have consulting partners that can assist, but they can be stretched as well. It is not an insurmountable problem, but buyers should be sure they get the help they need to have a successful implementation.

Note: Salesforce paid my travel expenses to attend Dreamforce.

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Kenandy: A New Cloud ERP Provider Emerges from Stealth Mode

Four Cloud ERP Providers on the Salesforce Platform

As cloud ERP solutions mature, they are becoming viable alternatives to traditional on-premises and hosted ERP systems. Dreamforce 2013, the annual conference of Salesforce.com users in San Francisco last November, offered a good opportunity to review the progress of four such cloud ERP systems—all built on the Salesforce.com platform.

Salesforce1: The Next Generation Salesforce Platform

During the conference, Salesforce unveiled the latest iteration of its platform, now dubbed Salesforce1, as shown in Figure 1.  The platform has a lot going for it.

• It provides a complete applications development environment (a platform-as-a-service, or PaaS) running on Salesforce.com’s cloud infrastructure. Developers building on Salesforce1 can interoperate with any of Salesforce.com’s applications, such as its Sales Cloud, Service Cloud, Marketing Cloud, as well as other third party applications built on the platform. 
• It includes social business capabilities. Developers can incorporate Salesforce.com’s social business application, Chatter, as part of their systems. 
• The platform puts mobile deployment at the center, allowing apps to be written once and be deployed simultaneously on a variety of user platforms, including desktop browsers, tablet computers, and smart phones. In support of the so-called "Internet of Things," Salesforce1 can even be deployed on connected devices. 
• Finally, the platform provides a way for developers to market and sell their applications, by means of Salesforce.com’s AppExchange marketplace. 

For a detailed view of Salesforce1, see this review by Doug Henschen over at Information Week.

With Salesforce.com now the market leader in CRM, it is no wonder that its platform has become more and more attractive to developers. Building on this platform, third-party developers become, in essence, an ecosystem around Salesforce.com, with strong network effects. The more popular the platform becomes, the more it attracts developers. In return, the more developers build on the platform, the more attractive it becomes to other developers. It is a virtuous cycle.

In our consulting work at Strativa over the past three to five years, I’ve seen several cases where organizations first implemented Salesforce.com’s CRM system, then based on that success started looking to see whether they could replace their existing on-premises ERP system with a cloud-based solution. And, when they search the AppExchange, they find four cloud ERP providers: FinancialForce, Kenandy, Rootstock, and AscentERP.

I’ve been following these four providers for several years, and this post serves as an overview and update, based on briefings and interviews I conducted with these four vendors during the Dreamforce user conference.

FinancialForce

As the name implies, FinancialForce started in 2009 as an accounting and billing system. It was formed as a joint venture between UNIT4 and Salesforce.com. The company expanded into professional services automation in 2010 with the acquisition of a PSA system from Appirio, built on the Salesforce platform, and by building out its own services resource planning (SRP) functionality. More recently, Financialforce developed offerings for revenue recognition and credit control on the new Salesforce1 platform for revenue recognition, pushing these functions out to sales and services users in the field.

The company lists 50 customer case-studies on its website, an impressive number for a vendor that is only four or five years old.

At Dreamforce 2013, FinancialForce took two more steps to expand its ERP footprint. First, it announced acquisition of another AppExchange partner, Less Software, which provides configure-price-quote (CPQ), order fulfillment, service contracts, inventory management, and supplier management modules. Founded just two years ago, Less Software was already partnering and doing joint deals with FinancialForce, so the acquisition does not appear to acquire much if any integration work. FinancialForce refers to Less Software as having supply chain management (SCM) capabilities, but I would view that as somewhat of an exaggeration. There are some light warehouse management capabilities, but no transportation management or supply chain planning functionality that I can see. Less Software has had particular success in selling to value-added resellers, such as Cisco resellers, as well as to industrial distribution organizations and one manufacturer of children’s furniture.

The second step, announced during the conference, was the acquisition of Vana Workforce, a human capital management (HCM) software provider—which is also built on the Salesforce platform. Vana's HCM functionality includes core HR, talent management, recruitment compensation, time management, and absence management. Payroll is not provided, but the system can connect with a number of popular payroll systems. As with Less Software, Vana Workforce was already partnering with FinancialForce, so the integration effort, again, would appear to be minimal.

Organizations in the professional and technical services sector should take a look at FinancialForce, as well as anyone needing a financial management solution. With its acquisition of Less Software and Vana Workforce, FinancialForce now qualifies for the short list for distribution and light manufacturing companies. There were hints during my briefings that FinancialForce may continue with an acquisition strategy, so it is likely that additional industry sectors may become potential targets for this solution provider.

Kenandy

I covered the launch of Kenandy back in 2011, when I interviewed its CEO Sandra Kurtzig. Sandy was the original founder and CEO of ASK Group, the developer of the well-known ManMan ERP system. Her coming out of retirement to launch a new ERP system made a big splash at Dreamforce 2011, where she appeared on stage with Salesforce CEO Mark Benioff and Ray Lane, former Oracle President and now Kenandy board member representing investor firm, Kleiner Perkins. Salesforce.com is also an investor in Kenandy.

Since that launch, Kenandy has been rapidly adding functionality. It has its own financial systems, including general ledger, invoicing, accounts receivables, and accounts payables. Multi-company and multi-currency support were added earlier this year, with up to three reporting currencies. According to Kenandy executives I interviewed, the system also supports multiple plants with multiple locations in a single tenant. There is a full MRP explosion. Lot tracking and serial tracking allow Kenandy to sell into foods and other industries that require track and trace. Item revision levels are tracked with multiple revisions allowed in inventory.

