Insights from Dreamforce ‘15 Exceeds Expectations

I recently attended my first U.S. Dreamforce, the annual salesforce.com event designed to showcase its products and services as well as those of its partners, and I was impressed. I was told that Dreamforce ‘15 would be big, and it was – just about every hotel, restaurant, meeting room in San Francisco seemed to have been taken over for the week, and still the company had to bring in a cruise ship to accommodate people and events. I was told it would be manic, and it was – more than 100,000 attendees, and buses and cabs blocking surrounding streets. I was told it would be busy, and it was – more than 600 conference sessions.  I was told it would educational, and it was – I gained many insights into new product developments, both from salesforce and several of its partners. Here are some of the key takeaways for my research practice.

The main buzzword for the week was “connected.” Salesforce seems to base its strategy going forward on the assumption that everything will be connected; indeed, it has moved on from speaking of the Internet of Things (IoT) to the “Internet of Everything” and launched its IoT Cloud, which supports connecting any digitally enabled device to all other similar devices and to people online, including customers. It is powered by Salesforce Thunder, an event processing engine that can ingest and analyze event data from billions of devices. Thunder enables companies to collect data from any enabled device, process it and build rules that allow proactive, personalized interactions with customers through the devices of their choice; at last companies can envision reaching the goal of building one-to-one relationships with customers.

Another hot topic was usability; in what must have been one of the loudest introductions ever at a trade show, the keynote audience was treated to an introduction to Force and Lightning. This platform supports mobility and provides the basis for a new user interface for all salesforce products. The first capability enables companies to build smart mobile apps to connect with customers through these devices. The second is a new generation of user interface common to all salesforce apps, both easier to use and more appealing to users who rely on smartphones and tablets. The UI has more point-and-click capabilities, better visualization, alerts and views of key information. There is also more capability to customize screens to individual requirements and render these on different devices. Both of these developments will appeal to today’s users and are aimed at increasing adoption of the software by employees and of mobile apps by customers.

Another major product announcement was about Wave Analytics. This is the latest version of salesforce’s analytics product designed to ingest various forms and large volumes of customer-related data, whether it be structured (such as ERP and CRM records), unstructured (voice and text) or event data (from digitally enabled devices), analyze it all and produce visualized information in forms suitable for each user. Despite the initial release, not all the functionality is available yet; salesforce still needs to develop capabilities to ingest all the forms of customer data now being generated and to manage identifiers so that companies can know, for example, that phone calls from an identifier are from the same customer who sent a particular text message, posted this comment on social media or used this mobile app. Customer and engagement analytics has become a hot topic lately; if it can deliver on all these features, salesforce can provide users the information and insights they require to carry out their tasks, even if they are away from their desks.

I also caught up with five of salesforce’s partners that specialize in contact centers in the cloud: 8×8, Five9, inContact, NewVoiceMedia and Transera. At the core of each of their product suites are capabilities to manage multiple channels of engagement in the cloud and route interactions to the person most able to resolve a customer’s issue. Each has a slightly different focus, and thus capabilities, which I will be analyzing in the coming weeks. I also met with Pitney Bowes, which has entered the customer engagement market, as I have written, with EngageOne Video, its interactive video product. The company also provides data management products, which I believe will become essential as companies try to manage the flood of customer-related data and use it to produce a complete view of the customer.

A strong message in salesforce CEO Marc Benioff’s keynote was that the combination of IoT and mobility changes the way businesses do what they do. For example, the ride service Uber was used on several occasions to show how mobile use can transform the ways customer engage with each other and companies, where and how people work, and how we consume services. Another new technology – cloud computing – changes the model by which some companies charge for goods and services from one-off purchases to subscriptions.

The most obvious case of this in the consumer market is telecommunications where part of what customers pay is based on rental and usage (calls made).Zuora is a new company has latched on to this change and provides products and services that help companies manage the end-to-end customer life cycle, proactively manage customer engagement, and drive up customer lifetime value throughout the duration of the agreement. Companies considering this model should investigate how Zuora’s software does this.

Not every session was purely about software and services; some discussed issues connected with the impact technology has had and will have on the way people live and the way companies run their businesses. One such session was chaired by John Taschek, a salesforce “market strategy expert in cloud computing.” Three speakers discussed how technology has opened up the way tasks are carried out, developments in artificial intelligence and the possible consequence on future work patterns as machines and software automate more tasks. All in one way or another involve IoT and mobility, which open up possibilities not previously imagined. Business models have changed, consumer communication habits have changed and data volumes have exploded, but new analytic techniques allow us to extract insights from complex data, and software-driven machines can automate tasks like never before. There were examples of these at Dreamforce. Is it all perfect? No. Is it complete? No. Do we understand how to use it all? No. But it is certain that the pace of change and innovation is still accelerating, and salesforce and its partners are at the forefront of some of these changes. For those not able to attend Dreamforce ‘15, I recommend you keep track of salesforce and its partners to see how they can help you prosper in this changing world.

