It’s finally time to call a spade a spade, or in this case, a soon-to-be has-been a has-been. Of course, doing so after the fact sounds too spiteful, so I’m going to do it well ahead of the curve. While these kind of predictions are hard to get right, I think I’m calling this one correctly, based in part on a similar call I made five years ago.
My prognostication is about Salesforce.com, and here goes: Salesforce.com is the next Siebel, the next CRM has-been, the next low-priced software buyout opportunity, unless somehow the company gets sold before its stock begins to tank or it engineers a remarkable turnaround from its current moribund strategy. It may take a couple of years, and there may be some big blockbuster announcements and a couple of good quarters in the interim, but it’s gonna happen, and it’s gonna be ugly.
I had a similar epiphany (pun-intended, all you ex-Epiphany customers and shareholders know what I mean) about Siebel way back in ’02 (and Epiphany from the get-go, BTW). Remember Tom Siebel, the man “who could see around corners” (at least according to a glowing cover BJ from Forbes). Sometime in mid-2002 I started seeing three problems with his business model, all of which seem to be repeating themselves five years later with respect to Salesforce.com
1) Siebel’s claims to deep integration with the rest of the ERP stack were exaggerated. This lack of integration made it much easier to rip and replace Siebel, and therefore left it vulnerable to… 2) An increasingly robust set of offerings from SAP and Oracle: while not necessarily as robust as Siebel, the value of out-of-the-box integration greatly exceeded the Siebel’s best-of-breed value-add. 3) The lower-cost Salesforce.com model was looking like a much better deal than high-priced Siebel, particularly considering points 1 and 2.
You could almost do a search and replace with Salesforce.com and say exactly the same three things. SF.com doesn’t have a critical mass of customers doing deep integration, and competitors like SAP and Oracle, and now Microsoft too, are all offering deep integration to their respective software stacks in addition to coming out with on-demand CRM offerings. Point 3 above holds true, with the following difference: now deep integration can happen in the context of an on demand model for SAP, Microsoft, and Oracle customers, and therefore all of SF.com’s strategic differentiation has been lost (including App Exchange, which I’ll tackle in a moment).
There was a final problem with Siebel, which I related in a series of columns, that has an unfortunate parallel in the person of Marc Benioff, SF.com’s CEO and chairman and head cheerleader. Tom Siebel was telling tall tales about his company’s user satisfaction ratings at every quarterly financial call, claiming 90+ percent satisfaction in an industry that has never, (and will probably never) achieve those figures. A little sleuthing on my part turned up the smoking gun: a rigged survey question that made it virtually impossible to give Siebel a negative report card. (See this column for the initial report and this one for details on the bogus survey questions.)
The parallels, unfortunately, regarding Marc’s claims for App Exchange, his one strategic ticket out of his current mess, are a little too similar. Marc has been making lots of exaggerated claims about App Exchange, the value of the VC money that has been thrown into App Exchange, and other issues regarding how well his company is really doing. I’ve written some about this, others like Phil Wainewright have weighed in, and a few more in the blogosphere (Sinclair Schuller in particular) have also noted the credibility gap that Marc is building for himself.
So how can I be sure that Salesforce.com is the next Siebel? To be sure, I’m more ahead of the curve today than I was in 2002. By the time my second column had come out on Siebel’s survey hooey, the wheels were already falling off. Whereas SF.com probably has a couple of good quarters left in it. But the wagons are circling, and so far Marc’s only chance for turning things around is so unsuccessful that he’s resorted to bluster and BS about what’s really happening.
Maybe we’d all do the same if we had a few hundred million smackers to protect, but instead of bluster I think a little strategic realignment is in order for Salesforce.com. And don’t think a consumer giant like Google (which has no innate understanding of the enterprise software market), and its poor excuse for an online Office suite, can rescue SF.com. It’s going to take a lot more than that to keep Oracle or the repo man (Infor, Epiphany’s new owner) from buying up the resulting mess in a fire sale. Marc had better start now, before it’s too late.