This post “The End of SaaS” originally appeared in the Huffington Post.
Salesforce’s famous marketing slogan “The End of Software” needs a facelift. Mr. Benioff’s CRM behemoth became the market leader by disrupting the traditional model through the cloud. However, with slowing growth and competition from the likes of Microsoft catching up, the company needs another dose of platform innovation to carry it through the next 5-10 years.
Existing SalesForce Platform Efforts Have Moderate Growth Potential
Platforms that build and coordinate networks are the most valuable businesses today. In fact, public platform companies are valued at a two to four times companies who are built around other, more traditional business models. There’s a good reason for this gap. Platform business models have better profit margins and grow much fasterthan other business models. But Salesforce’s platform efforts to date only have limited growth potential.
So far, the company has been focused on building a development platform. Third-party software developers can integrate with Salesforce both on the web and on mobile. On mobile, their Salesforce1 app can be integrated with other apps on your device. You can visit their app marketplace and browse over 300 apps that have integrated with Salesforce1 since launch in Q4 2013. A decent start, but, by no means a game changer.
The best development platforms we’ve seen are Apple’s iOS and Google’s Android for mobile, or the Xbox One. All of these development platforms have hardware, an operating system, and a software layer. Salesforce’s development platform only leverages software and provides less utility to 3rd party app developers, hence only ~300 apps created in the past 15 months. The most comparable example would be Facebook’s single sign-on capabilities. By integrating with Facebook, an app developer can let a new user create a user profile by “Logging in with Facebook.” This is the best use case we’ve seen of development platforms that only leverage software. But I don’t see it translating too well with a CRM tool instead of social network.
New & Truly Disruptive Platform Opportunity: Connecting the Buy & Sell Side
In many industries, salespeople sell directly to buyers. But, in other industries, salespeople connect directly with other salespeople.
Let’s take commercial real estate as an example.
If you own a building with commercial real estate, you have brokers who are responsible for leasing your space to businesses. Your brokers need a CRM tool to track and optimize their sales funnels.
If you own a business and need to rent space, you have also have a broker who is responsible for finding you a space to lease. Your broker also needs a CRM to track and optimize his/her sales funnel and opportunities.
Both sides of the market use a CRM tool to do their job better and close more deals. The value Salesforce provides to the brokers is linear: they provide a tool to better organize their deal flow so they can ultimately close more deals. Ultimately, what both parties are interested in is signing more leases. This is what Salesforce should focus on doing in the appropriate industries.
The way to truly capture the most value in any specific vertical is for Salesforce to facilitate the exchange. And Salesforce has already been starting to focus on verticalspecific teams and solutions.
By positioning itself to play a bigger and bigger role in facilitating these transactions, Salesforce will evolve its value proposition away from a linear flow and into a networked flow.
Marketplaces Gaining Huge Traction in 2015
The commercial real estate industry is just another form of a marketplace: connecting buyers and sellers. In 2015, services marketplaces are poised for domination with expected IPO’s from Uber, Airbnb and others.
Outside of the “on-demand” oriented services marketplaces, there is a burgeoning trend of startups that are focusing on industries just like commercial real estate, where they can use technology to cut out middlemen, reducing transaction costs for both parties.
The tough balancing act for Salesforce is around privacy and potentially commoditizing part of your customer base when operating a services marketplace at scale. These are certainly not easy obstacles to overcome. But if one company can pull it off, it would be Salesforce, guided by the fearless leadership of Mr. Benioff.
Filed under: Platform Innovation | Topics: platform innovation, Salesforce
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