Am I the only one who missed the April 1 announcement of a strategic alliance between Salesforce.com and Intuit? Given our industry’s endless nattering about whether Salesforce.com will move into marketing automation, this should have attracted more attention (or, at least, enough attention that I would hear about it sooner than I did).
In case you too missed the news, it comes down to this: Salesforce.com will be available on Intuit’s App Center and be deployed so that the Intuit and Salesforce.com databases are synchronized. For those of us used to thinking of Salesforce.com as the 900 pound gorilla, it’s disorienting to see Salesforce on the Intuit App Center, rather than the other way around.
But it does make sense. Intuit has more than 4 million customers, compared with 90,000 for Salesforce.com. The revenue differential isn’t as large ($3.5 billion for Intuit vs. $1.7 billion for Salesforce) and Salesforce.com actually has a slightly higher market cap ($17.5 billion for Salesforce.com vs. $16.5 billion for Intuit). But Intuit represents a gateway to the small business market for Salesforce.com, so it’s clear who needs whom.
What has this to do with marketing automation? Pretty much everything, I’d argue, at least for companies like Infusionsoft, OfficeAutoPilot, and Genoo, who target “micro-businesses” at the lowest end of the market. Those vendors base much of their appeal on the convenience of using one system for marketing, Web pages, CRM, and even order processing. The one thing they don’t offer is accounting, in good part because Intuit’s QuickBooks has such a dominant position.
The lack of accounting data is an important gap, because the accounting system is the ultimate source for information on customer identities and transactions. That data is important for effective marketing. Having it automatically available to Salesforce.com makes Salesforce a much more attractive marketing option for small businesses.
I suppose I should backtrack a bit here and acknowledge that I’m talking about marketing to customers – that is, people who have already made a purchase – rather than marketing to prospects or leads. Business-to-consumer marketing automation systems manage relationships with both groups, while B2B marketing automation is concerned primarily with just prospects and leads. The “micro-business” marketing automation vendors are more like B2C systemsbecause they do deal with customers as well as leads and prospects.
In other words, the Intuit / Salesforce.com alliance poses a very large threat to the “micro-business” marketing automation vendors but doesn’t have much impact on the rest of the B2B marketing automation industry, which sells to larger companies. Indeed, those larger firms are typically not QuickBooks clients at all.
But here’s the thing: let’s say that Salesforce.com does succeed in selling to a lot of Intuit clients, and in the process adds marketing automation features to serve them better. Those marketing automation features will be available to all sizes of Salesforce.com clients, including the larger ones who currently purchase marketing automation systems. Even if those firms continue to use marketing automation just to target leads and prospects, they’ll suddenly have a stronger reason to adopt Salesforce.com as their marketing platform. So marketing automation vendors who thought the Salesforce.com / Intuit deal didn’t apply to them, might want to think again.
David, nice analysis.
I’ve often wondered why Intuit didn’t aggressively enter the CRM space with a cloud-based solution that tightly connected with Quickbooks Online. And I don’t mean Quickbase. Goes to show that even big companies can’t be all things to all people.
I’m skeptical either party will get much of this arrangement. It seems like a marriage born in the marketing conference room, not designed to actually meet the needs of the target customers — small businesses.
True, Salesforce.com will get access to a large market, with Intuit as a reseller. According to the press release:
But Salesforce.com is an expensive solution for small businesses, mainly designed for B2B and not an all-in-one approach like Infusionsoft. I don’t think Intuit will have much luck selling this combination, but whatever it does sell is upside for Salesforce.com.
As for Intuit, it gets a nice brand for the App Center and some reseller fees or a revenue cut, I presume. But resellers typically don’t make much on product sales, so it seems unlikely that we’ll see Intuit putting a big push on Salesforce.com, any more than Salesforce.com spends a lot of time marketing partners in its AppExchange.
In 2009 Salesforce.com introduced the Contact Manager Edition designed to attack the low-end of the market. I haven’t heard much about it since. Overall I view this move as another attempt to cheaply fill the pipeline with prospects that will hopefully upgrade to more expensive solutions. See Salesforce.com launches PIM for the Cloud… but Why?
Hi Bob,
You raise some valid points. Many of these alliances don’t come to much. It will mostly depend on whether Salesforce is serious about penetrating this marketplace and make the necessary product enhancements to succeed. Obviously they have the financial resources to do that but it’s not clear that this is really their strategic direction. Historically, it is difficult for enterprise vendors to move downmarket.
I guess one question is the potential — is the micro-business segment big enough and profitable enough to be strategically appealing to Salesforce.com? Let’s assume a huge success: Salesforce could sell 1 million clients at $1,000 per year. That’s a $1 billion business. Big enough to be interesting, but maybe lower margins than the current business. (Hard to say — intuitively, the margins on small business should be lower, but Salesforce currently earns just $65 million on its $1.7 billion revenue compared with $574 million on $3.65 billion revenue for Intuit. But maybe that’s because Salesforce is growing a lot faster.)
Given those numbers, you could argue either way for whether this really an opportunity that Salesforce will commit to. If I had to bet, I’d say it isn’t consistent with their over-all strategic direction, which is to expand its services to enterprise clients via the platform, social media, etc. But that doesn’t mean they can’t throw a small (for them) amount of money at it. And even that’s enough to make some trouble for smaller competitors: remember, a mere 10,000 clients would give Salesforce.com a larger client count than all the existing micro-business marketing automation vendors, and a company that is happily using Salesforce for CRM is much less likely to buy a separate marketing automation system.
If I were a competitor in that space, I’d certainly be staying awake nights thinking what this means.