Only three years in existence, the installed customer base is small but growing, with some impressive wins. During Dreamforce, Kenandy touted its recent win with Del Monte Foods, which implemented Kenandy for its acquisition of Natural Balance, a pet food manufacturer. I spent some time one-on-one with the Del Monte project leader, who provided quite a bit of insight into the dynamics of the implementation. Del Monte was able to implement Kenandy’s full suite—financials, customer order management, and distribution—in just three months. This included integrations with third-party systems for EDI, warehouse management, and transportation scheduling.

He also shared with me that he wrote a trade promotion management (TPM) system on the Salesforce platform, integrated with Kenandy, in just six weeks—and he did it by himself. He had previously built a similar system integrated with Del Monte’s legacy system, but that effort took seven months with a team of seven developers. Even discounting the fact that his previous experience might have made development of the second system easier, by my calculations this is about a 50 to 1 improvement in productivity, illustrating the power of the Salesforce platform.

Del Monte is not finished with Kenandy. The firm reportedly plans to eventually move all of Del Monte’s ERP processing from something like 60 internal systems to Kenandy.

More information Del Monte’s experience can be found in a case study on Kenandy’s website.

Rootstock

Rootstock Software is another manufacturing ERP provider with an interesting history. The management team, headed by CEO Pat Gerehy and COO Chuck Olinger, has decades of experience building manufacturing ERP, most recently at Relevant. Following the sale of Relevant to Consona (now Aptean), the team embarked on a new venture to build a manufacturing cloud ERP system from scratch. They developed their first iteration of Rootstock on the NetSuite platform in 2008, interoperating with NetSuite for financials and customer order processing. In 2010, however, they disengaged from their NetSuite partnership and rewrote Rootstock on the Salesforce platform. (That the Roostock developers could build a complete system so quickly on the NetSuite platform and then again on the Salesforce platform speaks to the power of these modern cloud platforms for rapid software development.)

As a result of the replatforming on Salesforce, Rootstock developed its own customer order management product and now partners with FinancialForce for its accounting systems. It also has good functionality for purchasing, production engineering, lot and serial tracking, MRP, MPS, and capacity planning, shop floor control, manufacturing costing, and PLM/PDM integration. The system can support multiple companies, multiple divisions, and multiple sites, all within a single tenant on the Salesforce platform.

On its website, Rootstock highlights an impressive list of 25 customers. These include Astrum Solar, a residential solar provider with operations in a dozen states in the US. EBARA International, a manufacturer of pumps and turbine expanders in the energy industry, with 77 subsidiaries and 11 affiliated companies worldwide.

Over the past year, Rootstock has been gaining traction. After the Dreamforce conference, it announced four more wins in the month of November: Microtherm, a business unit of ProMat International; Proveris, which provides testing protocols for drug developers; Source Outdoor, an outdoor furniture manufacturer; and Wilshire Coin, a coin dealer.

Buyers looking for strong manufacturing functionality, including hybrid modes of manufacturing, should consider Rootstock. Project-based manufacturing is also a sweet spot.

AscentERP

AscentERP approaches manufacturing ERP from the execution side of the business. Its co-founders, Michael Trent and Shaun McInerney, have a long history in warehouse management and data collection, and it shows in the capabilities of the product. Built from the start on the Salesforce platform, AscentERP supports production modes of build-to-order, assemble-to-order, and configure-to-order along with repetitive manufacturing capabilities. It can take opportunities from Salesforce.com and convert them into sales quotes and into sales orders in the production system. The system supports the complete manufacturing process from master planning, purchasing, production, and shipping. Reverse logistics is also supported through an RMA process.

Like Rootstock, AscentERP supports the accounting function through partnership with FinancialForce. In addition, the system also integrates with Intacct, another SaaS financials system. For smaller companies, Ascent created an integration with Quickbooks.

During Dreamforce, AscentERP announced advanced manufacturing functionality, including workflow and alerts, multi-plant and multi-location support, production scheduling and tablet computer data collection using the new Salesforce1 platform.

Reference accounts include Chambers Gasket in Chicago and All Traffic Solutions, a manufacturer of electronic roadside signs. Both of these customers use FinancialForce for financials. Other reference accounts include The Chia Company in Australia, the world’s largest grower of Chia seed and products, so familiar during holiday season, and SolarAid, an international charity that provides access to solar lighting.

Buyers may want to short list AscentERP if they are looking for a nuts-and-bolts production system with good support for warehouse management and data collection. Smaller companies may find the Quickbooks integration an interesting option, allowing them to implement ERP without having to give up Quickbooks.

One sales strategy I wish more enterprise SaaS providers would follow: AscentERP offers a free 30 day free trial on its website.

Cast a Wide Net

All ERP systems have their strengths and weaknesses, and these four are no exception. For example, all of these systems are relatively new. Although they are rapidly building out their functional footprints, there are still gaps in their functionality. Buyers that insist on having every box checked on their RFPs may not like this, but those buyers who are willing to do some system enhancements on the Salesforce platform may find that the advantages of speed and flexibility outweigh any short-term gaps. It all depends on whether buyers are viewing pure cloud deployment as a strategic advantage.

