Sunday, July 20, 2014

CRM vs CEM: Two Sides of One Coin

While most people reading this will be familiar with the acronym ‘CRM’ (Customer Relationship Management), others may not be as familiar with CEM (Customer Experience Management). In my reading of CRM articles, CEM is getting increased coverage, with some authors going as far as suggesting it will replace CRM, so I thought I would write a blog exploring the two.

What is CRM?

For a discussion on what is CRM, check out my blog article from five years ago, covering precisely this. The article stands up quite well, I think. In essence, there is the philosophy of CRM (delighting customers by anticipating their needs) and the technology of CRM (the systems to capture the customer needs to assist in employing the CRM philosophy).

What is CEM?

Also called ‘CX’ (Customer Experience) is the management of the experiences a customer has with a vendor. The marketing folk refer to this as ‘Service Design’. As with many things in life, if CEM is done well it is imperceptible; if it is done poorly, it can be torturous. 

A good example is ordering pizza online (or, at least, my experience of it). You select the deal you want, pick the pizzas and pay. A short time later a meal arrives at the door. Simple, effective and precisely what I need, when I need it.

In terms of CEM horror stories, this is one I came across recently about a poor guy trying to disconnect his Comcast cable service (internet service).

It is painful to listen to but is a great example of a poor customer experience.

The Commonalities of CRM and CEM

Previously in conversations I often referred to CRM and CEM as one in the same but they are not (thank you David Berry, the most philosophical of the CRM MVPs, for the conversations that made me examine this position). CRM and CEM are designed to achieve the same outcome, to align the products and services to the needs of the customer and ensuring the business interaction is as smooth and consistent as possible, they just go about it in different ways.

In the case of CRM, this is done by

  • encouraging transparency and consistency in customer interactions
  • capturing feedback from customers to assist in improving processes
  • centralising information so all parts of the business have a full picture of the customer and their needs

In the case of CEM, the exercise involves mapping the customer touch-points (how they interact with a vendor) and then ensuring these are aligned to the customer’s expectations and the values of the vendor.

In our Comcast example above, our hapless customer wonders if the service agent has a series of questions they must get answers from in order to proceed i.e. a CRM system. However, while the CRM system may capture some elements of this disastrous interaction for future improvement, it is the CEM which lets Comcast down. It is clear, while the service agent is all for trying to retain the customer, they are failing to give the customer what they want i.e. disconnection. The interaction is all about Comcast and nothing about the customer.

This customer will never go back to Comcast after this interaction, whereas if the service agent had simply recorded the non-answers and marked a flag in the CRM system for a follow-up in a few months time, all parties would be satisfied. If Comcast had emphasized a customer-focus, rather than a retention focus and mapped the scenario of a frustrated customer and the appropriate way to deal with them i.e. listening with respect, this PR disaster would never have happened.

The Differences of CRM and CEM

The key difference, as I see it, is the focus. In the case of CRM systems, the focus is on ensuring the user can perform the interaction as efficiently as possible and capture the key information needed to ensure the business can be managed effectively. The idea is, if the user can do their job efficiently and effectively, they will have time to give the customer the attention they need and the information on hand to make the interaction delightful.

The focus for CEM is not the user, but the customer. CEM ensures the experience for the customer is efficient and effective. While long waits on the phone to talk to a customer representative may be inevitable, given the resources available, an alternative is to offer the customer a call back service or encourage them to check an online FAQ while waiting. This is an example of improved CEM.

What Can Help Customers Most? CRM or CEM?

Accenture conducts an annual Global Consumer Pulse Survey. The latest survey (2013) has some insights on what frustrates customers globally with customer services:

  • 65% of customers were extremely frustrated contacting a company multiple times for the same reason
  • 62% of customers were extremely frustrated being on-hold for a long time when contacting a company
  • 60% of customers were extremely frustrated dealing with employees who were unfriendly or impolite
  • 58% of customers were extremely frustrated having a company deliver something different than they promise up front
  • 55% of customers were extremely frustrated having to repeat the same information to multiple employees of the company or through multiple channels
  • 52% of customers were extremely frustrated with dealing with employees or self-help sites/system that cannot answer their questions

and for marketing/sales practices:

  • 60% of customers were extremely frustrated having a company promise one thing but deliver another
  • 54% of customers were extremely frustrated with realizing that a company cannot be trusted on how to use personal information provided to them

