TechCrunch has an entertaining video of Mike Arrington, TC co-founder interviewing or should I say grilling David Sacks, CEO Yammer about its recent performance announcements. In the accompanying post, Mike says:
Yammer now has 70,000 corporate clients, and 800,000+ total seats (users). At least 1,000 of those companies are paying for the product, and Sacks says 10%-15% of seats are converting to paid. 70% of Fortune 500 companies are using Yammer, says Sacks. Paying customers include Cisco, Nationwide, AstraZeneca, Alcatel-Lucent, Sungard and Molson Coors.
Yesterday, while meeting Salesforce.com and VMWare executives, Yammer came up as a passing topic in the context of where Salesforce.com is taking Chatter. While Yammer says it has no fear of Chatter, largely based upon price points I reckon they're blowing some serious smoke.
Any enterprise business that reports 70K customers but is saying that translates into something around $1 million a year in revenue doesn't have much of a business. In the interview, Sacks suggests the company will hit '8 figures' in 2010 revenue i.e. something around $10 million but even then, that's chump change in enterprise revenue terms. Salesforce.com on the other hand is giving Chatter away to its customers while FinancialForce is trying to figure out how it might monetize its Chatterboxes.
I have long held the view that 'content without context in process' is meaningless. This is the fatal flaw for stand alone services like Yammer and extends to other services like SocialText. Don't misunderstand me. Yammer, SocialText and a string of other enterprise grade social tools clearly provide value. On the video, Arrington is at pains to point out that their 20 or so users love it. But these services will never be mega trend businesses. Ultimately, they offer features of a much broader set of technologies that should be embedded inside business processes. This is where Salesforce.com has an advantage.
It does not need to charge for Chatter - and arguably the incremental revenue would not be worth it - because it can use Chatter as a platform from which new business processes are derived. This is what FinancialForce demonstrated in some recent use case scenarios.
As we watch the evolving business process landscape, the vendor challenge will be to figure out how they package end-to-end business processes that can take advantage of social tools that augment those situations where process fails. In theory, this is a relatively easy task. In practice it could be either a 'lights on' revelation to buyers or a tough sell. Today, business is used to buying functional applications. Hence Yammer et al can point to pain issues they solve at low cost. But ultimately, these are all just that - point solutions. Companies like SAP have long touted the process story but in the sales cycle they're really selling functionality such as an HR solution, or finance package. I'd go so far as to argue that even though SAP has a large-ish group of business process experts, they tend to think along functional lines.
If Salesforce.com and its partners can morph towards becoming process factories then the enterprise apps space changes dramatically. Instead of enduring shelfware and bloatware, business can start to think of cherry picking the processes that add the most value. That's a different mindset to that which exists today. It means a decomposition of applications into bite sized pieces that can be quickly assembled much as you'd go shopping at Wal-Mart with a week's food menu in mind.
I have yet to see this articulated at scale but in conversation with Marc Benioff, CEO Salesforce.com, it is clear that is the kind of message he wishes to convey at an upcoming Chatterforce event. I'm sure he sees the idea conceptually but we also have to remember that Salesforce.com is deeply entrenched in and associated with CRM. Any change of this kind will require some explaining to both market and industry analysts. In talking with George Hu, EVP Salesforce marketing and alliances, he nodded vigorously at the contextual idea. My sense is they see where this goes but need many more examples before they publicly discuss direction.
While a number of my colleagues played down the VMForce.com announcement as they thought about application management, Amazon alternatives and the like, that announcement is another piece of this much larger puzzle. At a time when CIO's are increasingly being asked to find value but remain constrained by tight budgets, that socially orchestrated process message could represent good news. But only if it is carefully articulated as a value delivery story and not just a bunch of nice to have bolt ons.
So to my headline. Does this mean the death of Yammer? Not at all. It's roster of high profile customers is impressive. Small businesses of the kind that TechCrunch represents will have no difficulty in forking over $40,50,60 a month for limited numbers of users. But at such weak price points, they can easily be replaced.
Disclosure: FinancialForce is a client