The four vendors outlined in this post are not the only cloud ERP providers in the market. Buyers should also consider other providers, not built on the Salesforce platform. These include established cloud players such as NetSuite and Plex, as well as newer entrants, such as Acumatica. Finally, some of the traditional providers of on-premises ERP systems, such as SAP, Oracle, Microsoft, Infor, and Epicor, offer hybrid cloud deployment options that may be alternative to these cloud-only providers.

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Choosing the right ERP system—whether cloud, hosted, or on-premises—can be challenging. Those looking for more in-depth analysis and independent advice in navigating the process should consider our software selection consulting services at Strativa.

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Oracle and Salesforce.com: The Great Detente

Salesforce.com and Oracle today announced a "new strategic partnership." For their mutual customers, the announcement represents a welcome thawing of relations between the two companies. But it remains to be seen whether it represents a strategic change of direction for Salesforce.com.

Not a Radical Departure for Salesforce.com

The press release is quite short, just five paragraphs, outlining five points of partnership:

• SFDC will standardize on Oracle Linux.
• SFDC will deploy Oracle's Exadata engineered systems in its data centers. 
• SFDC will deploy the Oracle Database and Java Middleware Platform as part of its cloud infrastructure.
• Oracle will integrate salesforce.com's cloud apps with Oracle’s Fusion HCM and Financial Cloud.
• Salesforce.com will also implement Oracle’s Fusion HCM and Financial cloud apps for its own internal use.

So, what exactly in this announcement represents a fundamental change in direction for Salesforce?

• SFDC's infrastructure is already based on Linux, so standardizing on Oracle Linux is a minor change.
• SFDC's applications already make use of Oracle's database as the lower-level physical data store.
• The press release provides no detail on how SFDC will make use of Oracle's Exadata boxes. If they are merely used to replace commodity storage devices, there would not be any change to the basic architectural design of SFDC's infrastructure.
• Oracle's integration of Fusion HCM and financial system with SFDC is merely an application integration initiative. 
• SFDC's implementation of Oracle Fusion HCM and financial applications is a routine "win" announcement. 

The second bullet could potentially be the most radical departure for SFDC. Oracle's new database release, 12c, could provide the capability for SFDC to run multiple pluggable databases (one for each customer) within a single container database. This would represent a fundamental shift for SFDC away from its single multi-tenant database architecture in favor of Oracle's pluggable database approach.

Nevertheless, the fact that there is no mention of 12c or pluggable databases in the press release makes me seriously doubt that SFDC intends to fundamentally change its platform architecture. I have a question pending with SFDC on this point and will update this post if and when more information becomes available. [Update: SFDC is not willing to provide details beyond what was in the original announcement and subsequent conference call with Ellison and Benioff.]

Thawing of Relations

What I do find significant in this announcement is that Oracle and Salesforce.com have apparently buried the hatchet, at least for now. For their mutual customers, now and in the future, this is good news.

Customers are not well-served by vendors sniping at each other, and the verbal tiffs between Benioff and Ellison over the past few years, frankly, have become annoying. Hundreds of customers have interfaced Oracle Applications with Salesforce.com's cloud apps. But until now they have done so without the explicit support of Oracle. Customers will be pleased if the two companies can cooperate in providing standard integration. Hopefully, both parties will start acting like adults and doing what is in their joint customers' best interest.

Workday Is Odd Man Out

If there is a competitive target in this announcement, it has to be Workday. SFDC will implement Oracle’s HCM and will integrate its Sales Cloud with Oracle’s HCM and also with its Fusion Financials product. This puts Workday in an awkward spot in that Workday leverages Force.com for its platform-as-a-service capabilities. It will be interesting to see how Workday reacts to this détente between Oracle and Salesforce.com.

While the use of Oracle Fusion within SFDC doesn’t mean much to SFDC customers, it does give bragging rights to Larry Ellison against Workday. Interestingly, NetSuite's CEO Zach Nelson was recently taking pot-shots on stage at Workday during NetSuite's Suiteworld conference. At the time, I took it as a sign of Workday's competition with NetSuite in financial applications. Now I see it as part of a wider competitive alignment. Both Zach Nelson and Marc Benioff are Oracle alumni and both have close ties to Larry Ellison. The three now seem to be joining in solidarity against Workday and validating that Workday is a threat to all three.

Regardless of the competitive posturing by these major enterprise technology providers, the Oracle/Salesforce detente is welcome news for customers.

Update, 11:30 a.m. PDT. Dennis Howlett spoke with Aneel Bhusri, co-CEO Workday, who says that he doesn't anticipate any impact from the Oracle/SFDC announcement. 

Update, 12:15 a.m. Salesforce.com replied to my inquiry indicating they are unable to provide additional details at this time on the announcement.  

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Oracle's Behavior Undercuts Its Own Cloud Accomplishments

Oracle's Behavior Undercuts Its Own Cloud Accomplishments

Oracle held a much anticipated "Oracle Executive Strategy" update event for its Oracle Cloud services yesterday. With Larry Ellison leading the presentation, there was much thunder and lightening--but not much rain. This is unfortunate, because Oracle has put together an impressive set of cloud services. Ellison's inability to resist slamming the competition led him to overstate what Oracle has actually delivered, and to minimize the success of Oracle's competitors.

This post serves as a summary of the key points I gleaned from the webcast and from an analyst question and answer session afterwards with Thomas Kurian, Oracle's EVP of Product Development, who is always a pleasure to listen to.

Is There Anything New?