In terms of which can help most, the CRM system or CEM, it is a bit of a mixed bag. A better designed CRM system can help with:

  • Automated escalation and notification processes to ensure a customer does not need to contact a company multiple times for the same reason
  • Ensuring a customer’s information is readily available so a customer does not have to repeat themselves
  • Ensuring personal information is secure and only appropriate information is shared within the organisation and outside of it

CEM can help with:

  • Ensuring there are options other than being on-hold
  • Ensuring service agents are respectful and actually listen
  • Aligning brand promise to service delivery
  • Ensuring, if a question cannot be answered, there are options to escalate so that it can

This shows it is not CRM or CEM but CRM and CEM. Both work together to ensure an optimal outcome for customers.


While the terms ‘CEM’ and ‘CX’ are relatively new (going off Wikipedia, about ten years), the idea of Service Design is much older (about 30 years) and, of course, as an ad hoc activity, older still. Similarly, the idea of ‘database management’, as it was called in the eighties or CRM as we know it today has been around formally for a few decades but as a practice for much longer.

Both aim to make the interaction of customer and vendor as smooth and as pleasant as possible with CRM systems focussing on managing the process from the employee’s side and with CEM managing the process from the customer’s side. Both are necessary for the best experience and a failure of one cannot compensate for the other.

As interactions channels go online and become social, the CRM technology will extend and overlap with the traditional domain of CEM. A good example of this is a customer portal. Often this is a technical extension of the CRM system but the experience of that portal is pure CEM.

My prediction is, as these areas overlap more and more, they will combine to become a uniform discipline, complementing each other, rather than one taking over the other. CRM is not dead and CEM is not a re-badging exercise; they are distinct pillars supporting a common goal and CEM is definitely something CRM consultants will need to consider in the future.

Thursday, July 10, 2014

Book Review: Packt Microsoft Dynamics CRM 2013 Marketing Automation


Introduction and Disclaimer

It must be the season for it because I have two book review requests backed up which I have sat on for a few weeks. Finally I have two seconds to scratch myself so here is the first one for Packt’s Microsoft Dynamics CRM 2013 Marketing Automation (the second is for Microsoft Dynamics CRM 2013 Unleashed which I will blog about in the upcoming weeks). As usual my compensation is a free copy of the book. Here is the link and this is what it looks like.


In terms of the authors, Alok Singh and Sandeep Chanda, I do not know them so extracting a free drink for a good review will have to wait until the second book review.

Overview and Structure of the Book

The book is reasonably short (128 pages) compared to many of the weighty CRM tomes out there and the chapters are:

  • Preface
  • Chapter 1: Getting Started with CRM Marketing
  • Chapter 2: Segmenting with Marketing Lists
  • Chapter 3: Marketing Campaigns
  • Chapter 4: Campaign Response and Performance
  • Chapter 5: Marketing Metrics, Analysis, and Goals
  • Chapter 6: Enhance CRM Marketing with Marketplace Solutions


The claim is the book is for new marketers looking to understand the essentials of sales management and for veteran marketers wanting to create advanced marketing strategies. This is a big claim in that it is a lot of ground to cover.

Given the inherent limitations of Dynamics CRM for mass communication e.g. a lack of an html editor for outbound emails, it is good to see that the final chapter reviews the, arguably, two most common CRM add-ons to assist with mass email marketing: CoreMotives and ClickDimensions. Two obvious omissions are ExactTarget (possibly because it is now owned by Salesforce, although my understanding is the management are still autonomous and will be supporting Dynamics CRM in the foreseeable future) and Dynamics Marketing (perhaps it was too new to be included).

Chapter 1: Getting Started with CRM Marketing

The chapter begins with its definition of marketing: “The process of engaging with the target customers to communicate the value of a product or service in order to sell them”. Having a wife who has worked across the length and breadth of marketing, I object to this definition. It does not cover things like brand marketing (communication of the values and beliefs of an organisation) and pull marketing (communicating with an unknown audience). It does provide a reasonably good definition of product push marketing which is the strength of traditional CRM systems or, if you like, direct marketing.

The chapter does touch on social media, which is good and, given, pre-Spring release this was a weak area for Dynamics CRM, it will be interesting to see if this is covered in more depth later on in the book.

The chapter then goes on to cover some of the key challenges of marketing, giving a quick overview of how CRM system can assist in tackling some of them.