Regards,

Richard J. Snow

VP & Research Director

New Generation of Recurring Revenue and Billing Inspired from Cloud Computing

Much has been written about how cloud computing changes the way businesses source their software and services. For software companies, instead of being installed inside the company, software like business applications run on a computer installed at an external site. If the external site is not shared with any other business, this is called a private cloud; if it is owned and operated by a third party and supports more than one business, it is called a public cloud. In the case of public clouds, users access the applications via the Internet, and increasing they can do this while out of the office, using laptops or mobile devices like smartphones and tablets. The main advantages of this model are that companies don’t need to invest in hardware or support staff to install and maintain hardware or software like these applications, the vendor handles system updates and users can work anywhere (including on the move) by logging in through a Web browser or an application designed specifically for mobile technology. Our research confirms that the overall importance is overall important in more than half (57%) of organizations.

With cloud computing and a shift to pay for what you use approach, it is not surprising that the billing model changes. Companies no longer pay an upfront license fee, followed typically by annual maintenance and support fees but pay on some type of usage basis. These can include a regular “license to use” fee plus charges based on the number of users, the amount of use, the volume of transactions and other factors depending on the supplier’s model. Such a model also changes the relationship between the supplier and the company into a subscription billing process. The parties typically agree on a contract for a fixed period of time and in many cases with an auto-renewing basis. The cloud vendor’s aim is to optimize usage (and the fees accruing from it) and if not auto-renewed, persuade the customer to renew the contracts and perhaps extend it by adding additional services; for its part the customer company wants support and maintenance taken off its hands during the life of the contract. This is complicated when customers want to use more support channels, such as self-service and mobile apps, and the supplier has to not just support them but continue to develop and build for evolving technology.

In any case the cloud model creates billing issues for the vendor that must be managed properly within commerce processes. For cloud vendors billing becomes more complex than in the old on-premises model. It now is based on recurring revenue, calculated by usage over a determined period but billed in intervals. The vendor has to produce invoices that include both regular periodic and event-driven usage charges; for the latter companies have to collect usage data from multiple devices. They also must include charges for packages of services (such as fixed-line telephones, mobile phone and data access and television). Charges may vary depending on events (more or less users), and the billing system must recognize discount periods, premium rates if usage goes beyond agreed levels and other factors. Invoices and payments likely will have to be enabled through online channels, and account management has to recognize the current state of the contract – for example, recognizing free offers at the beginning of the contract and special offers later to entice the user company to extend the contract.

For the cloud vendor, customer service also changes. It becomes a continuous, proactive process that has to blend with marketing, sales and commerce processes to achieve contract extensions and up-sales; because of this business units that have tended to work separately and keep their data in silos need to cooperate more. Customer service must be provided through more channels, and responses must be consistent regardless of channel. Customer engagement should be personalized and  take into the current state of the relationship; for example, at the start of a contract there will more emphasis on advising on how to set up the system, whereas during the life of the contract, the vendor should try to up-sell as well as resolve issues. To meet users’ growing expectations, vendors are likely to have to support a wider variety of self-service such as capabilities to self-administer the software, and access to support services and invoices via the Internet and mobile devices. All-in-all these new recurring revenue models offer the opportunity to extended the active customer relationship and increase customer value, but they also generate new invoicing and customer relationship challenges.

Along with its advantages the cloud model also creates challenges for businesses that use it. There are technical issues such as security, scalability, performance and integrating cloud-based data with on-premises data to, for example, create a complete view of the user company’s customers. There are also relationship issues such as expected levels of support, extending the contract or, in the worst case, terminating the contract and moving to another supplier.

The cloud model is enabling more businesses to adopt such potentially lucrative revenue models. Consumers already subscribe to video rental services and pay for what they download. Photographs can be uploaded to the cloud, processed and shared online, and charged for by volume. Hardware can be rented in the cloud and paid for by usage, size and services. Looking ahead, purchasing a car might become obsolete as more people choose to lease cars or subscribe to a service that allows them to rent a car on demand and pay by miles driven and/or days hired. With a broadening set of devices and technology on the Internet from wearable computing to transportation vehicles that is classified in the new term called The Internet of Things. This will  open up further opportunities as more devices become connected through cloud computing and companies offer to provide services through them or by connecting with them. Our research finds that cloud computing delivers a wide array of benefits from lowered costs (40%) to improved efficiency of business processes (39%) and within specific line of business areas and processes even more specific benefits as the adoption and utility of it becomes a standard method for organizations.

Recurring revenue is a rapidly developing market, and although issues are emerging, so are solutions. Ventana Research is seeking to understand current and emerging practices for billing and customer engagement for these business models and the changes such models are generating. If you already offer such services or are planning to do so in the next couple of years, please visit our benchmark research on recurring revenue. We will share the results to help guide you to business success in this business application and process category.

Regards,

Richard J. Snow

VP & Research Director