People keep asking me about Salesforce.com (SFDC) as a distribution platform and I thought I should pen a note on it.
Let’s start with why we created Notion, what our thinking was and how this relates to this topic.
We announced Notion the day after we sold Messagelabs.com. We had 9 million paying users, 20,000 customers, $150million in subs, we were adding $50million in sales and we had a multi-channel strategy where there was very little by way of proposition to the channel; no professional services and no complexity you just changed the MX record and we sent the bill. An amazing model for direct! In saying that we went from 100% indirect in 2000 (which was a total failure), we then went almost entirely direct with a few partners fulfilling tactically. Overtime, as our brand became better known and the market for cloud-based scanning became more established, we started to increase our levels of indirect partner business again and the business settled into around a 50/50 direct/indirect revenue spilt up to its sale to Symantec in 2008. But even as the partner business increased it was more as a source of leads than a self-sufficient channel. I can honestly say that we had a very weak proposition to the channel. They gave us access and coverage – that’s it.
When we sold MessageLabs our observation was SaaS was less than 2% of total IT spend but of that nearly all of it could be attributed to the few established brands in SaaS such as WebEx, Netsuite and Success Factors. Notably SFDC was the 800lb Gorilla in the club. Like MessageLabs, none of these had a strong indirect channel model at that time. It just didn’t fit with the core skill set of traditional integration partners, namely designing and managing complexity, bespoke software development, integration and training. These skills just weren’t needed in the same way with SaaS.
SFDC now has 150,000 customers on their Sales cloud, Service cloud or Marketing cloud. What have these customers bought into?
These customers want to setup and extract value quickly. They don’t want to run expensive software development projects, although many large enterprises are developing bespoke Apps themselves on Force.com. Customers are totally happy to access their data via a browser, love the deferred revenue pricing vs old softwares ownership model and buying additional apps purpose built for the platform.
Take our portfolio company Brightpearl – they have have an ecommerce acceleration proposition which allows small retailers to exploit the hyper growth available to retailers selling to consumers over multiple channels. Retailers operating over two channels or less are growing on average at 6% and those operating over four channels or more are growing at between 40% to 60% depending on the product category. That’s a stunning proposition to small retailers dealing with multichannel complexity – adopt a platform. But how does Brightpearl scale a GTM team where sales productivity and low customer acqisition cost is critical? The answer is adopt SFDC Salesforce Automation to drive sales data and sales productivity, add Marketo to drive up marketing efficiency and add Docusign to improve closing ratios – all pre integrated, all SaaS with the ability to extract value in days vs years. They grow at 150% YOY all over the world and they would not be a Marketo or Docusign customer if it was not for SFDC. This situation is replicated across the 150,000 SFDC customers –they buy SFDC who don’t cover all the business applications they need. How do I sweat my investment in SFDC? What makes my business grow faster NOW which is in the cloud and ready to go? Is it pre-integrated with SFDC? It is? So I can set up an account straight away and start extracting value tomorrow?
So where you’re selling to customers in the SFDC sweet spot, you have a joint proposition with Sales, Service or Marketing cloud and you are looking to take that proposition to a global customer base then SFDC has to be an integration candidate from a distribution perspective. Much in the same way we might ask what is your strategy to enter the North American market, now, if appropriate we might also ask, what is your strategy to enter Salesforce as a market in its own right.