On Twitter and in back channel Skype conversations with other analysts, many of us were questioning: what exactly is being announced today? Nearly everything presented had been previously been presented at Oracle Open World in 2011.

Reading carefully through the pre-event summary document and scanning through my notes, I can only come up with two things that are new:

1. Oracle is announcing new Oracle Fusion cloud applications and services in addition to those  announced during Open World (which were CRM, HCM, Social Network, Java Service, and Cloud Service). Larry Ellison indicated that Oracle now has 100 cloud applications and services.
    
2. Oracle demonstrated some of the social marketing functionality from its Vitrue acquisition, which Oracle announced in March. 

Other than that, it's difficult to find anything that Oracle had not announced or presented earlier. So the event was largely a re-presentation of Oracle's cloud services, some demonstration, and a healthy dose of competitor-bashing.

Essentially, the 90 minute event fell into a pattern of presentation that is becoming all too familiar in the past several Oracle Open World conferences. There are too many issues to list individually, but I'll point out what I see as some of the things I found most troubling in Oracle's presentation.

Oracle Exaggerates Its Cloud Apps Availability

Oracle claims 100 Oracle Fusion cloud services but provides no list of the applications. Seeing that Oracle announced five during Open World, it's difficult to understand how it is now claiming 100, unless it is talking about very small pieces of functionality. During the post-event analyst briefing, I believe Tom Kurian did promise to deliver a list--so we'll have to wait for that. Update: Oracle has provided the list.

Furthermore, not all of the capabilities that Oracle showed or referred to during the event are in general release. Tom Kurian did review what products were generally available, but I was not able to capture that information. Again, we'll have to wait for some public clarity from Oracle on what customers can buy today and what is still waiting for general availability.

Oracle's Developer Cloud Still in Controlled Availability

Specifically, Oracle Java Service and Database Service are not yet available via customer self-service, as shown in the screen shot below. With a public cloud infrastructure service, you should be able to walk up to the website, submit a credit card and gain instant access to a development environment, run it for a few hours or days, then shut it down. Amazon Web Services has offered this for years.

A quick test on the Oracle website shows that if you try to sign up for cloud services, you are led to a screen as shown below, where you can leave your contact information. The message on that page reads,

When you submit this form, your information will be placed into a queue for access to controlled availability services. We will be provisioning Java and Database services in batches over the next several months. Our Fusion Application services will be made available shortly after that. You will be notified by email when your instance is ready.

I questioned Tom Kurian on this point and he indicated that this is a temporary measure during the ramp-up period. He said that Oracle is currently signing up about 150 development customers a week for its Java and database services and that by the end of August, the sign up process should be available entirely on a self-service basis. But today-there is still friction at the point of sale.

Ellison is Rewriting History

At the beginning of his presentation, Ellison claimed that Oracle began to rebuild all of Oracle's applications for the cloud, calling it Project Fusion. But some of us have a long memory, and we've written blog posts on Oracle's Fusion program over the years.

At the beginning, Oracle did not pitch Fusion as a cloud program but as an integration strategy for its disparate applications. Fusion would be the successor to Oracle's E-Business Suite, PeopleSoft, J.D. Edwards, and Siebel systems. As Oracle made many acquisitions, it needed a strategy, using middleware, to integrate these applications with one another and a successor set of applications based on the best features of each of its acquisitions.

See my many posts at the end of this post, and try to find one where Oracle ever used the word "cloud" in talking about Fusion. Oracle has not been working on cloud applications for seven years. It has only been in the past year or two, as Salesforce.com and Workday began eating Oracle's lunch that Oracle responded with its own cloud pronouncements.

I have heard off-the-record that the early leaders in the Fusion group made sure to architect the product to allow cloud deployment. But Ellison's early presentations indicated that Fusion would be a traditional sold-as-a-license product, deployed on-premises, not a cloud service. To now claim that Fusion was a 7-year cloud development effort is simply not true.

Ellison's Characterization of Competitors is Out-of-Bounds

For example, Ellison claims that SAP has done nothing in the cloud except for its acquisition of SuccessFactors, and that it will have nothing otherwise in the cloud until 2020. He conveniently overlooks SAP's five or seven year effort to develop Business ByDesign, a full-suite multi-tenant cloud ERP system, which SAP has has sold to over 1,000 customers.

Whether SAP has met its objectives for ByD is not the point: Oracle has by its own numbers claimed only 200 sales of Oracle Fusion. So, even by Oracle's own numbers, SAP has sold more cloud customers with its own developed products. (Ellison also conveniently ignores SAP's own cloud-based line-of-business applications.) SAP may have its own problems in transitioning its business to the cloud, but Ellison's mockery of SAP is simply unfair and inaccurate. 

Ellison's slamming of the competition continued with a mis-characterization of Workday's in-memory technology and a straw-man argument that other SaaS providers tell customers "not to worry about security." Can Ellison point to any cloud competitor that has told its customers "not to worry about security?"

Oracle Exaggerates Adoption of Fusion Apps

Oracle claims just 200 sales of Oracle Fusion Apps, and it refuses to break down that number into how many are CRM, HCM, and so on. Although Oracle will not release that information, I have reason to believe that most of those sales are for HCM and that there have been few new sales of Fusion CRM.

Tellingly, there were no customers on stage with Ellison or Hurd. Except for a couple of slides with logos of companies that Oracle claimed as wins over its competitors, there were no customer mentions, no customer testimonies.