There are a few more lines about what marketing is e.g. “the marketing team owns the message and the sales team owns the relationship” which jar with me but the idea that sales and marketing (and, in my opinion, most other areas of the business) can benefit by sharing information in a central system is a sound one.

The basics of the sales funnel are covered and the idea of sales stages is introduced although specific sales methodologies e.g. Solution Selling is not touched on. The summary suggests the sales funnel review was a ‘deep dive’ and, while it is a good summary of the key elements in sales funnel management, the depth is arguable.

Overall, despite my misgivings, a good summary of the elements of sales management and marketing as it relates to a traditional CRM system.

Chapter 2: Segmentation with Marketing Lists

This chapter covers Dynamics CRM Marketing Lists and begins with some of the key limitations of Marketing Lists e.g. only certain entities can be used, a list cannot have multiple entities etc. To this day, while we can specify an entity in CRM as being ‘emailable’, this does not make it available to be used with Marketing Lists.

The chapter then talks about how to populate static Marketing Lists i.e. lists with specific members as opposed to rules-based lists. It talks at using CRM’s Advanced Find functionality but does not go into detail as to how so you do need to be familiar with the Advanced Find functionality of CRM before tackling this part of the book.

The chapter, again, covers some of CRM’s limitations although does not mention the lack of visibility of dynamic lists against the contact or that, for email, you are forced to use email address 1.

In terms of a high-level summary of Marketing Lists, the chapter does well but, again, we do not venture too deep e.g. the construction of Advanced Find queries.

Chapter 3: Marketing Campaigns

The chapters do wonders for putting me off in the first paragraph. In this case the opening line is “A campaign is the actualization of your marketing strategy; all the careful planning and ideation that go into marketing is brought to life with a campaign". ‘Actualization’ and ‘ideation’ are real words although a proper marketing strategy is more than just a marketing campaign. The word ‘ideation’ just means the ‘generation of ideas’ and has been around for about 200 years. I am not a fan of the word but perhaps this is me being fussy; ‘thought’ strikes me as perfectly serviceable in this context.

Moving on from my pedantry, the chapter provides a summary of CRM Marketing Campaigns, including Quick Campaigns. The essentials for setting up a campaign are covered and, again, finer details such as setting up an email template are mentioned but not explored. The storage of activities against individuals, and the interdependence of Word and the Outlook client are not mentioned.

The chapter provides a reasonable summary of the key functions and operations of campaigns.

Chapter 4: Campaign Response and Performance

In my opinion, there is no room for contractions in formal documents. So when I see “Any marketing campaign doesn't end with the successful execution…”, I see red. Again, this may not be a big deal to you but immediately puts me off.

Campaign responses are a small passion of mine (it obviously does not take a lot) because no one uses them to their full potential. The trick to unleashing their power is to realise a campaign communication e.g. a phone call or email can be directly converted to a campaign response. The way most people use them is to click ‘Add New Campaign Response’ and then drive themselves nuts filling in all the fields. Thankfully, this chapter covers both methods of creating a campaign response and a third (creating a campaign response automatically from a reply).

The chapter also covers converting a campaign response to a lead or opportunity, which is also often overlooked but essential for transparency on the opportunities generated from a specific campaign.

So far, this is my favourite chapter in the book in that it covers how to properly manage campaign responses. Well done authors.

Chapter 5: Marketing Metrics, Analysis, and Goals

This chapter reviews key marketing measures commonly employed to assess the effectiveness of direct marketing campaigns. It then talks, albeit briefly, on the out of the box charts available to measure some of these metrics. The creation of new charts is not covered but the use of the report wizard is reviewed, as are the out of the box marketing reports and dashboards. Personally, I am not a huge fan of the report wizard as it is severely limited, compared to the full SSRS development suite. I would have preferred to see a quick review of chart and dashboard creation here, or the use of Excel to bring the data into an alternative analysis tool but this was not the case.

A high level review of goals management is also included in this chapter with some friendly screenshots to help in setting them up. Given the complexity of goals though, even this may be insufficient for the less experienced user.

Arguably the lightest chapter in the book but one that does give a taste of the BI tools available in CRM.

Chapter 6: Enhance CRM Marketing with Marketplace Solutions

ClickDimensions and CoreMotives are reviewed with some of the elements which are not available out of the box being covered (although many are now available via Dynamics Marketing).

