What’s With All The Chatter?

There seems to be a trend happening in software / technology these days. We’ve gotten way out of control announcing products way before they are baked in an attempt to generate press and build FUD in a way that didn’t happen just a few years ago.Microsoft is guilty, announcing planned features in SharePoint 2010 almost a year before it is scheduled to ship.  Google announced Wave 2 months before developers could get their hands on it and who knows when it will be publicly available.  Today, Salesforce.com announced Chatter, a social integration tool that will turn water to wine and cram 10 pounds of productivity into a 5 pound bag. At least according to Marc Benioff during his keynote today. The downside of this miracle cure is that, like SP10 and Wave, it won’t be available until some undefined date way in the future.I’ve been hearing rumors about SFDC doing something cool around enterprise collaboration for a few weeks. I have to admit, my speculation was that they were going to announce a partnership to integrate with Google Wave.  The first announcements made Chatter sound like it was simple integration / Twitter-esque clone built on top of SFDC.After reading Charlene Li’s post, though, I’m intrigued about where this will go.  Some of her key points were:

Enterprise apps get social–and smart. This is more than merely integrating Twitter-like functionality into CRM and creating “social CRM”. This is a rethink and elevation of how information flows around an organization, and where it lives. The elevation of deals to be on the same level as people is significant — in every other social platform, people reign supreme and the world pivots around them. Look for social CRM providers like Oracle, Microsoft, IBM, and many others to open up their platforms as well.

And:

This means your enterprise app will be “adopting” social technologies, moving away from sending notifications via email (and cluttering up your inbox) and instead, sending updates just like everyone else on your team into the news stream.  Essentially, your enterprise app will be “tweeting”, with it’s own “profile” and Chatter updates aggregated into one place.

This is pretty interesting and something that we’ve been working on for sometime at Socialtext.  On the one hand, SFDC will be a formidable competitor in the market place.  On the other, they are still 5 – 8 months from delivering anything in the best of circumstances.Also, there is still a level of acceptance that will need to be overcome.  Many of the CIO’s that I speak with are still skeptical of having tons of data in the cloud.  Salesforce brags that in 2011, 25% of apps will be in the cloud.  Simple math, but that means that 3/4 will still be on premise.  And let’s face it, most sales reps don’t use SFDC the way they should so paying $50 a month for a glorified contact management system beats hell out of a seven figure Siebel implementation.  It will be interesting to see what kind of acceptance having deal status and team interactions in the cloud will get. From what I’ve seen, it is cool if a small group is doing it, but when a big enough contingent of employees has conversations in the cloud, it makes everyone nervous.The second question that I have is around the level of integration.  They are currently promising a pie in the sky picture of this integration where everything is updating everything, but they haven’t explained anything at all about which apps this will work with (outside Salesforce) and what it won’t (assuming Oracle) nor have they gone into the security of having certain things shared and others not.  Don’t get me started on how this will map to a company’s archiving policy.Selling social software is hard.  I’ve often said that this is one of the hardest jobs I’ve ever had.  I’m excited about SFDC getting into the market.  I love the competition and it will raise the level of customer acceptance to another level. It’s another endorsement. And we could all use that.Other posts about Chatter:

What do you think? Will Chatter change the way you work, will it be a blip on your radar or will it just be mindless chatter? Leave me a comment and let me know what you think.

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Will SaaS / Enterprise 2.0 Migrate to Value Based Pricing?

Back in my day, there was a company called PeopleSoft.  You old timers might remember them.  Acquired by Oracle back in ought-four.  They sold their product not by list price, but by value-pricing. For little companies, this was a great thing and for big companies, it probably wasn’t too bad either. What it was, though, was difficult to predict, budget early on, or budget consistently (or so I’m told by my customers).Which is why I was so intrigued by the post from Ian Hendry citing the comments of Laurent Lachal of Ovum.  The general premise is that Salesforce has some much information about what you’re doing with the data (number of leads coming in, conversion rate, close rate) that they can easily see how much value your getting from the system and could potentially price their platform in a way that relates to that value.  From the post:

Salesforce.com, again as an example, holds a lot of back-end data on how many contacts each of their customers hold in their CRM systems; how many leads they have; what proportion of those convert to opportunities; and then statistics on revenue generated from those opportunities. Salesforce.com has the data to prove its system is helping to close leads and generate business; to shorten sales cycles. Why doesn’t SFDC bill based on the tangible difference it has brought to the performance of a customer sales team? Another example: email marketing applications from Vertical Response or Constant Contact bill you for emails sent, but they also hold data on who clicks through, so why not bill on traffic sent to your website instead?

It is a really legitimate argument, until you think about the quality of the people behind the platform.  For example, if you take 100 sales reps on a team, only 10 of them will be stellar when it comes to the use of your SFA system.  The rest will use it as a glorified contact management system.  I think that I’m an above average Salesforce user and I’d only give myself a C+ when it comes to taking advantage of what the system offers.I think that most sales reps would be hard pressed to say that they get $65 a month in value from their SFA tool.  This is obviously not something that Salesforce wants to hear, but lets face it, 99% of sales reps can get by with Excel and a phone. I think that, in this case, Laurent puts far too much value on the tool and far too little on the carpenter. Salesforce, for all of it’s cool bells and whistles, doesn’t close business for you. If I close a $1M deal, there is no way on earth that Salesforce contributed even one tenth of one percent to that.With that in mind, if you tie the price of Salesforce back to actual revenue generated, a bad quarter for a customer could sink a sales rep at Salesforce.  A bad quarter for a vertical sector or region or global catastrophe could dramatically impact the entire company.  There is a huge lack of predictability both on the vendors behalf as well as the customers.  A great quarter and all of a sudden a company is looking at a 10X bill for their SFA.As a sales rep, selling value-pricing is an even bigger pain in the ass because you have to convince your customers that the tool is going to transform their people into something that they aren’t.  I tend to agree with Markus Buckingham that people don’t change that much, so stop trying to get them to do so.  When you try to sell a product based on value-pricing, you not only have to sell on the merits and the value of the product (already hard), but you also have to convince your potential customer that they are going to be able to change the way that they do business so dramatically, so immediately, that they will want to pay a premium for this potential transformation.This is a really, really tough sell for limited upside to the vendor.  A similar example can be made for the email marketing system that Laurent points out.  Again, the email marketing platform is a tool.  If I put shit content into it, I’ll get zero click through, but the vendor shouldn’t be penalized based on a customer not being able to create good content.In the end, I think that if value-based pricing worked, you’d see it being adopted by a gaggle of companies instead of the Oracleized PeopleSoft (BTW, I don’t think that they do this any more.  Can anyone confirm?).  The problem is that as a vendor, you need to defer your revenue for a long time – until you and your customer agree that value has been seen.  As a sales rep, you have to sell twice as hard. And as a customer, you need to predict the future and expect that people will change.  Combine all this and you have three strikes to value-based pricing never catching on.What do you think? Am I crazy? Am I missing the value based pricing sales model? Let me know in a comment.Photo: ValueKing by Ilja

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