Oracle Customers Choose Cloud Because of Fusion Complexity

Back-channel discussions indicate that nearly all Oracle Fusion application sales are for cloud deployment, not on-premises. It appears that this is the case not because Fusion can only run in the cloud  (like Salesforce.com or Workday) but because Fusion technical requirements are so complex that virtually no organization wants to deploy Fusion Apps on-premises. It is easier to simply turn over the infrastructure and application management activities to Oracle.

On a Positive Note

The dissatisfaction felt by many of the event attendees is unfortunate. Oracle does have an impressive array of cloud services, although some are still in the process of roll-out.

• Specifically, I like the fact that Oracle is offering a full and complete IaaS platform, similar to Amazon's (although Oracle's is limited to Oracle technologies).
   
• I also like that everything in Oracle's cloud is based on public standards, such as SQL, Java, and HTML5. 
   
• I like that customers can freely move applications (Oracle's apps, or custom apps) from Oracle's cloud to on-premise deployment, or to other public clouds such as Amazon's--without modification. I questioned Kurian on this point, and he confirmed that there is no intent to lock in customers to Oracle's cloud. This is, in fact, a differentiator against Salesforce.com as a development platform, which because it is based on proprietary languages, does not offer portability. 
   
• Finally, the user interface or Oracle Fusion Application is cutting edge. From what I saw in the Ellison's demonstration, along with other Fusion apps I've seen demonstrated, Oracle has set a high bar for ease-of-use, embedded BI, and integration.

Oracle has fallen into a pattern in its public events of overstating its successes, misrepresenting its competitors, and touting statements-of-direction as accomplishments. This is unfortunate because it causes observers to discount what is in fact some very impressive technology. I hope that, in the future, Oracle will take a more understated approach that will do justice to its people, products, and services. 

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Infor’s Two-Pronged Cloud Strategy

While enterprise cloud computing pioneers such as NetSuite and Salesforce.com get much of the attention, there is some interesting cloud-work going on among traditional enterprise software providers. One such provider is Infor.

I had the opportunity to get an update on Infor’s cloud computing program last week, at Infor’s annual user conference, Inforum. The bottom line: I see Infor’s cloud strategy as having two prongs, and it is beginning to bear fruit.

I gave a brief overview of my thoughts on Infor’s cloud strategy in my video interview with Dennis Howlett. In this blog post, I expand on those initial thoughts.

Infor Representative of Traditional Enterprise Software Providers

Infor is generally known as a vendor that has accumulated a huge portfolio of enterprise software, by acquiring a number of players over the past decade. As a result, it claims an installed base of over 70,000 customers, making it the third largest enterprise applications provider by revenue, following SAP and Oracle. As such, it epitomizes the dilemma that such enterprise software providers face:

1. They are competing against cloud-only ERP providers, such as NetSuite, Plex, Intaact, FinancialForce, Rootstock, Kenandy, and others, who offer simple one-stop subscription-based cloud ERP. Infor is increasingly seeing these providers in net-new deals for core ERP systems, especially in the SMB market.
    
2. They are also battling against a host of cloud-based point-solution providers, who are creeping into Infor’s installed base offering everything from CRM to expense management to talent management. Infor has a number of good on-premises point solutions, but customers are increasingly finding cloud-based point solutions more attractive in terms of ease-of-implementation, flexibility, and time to value.
   
   The largest of these cloud providers, of course, is Salesforce.com, which a number of Infor customers have already chosen for CRM. Interestingly, Infor does not have its own best of breed CRM system—even on-premises. It does have its Epiphany CRM system, but that is more of a marketing automation solution, not a sales force automation system, which is what most prospects are looking for. 

 Infor, as typical for most established enterprise software providers, needed an answer to both of these competitive challenges. In response, Infor has a two-pronged strategy, as I see it.

First Prong: Infor Business Cloud

The first prong of Infor’s strategy is to offer customers its own cloud solutions, both for full ERP and for point solutions. This program, first launched as Infor24 in 2006, is now branded as the Infor Business Cloud. The products offered therein are not merely hosted offerings—some of them were originally built as cloud offerings, while others are originally on-premises offerings that have been re-architected, allowing them to be deployed as multi-tenant cloud services.

In other words, Infor is not merely hosting its on-premises offerings and relabeling them as “cloud” (so-called “cloud washing). In my interview with Jim Ploude, who is responsible for Infor’s cloud business, he made it clear: the cost for Infor to deliver multi-tenant cloud services is orders of magnitude lower than it is for single tenant hosted services. There are also great advantages in terms of economies of scale, administrative overhead, risk reduction, and flexibility.

For Infor customers that insist on traditional single-tenant hosted services, Infor or one of its partners can provide that. But those services are separate from Infor’s Business Cloud, which offers the full benefits of cloud computing, and are more cost-effective.

• In terms of ERP, the Infor Business Cloud currently offers only its Syteline product as a cloud service. But other products—which Jim was reluctant to name—are also in the pipeline for re-architecture as cloud offerings. These will give new customers additional choices for cloud ERP.
   
• In terms of point solutions, Infor has a broader selection of cloud services, including Infor’s Enterprise Asset Management (EAM) product (originally the Datastream acquisition), expense management, property management, workforce management, and hospitality management. Jim himself came onboard with Infor as part of the Datastream acquisition and already had extensive experience in deploying that product as a cloud service.

