Was That a Tipping Point We Just Lived Through?

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If I had to net out the year passing, I think I would go out on a limb and say it was an important tipping point. I know that’s risky because tipping points are best seen in retrospect, with some necessary perspective, so it’s always dicey to call such an event so early. Maybe my evidence with convince you, though.

On one hand, you could say that nothing much happened from an innovation perspective in 2006—at least with the major vendors. For them, it was a consolidation year in which Oracle bought Siebel and finalized the PeopleSoft acquisition, too. Oracle also began talking in earnest about Fusion, its platform strategy for bringing a lot of disparate (and some would say old and redundant) technology together.

In a lot of ways 2006 looked like either more of the same or possibly the beginning of the end. The main theme I saw in many quarters was stasis. Products were late, and announcements looked past the present into the intermediate future. For example, timeframes associated with CRM at Oracle Open World back in October focused on 2008, a long time into the future for this industry.

The big vendors seemed incapable of bringing advanced products to market.

The big vendors seemed incapable of bringing advanced products to market, at least in part because what the market seems to want is software as a service (SaaS), and that’s hard to deliver on platforms that were developed in the client-server era. Those solutions are even harder to deliver if your business model focuses on big license fees.

Moreover, while the theme was customer-centricity or the customer experience, many people in our industry, accustomed to an earlier CRM incarnation, pronounced these terms just off the beat, the way I might misuse a hip phrase with my teenage kids.

Partners
Below the radar and in some cases right in the middle of it, though, there was a lot happening that was new and very exciting. On the radar, you have to admire or at least think well of salesforce.com for introducing the AppExchange. They tell me that at Dreamforce in October there were 157 partners displaying their wares, and their booths were jumping with prospective customers.

It’s hard to separate AppExchange from the partners, but I will do that here to make a point. As important and exciting as the AppExchange is and what it portends, the real heroes are the partners because, without the partners, the platform would be an interesting dead end, and there have been a few of those in our industry.

The AppExchange was a big innovation, but the partners are making the innovation real, with hundreds of applications that do things that many of us had not considered before such as mash-ups. Mash-ups is another theme that really got going in 2006 and I expect this idea to mature and to deliver to market more sophisticated applications than the map and visualization applications we have today. Mash-ups have a potential to accelerate innovation, so watch for further developments.

I sometimes get into trouble with vendors when I mention more than one of them in an article. They all want to be unique and have the market to themselves, understandably. It reminds me of the early on-demand SFA days when, whenever I made a public comment about one, the other vendors would say, “What about us?”

Regardless, I think it is important to the health of the market that multiple vendors, such as NetSuite, are slowly bringing to market their platform ideas. Ultimately, what separates a working platform from a nice idea that becomes a dead end will be partner acceptance.

In 2004, I wrote that companies in a position to be partners should look to forge multiple partnerships that place their applications on more than one platform, and I still give that advice. Multiple platforms will give the marketplace confidence that the platform innovation is real.

As a business proposition, you can’t put all your eggs in the same proverbial basket, and partners shouldn’t become exclusive with any single platform. All platforms are not equal and partner programs vary, so it will be interesting to watch as the battle for partners heats up. Just as vendors publicized their subscriber counts earlier in the SaaS revolution, the new metric for platform providers will probably become partner count and by implication, application count—and probably both.

There were many more important events in 2006 than I can get to here, but the more I think about it, the more I believe ’06 will be seen as a transition year. The big guys are secure in their positions right now, if only for reasons of customer inertia. But the momentum appears to have slipped from them somewhat in 2006 as they tried to figure out how to preserve their market hegemony. Meanwhile, smaller companies just went out and innovated.

Denis Pombriant
Beagle Research Group, LLC
Denis Pombriant is a well-known thought leader in CRM and the founder and managing principal of the Beagle Research Group, LLC, a CRM market research firm and consultancy.

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