It is not a bad high-level summary and I learned a few things about what can be done with CoreMotives. However, the overview is not exhaustive. For example, survey and form management in ClickDimensions is not covered. Also, costs and licensing are not summarised.


As a high-level review of the Marketing module of Dynamics CRM 2013, the book does reasonably well and certainly goes deeper than, say, Microsoft’s free User Guide. As a guide for strategic marketers especially those who are already familiar with CRM, the book will leave the reader wanting. Also, this is not a book for developers. There is no code in this book, nor references to how a developer accesses the marketing functionality from the back end.

Finally, despite speaking at the growing importance of social media to marketers at the start, there is little content about how this can be handled in CRM e.g. Social Listening or Parrot.

Is it worth $14? My thinking is, if you need a book which covers all of the functions of CRM, you are better to go with the ‘weighty tomes’ mentioned at the start e.g. my next book review, “Dynamics CRM 2013 Unleashed” costs $38 for the e-book and is over 1,000 pages in length. However, if you need a high-level review of Dynamics CRM’s out of the box marketing capability, $14 is not a lot to spend.

Sunday, June 22, 2014

Are You Azure-Curious?

Something surprised me this week. Azure was awarded the Best Cloud Platform at the Cloud World Series Awards. Initially I thought this was some kind of Microsoft conference but not the case. The Cloud World Forum has sponsors from all disciplines, including Google, Amazon and Salesforce.

This surprised me, not because of personal experience with Azure, but because I had thought Azure was another Microsoft fast follower, still catching up with the competition. Perhaps Microsoft Azure was not longer following but was now edging ahead.

Coincidentally, I had recently decided to test the water with Azure, thanks to my MSDN subscription which gives me $160 of Azure credit per month to play with. I thought I would share my experience of using Azure in case, like me, you are also Azure-curious but anxious about what is involved.

Starting Up Azure

If you have an MSDN subscription, you can activate Azure, and go to the Azure management portal, directly from the ‘My Account’ page. No credit card needed; the service simply turns off when you run out of credit.


If you do not have an MSDN account, you can still start a trial with Azure from the Microsoft Azure site. You get a month and $200 of credit to play with (which is plenty).


Managing Azure

Azure management is done through the Azure Management Portal, which is crazy simple to use. I literally had a machine up and running in minutes.


You give it a name, assign an OS (including Linux flavors such as SUSE, Ubuntu and Oracle), the machine size and what region you want the machine to run in. Then you click ‘Create’ and a few minutes later you have your box, ready to go.

To access it, the management portal also gives you a remote desktop connection (RDP) file. Once in, you have nothing else to do other than install software and browse the net.

IP Confusion

One niggle I did have was the IP number allocated to my box was coming up as Brazil on IP Geolocation, even though I had specified the West US coast. I spun up another machine on the east coast and got the same behaviour.


A bit of browsing revealed that Microsoft recently bought a bunch of Brazilian IP addresses and many of the IP Geolocation services were still playing catch-up on the re-allocation.


For my simple purposes, the $160 was plenty to get a feel for the service. You only pay for the server while it is running so it was simple to spin it up during my lunch break, have a play and then shut it down again.


As you can see, I was spending about 6c per hour on compute time and a little less than 10c per Gig of transfer. With the $160 credit, I was in no chance of hitting my limits.

Internet Speed

The speed I got from the box, compared to my home box was massive. At home I have ADSL2+ and here are my internet speed test results (welcome to Australia).


Compared to the Azure box

internet speed

So Azure is about ten times quicker on the download and about 100 times quicker on the upload. If I need to get files quickly, the Azure box is the way to go. In fact, with my OneDrive (formerly SkyDrive) I can download files into the OneDrive folder on my Azure server, access them either on the server or via my OneDrive account and also have them eventually automatically sync to all my other important locations.

To test it, I tried downloading a movie file (nothing dodgy I promise). The file came down in seconds and within a minute it was available on my OneDrive where I could stream it on my local machine. An hour or so later the OneDrive sync had also brought the file down to my local machine.

More Than Just Servers

Azure offers a lot more than just virtual boxes. For example, I often have to spin up a CRM portal demonstration and Azure provides a great way for my developers to spin up a web site and configure it, as required. Here is the menu of ‘stuff’ available on Azure.



Before I took the leap, I thought that setting up a machine on Azure would be a complicated process involving network configuration, OS installing and other complicated processes best left to network administrators. While I am sure in some more complicated scenarios (such as getting the Azure box to talk to other boxes) some of this is necessary, for simply dipping a toe in the water, the process was easier than setting up a new laptop.