As I point out in the accompanying video, most of Infor’s large customer base cannot move their entire applications portfolio to the cloud. They have already invested in on-premises systems. But they are increasingly interested in cloud solutions that interoperate with their on-premises investments. Infor, therefore, must provide hybrid offerings. Hybrid cloud offerings are not a compromise—they are necessary to meet customers where they are. This first prong of Infor’s strategy, therefore, represents a pragmatic approach that can work for the majority of Infor’s customers.

Infor’s Business Cloud is more than a statement of direction—it already boasts 1,200 customers and somewhere in the neighborhood of 2.4 million named users consuming its services. Although Jim would not give specifics, I have reason to believe that the majority of these customers are for the point solutions, with cloud ERP (Syteline) representing a small, but growing, number. This is not surprising, as ERP is really the last bastion for enterprise cloud computing.

Cloud Services to Facilitate Version Upgrades

There is one more angle to Infor’s business cloud that Jim was not able to discuss at length, because Infor still has announcements pending in this area. This is in regard to the use of cloud infrastructure, such as Amazon Web Services, to facilitate customer upgrades to new versions of Infor products.

When customers are considering to upgrade an existing on-premises system, much of the preliminary planning work—such as exploring features of the new version, conference room piloting, and analyzing differences between the customer’s version (which may include source code modifications or extensions)—requires a second working instance of the application. Those activities are a natural use-case for cloud infrastructure. For vendors such as Infor, who have a large installed base of customers—a significant percentage of whom are trapped in older, highly modified versions—cloud infrastructure represents an opportunity to more quickly move those customers to new versions, where they can benefit from the new products that Infor is developing.

At Inforum, Infor was not ready to announce plans for leveraging cloud infrastructure to support customer upgrades. But there is a real need in this area, and I’m looking forward to hearing more about how Infor plans to move in this direction.

Second Prong: Partnering with Salesforce.com

The second prong of Infor’s cloud strategy is its partnership with Salesforce.com, branded “Inforce.” As Salesforce already has made inroads into Infor’s installed base, and as Infor does not have its own best-of-breed salesforce automation system, a partnership between the two players makes a lot more sense than Infor attempting to build or buy its own cloud CRM offering.

I discussed the first deliverable of this partnership, Inforce Everywhere, in my blog post, Infor and Salesforce.com: More Than a Barney Relationship, and I was happy to see one Infor executive “borrow” this phrase in an analyst briefing.

Inforce Everywhere is an application, built natively on the Force.com platform and using Infor’s lightweight ION middleware, that allows a Salesforce.com users to see Infor ERP data in Salesforce.com screens. Conversely, it gives Infor ERP users access to Salesforce.com data. As a result, users can have a 360 degree view of customer information encompassing both CRM and ERP data.

For most ERP customers buying Salesforce.com, system integrators build such integration on a one-off basis. What Inforce Everywhere does is to provide such integration as a standard product. During Inforum I had an opportunity interview Julia Klein, CEO of CH Briggs, one of the first early adopters of Inforce Everywhere, and she gave a powerful testimony of how important this integration is to her company. She said that if Infor didn’t build this integration, she would have to hire someone to do it for her company.

Success Hopeful but Not Guaranteed

Infor’s two-pronged cloud strategy is coherent, but as with any strategy there are obstacles. On the first prong, the Infor Business Cloud, I see difficulties moving a sales force accustomed to selling software licenses with large up-front payments to selling cloud subscription services. I did receive some indication that Infor is aware of this problem and is taking steps to mitigate the sales disincentive to sell cloud services.

The second prong, the relationship with Salesforce.com, also has the same challenge related to the sales model, which it hopefully will address. In addition, the pricing I have seen so far for Inforce Everywhere appears a bit rich, especially when combined with Infor’s own ERP pricing and Salesforce.com subscription fees. Of course, nothing stops Infor or Salesforce.com from negotiating more aggressive discounts, but wasn’t cloud computing supposed to simplify the rug-merchant nature of enterprise software sales? My concern is that if the pricing is too rich, many good prospects may find it more attractive to just do a minimal amount of one-off integration between the two products, just like they’ve done in the past.

In spite of these challenges, I think Infor has a good chance of success. If so, it will be a good sign for other traditional vendors working on making the transition to the cloud.

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Infor and Salesforce.com: More Than a Barney Relationship

Last year, Infor's CEO Charles Phillips took the stage with Salesforce.com's Marc Benioff to announce a partnership between their two companies. Coming in the midst of all the other announcements during Dreamforce, it would be easy to miss the significance of this one.

Now, with another announcement today, there is another step forward, which should be seen in light of the mutual commitments that Infor and Salesforce are making to each other:

• Out-of-the-box integration. Today's announcement is for a new software product, Inforce Everywhere. This is a native Force.com application that will make back office data from Infor's various ERP systems available to users within Salesforce.com's CRM applications. It also makes key Salesforce.com entities available within Infor ERP, as shown in the graphic nearby. See today's press release for more details. Additional products in the Inforce series are due out over the next 18 months.
  
• Reseller relationship. As announced at Dreamforce, Infor is now a reseller of Salesforce.com's Sales Cloud and Service Cloud, one of only three third-parties to attain this status. (The other two are Intuit and Dell.) This means that Infor can now sell SFDC and deliver first-level support to Infor's own customers.
  
• Financial commitment. Also, as announced at Dreamforce, Salesforce.com has become a financial investor in Infor. Salesforce has skin in the game.

