“Nothing focuses the mind like a hanging.”
In the past year, cloud-based solutions are being snapped up by the “old guard” CRM/ERP software vendors. Oracle bought RightNow and Taleo. SAP bought SuccessFactors and Ariba. Microsoft just acquired Yammer.
Can you acquire your way to success in the cloud? I think not. Because it’s not just about the technology or the customer base. These you can buy.
It’s about the business model and culture. Cloud-based software companies are built on a culture of customer loyalty. Not necessarily because cloud company leaders innately care any more about customers. No, it’s because keeping customers loyal is mission critical when your business runs on a recurring revenue model.
Enterprise software companies sell products, not experiences
Traditional software companies don’t have that DNA. Their leaders all grew up in a world where you build and ship products that customers can’t return. Sure some have Voice of Customer programs and maybe even a Chief Customer Officer. But customer loyalty was not engineered into the DNA at the beginning.
And, sorry, you can’t splice in the “customer loyalty gene” later. Have you ever seen a case where the acquired company changed the culture of the acquirer? Me neither.
What do you think the odds are that RightNow will transfer its customer-centric DNA to Oracle? Do you think Yammer will change the culture of Microsoft, as long as Ballmer is in charge?
Contact center industry up next
And this problem isn’t limited to enterprise software companies. The contact center market is dominated by companies like Avaya and Cisco that also grew up in a different era.
Now, I don’t follow the contact center industry closely, but it’s a critical set of tools in delivering great customer experiences. The cloud is coming to contact centers, too.
A couple of years ago I talked to some cloud-based vendors. It seems like the contact industry is at least 5 years behind the software industry, but the trend is strengthening towards the Cloud.
I recently sat down with Paul Jarman, CEO of inContact, one of the pioneers in cloud-based contact centers founded around the same time as Salesforce.com. He agreed that, while having the right multi-tenant technology was essential, it was the culture that was the biggest factor in success.
Just like enterprise software vendors, traditional contact center providers are struggling because their business models and culture motivate the organization to ship boxes, not to support an ongoing experience-based relationship.
So in the next few years, look for another wave of acquisitions where contact center market leaders try to buy their way into the experience economy, where loyalty really matters. I don’t think it will work any better than when Oracle assimilated RightNow.
Bottom line: the Borg always wins.
Further reading: Stop Making Excuses! Put Your Contact Center in the Cloud