If you are Azure-curious I urge you to try it out from an MSDN account or give the trial a go. You can then judge whether Azure is the Best Cloud Platform on the market (I am certainly thinking it is one of the easiest for spinning up a virtual machine).

Monday, June 9, 2014

Predicting Salesforce’s Subscriber Count

So this is my third consecutive post on Salesforce. I promise the next will be Dynamics CRM or something non-Salesforce at the very least.

For avid readers of the blog, you will know that every quarter I review the quarterly submissions of Salesforce to the Securities and Exchange Commission (SEC). Up until January 2011 this included the subscription numbers but a sad thing happened after this date; Salesforce no longer released their subscriber numbers. After July 2011 they also stopped releasing their customer numbers. There was no explanation, the numbers just stopped coming. Here are the data we have from Salesforce’s public statements up to these dates.

Financial Quarter Month Subscribers Customers Average Company Size
2003 Q4 Jan-03 76,000 5,700 13
2004 Q1 Apr-03 85,000 6,300 13
2004 Q2 Jul-03 96,000 7,000 14
2004 Q3 Oct-03 107,000 7,700 14
2004 Q4 Jan-04 127,000 8,700 15
2005 Q1 Apr-04 147,000 9,800 15
2005 Q2 Jul-04 168,000 11,100 15
2005 Q3 Oct-04 195,000 12,500 16
2005 Q4 Jan-05 227,000 13,900 16
2006 Q1 Apr-05 267,000 15,500 17
2006 Q2 Jul-05 307,000 16,900 18
2006 Q3 Oct-05 347,000 18,700 19
2006 Q4 Jan-06 393,000 20,500 19
2007 Q1 Apr-06 438,000 22,700 19
2007 Q2 Jul-06 495,000 24,800 20
2007 Q3 Oct-06 556,000 27,100 21
2007 Q4 Jan-07 646,000 29,800 22
2008 Q1 Apr-07 742,900 32,300 23
2008 Q2 Jul-07 800,000 35,300 23
2008 Q3 Oct-07 952,500 38,100 25
2008 Q4 Jan-08 1,100,000 41,000 27
2009 Q1 Apr-08 1,177,200 43,600 27
2009 Q2 Jul-08 1,287,900 47,700 27
2009 Q3 Oct-08 1,398,600 51,800 27
2009 Q4 Jan-09 1,500,000 55,400 27
2010 Q1 Apr-09 1,660,400 59,300 28
2010 Q2 Jul-09 1,769,600 63,200 28
2010 Q3 Oct-09 2,000,000 67,900 29
2010 Q4 Jan-10 2,102,500 72,500 29
2011 Q1 Apr-10 2,319,000 77,300 30
2011 Q2 Jul-10 2,554,400 82,400 31
2011 Q3 Oct-10 2,790,400 87,200 32
2011 Q4 Jan-11 3,000,000 92,300 33
2012 Q1 Apr-11 3,321,800 97,700 34
2012 Q2 Jul-11 3,640,000 104,000 35

The numbers in red are my best guess, based on the known numbers.

So is there anything else we can use to indirectly infer the subscription numbers?

My Old Idea

Up until this blog, my proxy for the subscription numbers had been Revenue which is still reported every quarter. Essentially I assume the average revenue per subscriber per month and then use this to derive a subscriber count. Generally I pick the revenue PUPM to be around $50 which, for the latest quarterly report, gives us a subscriber count of a little over 8 million subscribers and, assuming the average size of a Salesforce customer is 35 users, this gives us a total of 230,000 customers.

The above estimates rely heavily on my guess for the revenue PUPM and the average Salesforce customer size. While consistent with known historical values, they are still a speculation. There turns out to be a better way.

Daily Transaction Numbers

A couple of years ago, Ross Dembecki (Silverpop/Core Motives/CWR guru and seriously nice bloke) sent me a message suggesting that, if I was interested in Salesforce’s growth, to consider monitoring their daily transaction levels, as published on their ‘trust’ page. It turns out Ross was on the money and it has only taken me two years to catch up. By scouring the internet and using this article, we get quite a few data points for Salesforce’s historic transaction levels.