Taken together, these three commitments mean that the partnership between Infor and Salesforce.com is much more than the typical tech industry "Barney Partnerships" (I love you, you love me) that never go much beyond the press release and perhaps a few joint deals.

On the surface, the two may appear to be strange bedfellows: Infor, commonly seen as a roll-up older enterprise software companies, and Salesforce--the hot young leader of a new breed of cloud apps providers. But dig a little deeper and you can see how this relationship--which has real and substantial commitments--makes a lot of sense for both parties and for their joint customers.

What's in It for Infor?

By teaming with Salesforce, Infor gets immediate credibility in cloud computing. Rather than build its own true cloud-based sales or customer service functionality, Infor joins forces with the leader in this market space.

There's not much product overlap. Interestingly, although Infor has dozens of products in its portfolio, it does not have a best-of-breed CRM offering. Several of its ERP offerings, such as LN and Syteline, have their own SFA offerings, but those are limited to customers of those ERP systems. Its one standalone CRM product, Epiphany, is more of a marketing automation solution (and, in fact, will be the focus of a future product in the Inforce series).

Finally, Infor now becomes an option for Salesforce.com's many CRM customers who are looking for ERP solutions. Because Salesforce does not offer a complete business suite, cross-referrals from Salesforce can be an attractive sales channel.

What's in It for Salesforce?

Though not immediately apparent, the benefits to Salesforce.com may be even greater. For further growth, Salesforce needs new channels. Moreover, with over 70,000 customers, Infor's installed base is a large market. In terms of ERP revenue, the No. 1 player (SAP) and No. 2 (Oracle) are both fierce competitors to Salesforce, leaving Infor (No. 3) as the largest available option. (Microsoft, also with a large ERP installed base, is likewise a head-to-head competitor with Salesforce.com). The more I think about the larger market dynamics, the more Infor appears to be a great choice for Salesforce. The fact that Salesforce is putting its money where its mouth is (i.e. becoming an Infor investor) is further evidence that Marc Benioff views this relationship as strategic. On a side note, Benioff will be speaking at the Infor's annual user conference in Denver this year, in April.

What's in It for Infor Customers

Of course, Infor customers and prospects now will have an option to go with the market leading solution for cloud CRM. Furthermore, today's announcement of out-of-the-box integration will make the decision easier. Many ERP users choose Salesforce.com today, but I have seen first-hand that integration concerns do produce friction in the sales process. Salesforce and its implementation partners have some good answers for how they will handle integration, but generally each deal is a custom integration, raising uncertainty about the effort and cost.

What Inforce Everywhere does, in my mind, is to make ERP the system of record for Salesforce.com entities that should be managed in ERP: customers, contacts, quotes, orders, shipments, invoices, payments, and returns. Most problems with ERP/CRM integration involve duplicate and redundant data. If Inforce Everywhere works as advertised, it takes away buyer concern about integration and offers a 360 degree view of the customer to users of both CRM and ERP.

What Could Go Wrong?

Although overall I'm positive about the Infor-Salesforce partnership, it's important to take a balanced view. So what are the potential pitfalls? I can think of several.

• Will Infor's direct sales and partner channel be eager to resell Salesforce.com? Selling traditional software licenses carries large up-front commissions and recurring maintenance revenue. Other traditional vendors have had a hard time making the transition to selling subscriptions. It's easier if there is a completely separate sales channel for cloud, but I haven't heard that Infor is planning that. If so, how will Infor overcome the inherent disincentives to selling Salesforce?
  
• Will Infor's customers really be a large market for Salesforce? The 70,000 customer number may be a bit misleading, as a significant percentage of those customers are on older versions of Infor products that will not be able to take advantage of Inforce Everywhere (which uses Infor's new lightweight ION middleware for integration.) Furthermore, Inforce Everywhere today is only available for Infor's LN (formerly Baan) and its distribution systems (A+ and SX.e). Infor's XA (formerly MAPICS), Syteline, and Visual are scheduled for Q2 this year, followed by S21, Sun Systems, LX, M3 (formerly Intentia), and Adage integrations later this year and next year. (Interestingly, I do not see Lawson's S3 on the roadmap that Infor shared with me last week.) When taken together, this means that the addressable market for Inforce Everywhere is less than meets the eye, at least for today.
  
• Will Salesforce.com customers choose Infor over other options? Infor is not the only ERP choice for Salesforce customers, and Salesforce's relationship with Infor is not exclusive for ERP. In fact, there are other ERP providers--notably Rootstock and Kenandy--that are built purely on Force.com. If one counts more narrow providers, such as FinancialForce and Glovia, the options multiply. With the exception of Infor's Syteline as a cloud-based offering, all of Infor's ERP solutions are traditional on-premise or, at best, hosted offerings. How attractive will these be to Salesforce.com customers that have made a commitment to cloud computing?

Although there are several obstacles to success, I see great value in this partnership. Infor's customers now have an interesting and compelling way forward for CRM and for cloud computing generally, while Salesforce.com has a great opportunity to do an end-run around SAP and Oracle to gain mind-share with a large body of installed ERP customers.

I look forward to hearing the experience of some early adopters of Inforce Everywhere at the Inforum conference in April.

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Cutting Through the Fog of Cloud Computing Definitions

In recent years, the term "cloud computing" has been used and abused by vendors and their marketing groups to denote just about anything the vendor offers other than on-premise systems. Analysts too have piled on, each offering their own definition of cloud computing. This 2009 Wall Street Journal article outlined the confusion. The result has been fruitless arguments over what is "true cloud" or "false cloud," as in the recent tit-for-tat speeches by Larry Ellison and Marc Benioff during Oracle Open World.

