One More Time, with Feeling!
Oracle announced another software company purchase. Its acquisition of Responsys makes a few founders, VC’s, and assorted vested employees very happy for the holidays. Good for them. Really, I mean it. Good for anyone who has a liquidity event like this, regardless of time of year.
Over the last decade Oracle has demonstrated its ability to imitate the business model of Computer Associates, which made an art of buying software companies and milking them for their support revenue. It did quite well in the process though buying old companies is a bit like buying a used car. There might be some good miles left in the old dog but you also have to embrace the risk of future unexpected breakdowns.
But that was Oracle-as-CA 1.0, when it bought Siebel, PeopleSoft, and all the other client-server applications companies. Responsys is far from an old company and if you look at the companies Oracle has bought recently, they are far from over the hill. They are emerging companies in an emerging market with plenty of tread left on the tires, to continue the metaphor.
This has led many people to issue warnings to other vendors in the space like Salesforce. For instance, Raghu Raghavan, founder and CEO of Act-On, and a co-founder of Responsys, has a post addressing the purchase that says in part, “Salesforce now has a formidable competitor for the Marketing Cloud that they have so expensively acquired. On the B2C side, Oracle/Responsys is (and always has been) clearly superior to Salesforce/Exact Target, and on the B2B side, Oracle/Eloqua easily trumps Salesforce/Pardot. Whoops!”
Well maybe. The thing about predictions, which I always put into a sports metaphor, is that while a team might look pretty awesome on paper, you still have to play the games. Nowhere was this clearer than with this year’s Red Sox. The team crashed and burned in September 2012 and no one expected much out of them this year but they went on to win the whole enchilada. Ditto the Yankees. Riddled with injuries and a certain albatross named A-Rod, they didn’t have a great year (for them) but they sure were entertaining in part because they kept finding a way to compete and win. I see Salesforce more like the Yankees. They’ve had some stellar seasons and they always find a way to win.
One thing Raghavan’s quote obviously doesn’t take into account is that the world has already moved beyond marketing automation as the shiny new object. It’s still way, way important but as recently as Dreamforce, Salesforce indicated that marketing is already in the rearview mirror just as surely as the current year is. That’s important too because, Salesforce has been calling the tune in CRM for many years now. First it was multitenancy and SaaS, then cloud, then social, then marketing, and now platform and becoming a customer company. This last advance is more than a slogan and it is the heart of why Oracle’s acquisition signals overreach and not shrewdness.
The fundamental assumption of the approach used by Oracle, and you might as well say Microsoft and SAP too, is that the market has not changed and will not change much. That vision is expressed in the vendor-consumer model and the product sale vs. subscription consumption model, take your pick. The reality is that vendor-consumer works well in new markets with new categories because it depends on land rush customer mentality. Seen many new categories lately? Hmmm?
Also, the subscription model is advancing on multiple fronts turning all kinds of products into services. More importantly, subscriptions are teaching consumers to be customers in a very different model where the customer forms half of a virtuous cycle of dependency that is antithetical to the vendor-consumer linear model. It’s a subscription culture today and culture is pervasive so regardless of whether you operate a subscription model or not, your customers are approaching you from that mind set. Approaching them from your old mindset might be hazardous to your business.
If Salesforce’s CEO and ringmaster, Marc Benioff, is right, then becoming a customer company is going to take more than the resources of a single company, it will require the efforts of a village, a community of loosely associated partners with solutions based on a common platform.
In the matchup between Oracle-as-CA 2.0 and Salesforce, I like Salesforce’s chances. I’ve said it before but it bears repeating, these guys have a Blue Ocean Strategy that isn’t predicated exclusively on which companies they buy and send into the breach.
They’re envisioning a future of business that they iterate towards and with every Dreamforce they get a little closer. But because the competition is stuck in an old model, Salesforce’s moves don’t entirely make sense and their boss can sometimes look like a simple huckster.
Who’s right? Which team will win it last game of the season? You have to put them on the field and let them play. So, game on, 2014, over and out.
(Cross-posted @ Beagle Research, LLC)