Date Transactions
28/09/2006 53,000,000
09/10/2007 117,000,000
2009 150,000,000
20/05/2009 195,000,000
10/11/2010 394,000,000
11/2011 500,000,000
17/11/2011 623,000,000
11/2012 1,000,000,000
08/2013 1,300,000,000

Plotting the transactions against the known subscriber levels gives us this.


The x-axis is the number of subscribers and the y-axis is the number of transactions.The “R-squared value” tells us how related the two sets of data are. In this case, there is a 97% match, suggesting the two are very correlated.

What is more, the equation of the closest fitting line (y=150.27x-40,000,000) tells us that for each subscriber that comes on board, the daily transaction count goes up by about 150.

Doing the same for the customer numbers gives us this:


Predictions From the Graph

We know that in August 2013, there were 1.3 billion transactions. Using our linear equation, this suggests that in August 2013, Salesforce had just shy of 9 million subscribers. Looking at the trust site, Salesforce is on the cusp of a 2 billion transaction day, which puts subscribers at around 13.5 million. In terms of customers, we get about 383,000 customers.

This is a lot more that the 8 million subscribers I predicted via the revenue which means one of my assumptions is wrong e.g. my predicted revenue PUPM is too high. In fact, at 13.5 million subscribers, the revenue per user per month is closer to $30. The numbers also predict the average customer size is 35, about one third of the average customer size of Dynamics CRM (4,000,000/40,000 = 100). This average company size is consistent with the known numbers where the last known average company size of 33 (and increasing). Also, the $30 revenue prediction is consistent with the known numbers where the last known value was $51 and falling.


Unless Salesforce release actual numbers, all of this is speculation but, using the transactions seems to be the best approach with minimal assumptions. The numbers predicted are consistent with the known data and their trends from three years ago. While the transaction numbers predict a very large subscription base (three to four times that of Dynamics CRM), if they are correct, Salesforce make a surprisingly small revenue from their subscribers and the average size of the companies using Salesforce is also surprisingly small.

Sunday, June 1, 2014

Microsoft Stops the Nibbling



It has been quite a week for CRM. The Non-Disclosure Agreement has been lifted on the Dynamic CRM Spring Release which means lots of blogs and tweets on what we can expect in the next couple of weeks or, if you are using Dynamics CRM Online, what you already may have.

Also, in case you have not seen it, Satya Nadella (the new Ballmer) and Marc Benioff have signed an agreement to play nicely. What does this mean for us folk in the Dynamics CRM space? What does it mean for Microsoft? Does this mean Marc will no longer be calling Microsoft bad names? Here are my thoughts.

The Partnership

The details from the press release are:

  • Salesforce1 (the app development platform for Salesforce) will play nicely with Windows and Windows Phone
  • Better integration with Office 365
    • Collaborate on Office content (Word documents, PowerPoints, Excel spreadsheets etc.) from within Salesforce and Salesforce1 apps
    • Use OneDrive and SharePoint as storage options for Salesforce
    • Better integration between Salesforce and Outlook
    • Connect Salesforce to Power BI

The Windows Operating System

Apple machines are making in-roads into the most traditional of offices. They are now mainstream. They even exist in my CRM team at Oakton. Even amongst the CRM MVPs, pre-Surface, there were increasing numbers of the thin boxes with the glowing fruit on the back. For the MVPs, I believe the Surface has reversed this trend (I plan to do a blog on this at some stage but I digress) but there are still many in the wild that prefer to fly through Air than to glide on the Surface.

Similarly, amongst consumers Android and iDevices are ubiquitous. The household without one (like mine) seems to be the exception, rather than the rule.

So how does this deal affect Windows? Salesforce1 will play nicely with it. So, for enterprises building apps on Salesforce1, a Windows-based tablet is now an option whereas before the Apple/Android alternative may have been necessary ‘evil’ for a roll-out. With Apple devices being the more expensive, cheap Android slates would be a good bet.

However, at Build 2014, Microsoft announced Windows devices under nine inches in size are royalty free. For Android devices, manufacturers pay royalties to Microsoft because of certain patents held, to the tune of $10-15 per device. So, in theory, a manufacturer could make a sub-nine inch device for less using the Windows or Windows Phone operating system than using the Android operating system.

Assuming, at worst, Windows devices come out at a similar price to Android slates, Windows is now an option for the enterprise rolling out Salesforce1 apps. Given the Windows operating system is familiar to the internal IT support crew, this potentially stops Google and Apple getting their foot in the door into what would otherwise be a ‘Microsoft shop’.