Such debates are likely to continue, but now there is at least one official source for the definition of cloud computing. The National Institute of Standards and Technology (NIST), an arm of the US Department of Commerce, has now published The NIST Definition of Cloud Computing. Though other standards bodies may (or may already have) published their own definitions, NIST carries particular weight as it is often referenced in U.S. governmental procurement. The NIST definition is vendor-agnostic and buyer-centric.

The NIST Definition

The NIST document is short--the body of the document comprises just three pages, with the definition itself taking up less than two pages. In it, the authors describe the essential characteristics, service models, and deployment models for cloud computing.

• The five essential characteristics are: on-demand service, broad network access, resource pooling, rapid elasticity, and measured service.
  

• They go on to then list three service models, which should be already familiar to most observers: software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS).

• Finally, they list four possible deployment models for cloud computing: private cloud, community cloud, public cloud, and hybrid cloud.
  

In my mind, the section that is most useful for distinguishing what is or is not cloud computing is the first one, the "essential characteristics." So, let me quote NIST directly (emphasis mine).

Essential characteristics:

• On-demand self-service. A consumer can unilaterally provision computing capabilities, such as server time and network storage, as needed automatically without requiring human interaction with each service provider.
  
  
• Broad network access. Capabilities are available over the network and accessed through standard mechanisms that promote use by heterogeneous thin or thick client platforms (e.g., mobile phones, tablets, laptops, and workstations).
  
  
• Resource pooling. The provider’s computing resources are pooled to serve multiple consumers using a multi-tenant model, with different physical and virtual resources dynamically assigned and reassigned according to consumer demand. There is a sense of location independence in that the customer generally has no control or knowledge over the exact location of the provided resources but may be able to specify location at a higher level of abstraction (e.g., country, state, or datacenter). Examples of resources include storage, processing, memory, and network bandwidth.
  
  
• Rapid elasticity. Capabilities can be elastically provisioned and released, in some cases automatically, to scale rapidly outward and inward commensurate with demand. To the consumer, the capabilities available for provisioning often appear to be unlimited and can be appropriated in any quantity at any time.
  
  
• Measured service. Cloud systems automatically control and optimize resource use by leveraging a metering capability at some level of abstraction appropriate to the type of service (e.g., storage, processing, bandwidth, and active user accounts). Resource usage can be monitored, controlled, and reported, providing transparency for both the provider and consumer of the utilized service.

Keep these key points in mind.

Cutting Through the Ellison/Benioff Fog

So, let's apply these characteristics to what Larry Ellison and Marc Benioff each describe as cloud computing. In my opinion, both are right and both are wrong.

Benioff's service, Salesforce.com, certainly meets the NIST definition of cloud computing, both in its CRM application, which meets NIST's definition of SaaS, and in its Force.com offering, which meets the definition of PaaS. He is also correct in criticizing the labeling of Oracle's Exalogic hardware as a "cloud in a box." By my reading of NIST's essential characteristics, one could construct a cloud service using Oracle's hardware, but the hardware itself should not be considered a cloud.

But if Benioff is referring to Oracle's newly announced Public Cloud Services as a "false cloud," he is wrong. Oracle's Public Cloud Services certainly meet the NIST definition of cloud computing. But it is primarily an IaaS offering, similar to Amazon's EC2. Assuming that Oracle will offer development capabilities on top of its Public Cloud Service, those would be PaaS, and if it chooses to run applications on top of its Public Cloud Service, such as Oracle CRM On-Demand, those would be SaaS.

On the other hand, Ellison is wrong to label Salesforce.com's PaaS offering as a "false cloud." Ellision's argument is that Force.com utilizes proprietary extensions to Java and other programming languages, which make it difficult to migrate applications to other cloud providers. But there is nothing in the NIST definition of cloud computing that requires interoperability between different cloud service providers, as desirable as that may be. Ellison is simply turning what he sees as a disadvantage of Benioff's cloud into an argument that it is by definition not a cloud.

Cutting Through the Application Hosting Fog

The NIST definition is also useful for cutting through vendor marketing efforts to label anything they do off-premise as cloud computing. In particular, application vendors that simply host their on-premise solutions in their own, or partner, data centers should not be labeling those as cloud computing. In particular, simple hosting of an application does not qualify as cloud computing because it lacks the essential characteristics (see bolded sections in the quoted definition above).

With a hosted application, the customer generally cannot "unilaterally provision computing capabilities, such as server time and network storage, as needed automatically without requiring human interaction." In addition, with a hosted application there is generally no "sense of location independence." Rather, the customer usually knows the data center and may even know the data center, cage, or rack in which his hosted application resides, even if the application is hosted on a virtual server. Finally, with a hosted application, computing resources generally cannot be "elastically provisioned and released, in some cases automatically, to scale rapidly outward and inward commensurate with demand." Rather, the customer must negotiate provision of additional computing resources.

Notice also that the NIST definition does not mention anything about how cloud services are contracted. Some vendors point to subscription pricing as evidence of their hosted applications being cloud offerings. According to NIST, how the customer pays for the service has no bearing as to whether the service is cloud computing. It could be subscription pricing, it could be a perpetual license, or it could be something else.

The marketing hype and confusion over cloud computing will no doubt continue. But at least now NIST offers a reasonable and objective definition.

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