Windows Phone

It may come as no surprise that I have a Windows Phone (a Lumia 925 to be precise), now my second Lumia phone. While I love the phone and the Windows Phone operating system (it trained me on how to use Windows 8 even before Windows 8 was released), there is a BIG problem with Windows Phones which is the app ecosystem.

There is no question the apps which are available give me everything I need. However, the number of times I see a retail organisation advertise an app which is available on Apple and Android but NOT Windows Phone drives me nuts.

While, in the consumer market, things are unlikely to change any time soon (unless Microsoft develop their own version of an Android emulator for Windows and release it as a standard part of their devices), for business apps developed on Salesforce1 this now encourages the rollout of Windows Phones for similar reasons as above for Windows slates i.e. internal familiarity, cost.

Microsoft Office

From my interactions with clients it seems Office 365 is gaining traction. Customers, more and more, speak of ‘Office 365’, rather than ‘Office’. Google apps is still out there in smaller organisations and, while I have not used it extensively, it seems to be a pale imitation which people put up with or tolerate out of defiance rather than out of any functional superiority. Similarly with other products like OpenOffice; it is a product which is Office-like but not a superior, compelling alternative.

In making it easier for Salesforce to work with Office content in Salesforce and Salesforce1, Microsoft again stops Google and others getting a foot in the door. It is conceivable that, in the past, if a small part of the business was using a Salesforce cloud product or a Salesforce1 app, with the choice of an awkward integration with Microsoft Office or a simpler integration with Google apps, the latter would be chosen. The new deal means such a concession is no longer needed.

OneDrive and SharePoint

There are so many cloud storage options out there. Google have the Google Drive and there is always the hipster’s favourite, DropBox. What does the discerning enterprise pick to compliment their cloud app system? For any organisation with an Office 365 subscription (giving them OneDrive) or an Enterprise Agreement with Microsoft (which inevitably includes SharePoint) it is now a no-brainer. The new deal shores up the defences against the onslaught of other cloud storage options.

Dynamics CRM

The last two parts of the deal (Outlook and Power BI), within themselves are not a big deal but, from a Dynamics CRM perspective, hurt a lot.

Outlook has never been a focus for Salesforce; they simply do not care. I was recently speaking to a friend of mine who works at Salesforce and he summed it up well. Salesforce see email as a channel to feed into their Salesforce applications so the only integration they desire is to make it easy for Outlook users to pass emails into, say, the Sales Cloud. Running a full-blown version of Salesforce within Outlook is irrelevant and not part of their cloud-first paradigm. For Microsoft, Outlook is where business lives so it makes sense to run Dynamics CRM, as much as possible, from within it. For businesses which do not live in Outlook, there is the web client and mobile apps.

However, when asked what are the main differences between Salesforce and Dynamics CRM, I cite the following areas:

  • Cost (Dynamics CRM is consistently cheaper than the Sales/Marketing/Support cloud equivalent offerings)
  • Better Outlook integration (if you work out of Outlook, Dynamics CRM simply works better)
  • Better integration with Microsoft Office
  • Better integration with the Microsoft ‘stack’ (Active Directory, Exchange, SQL Server etc.)
  • Deployment options (on-premise, hosted or cloud)
  • (more recently) The awesome power that Excel’s BI tools bring to CRM, especially with the Leo/Spring Release

The Microsoft/Salesforce arrangement erode three of these points (Outlook, Office and Power BI).

For Enterprise Agreements this is not a big deal. Microsoft will simply bundle in Dynamics CRM at a competitive rate. Similarly for organisations with Office 365, getting Dynamics CRM is as simple as ticking a box. However, for Microsoft partners, competing on a direct sale against Salesforce, things have become a little tougher. Perhaps Microsoft partners will need to compete on something other than the product, like great customer service, industry acumen and a focus on the customers’ strategic goals. For a company like Oakton which is a Microsoft AND Salesforce partner, the balance has shifted slightly but, in the big picture, little has changed.


The partnership is not about Salesforce and certainly not about Dynamics CRM, it is all about how Salesforce enables other competitors like Google and Apple to nibble away at Microsoft’s market share in a range of other areas which provide a lot of revenue to the Microsoft bottom line. By ‘making friends’ with Marc, Satya strengthens the walls around Microsoft core products like Windows and Office and gives their cloud/mobile offerings like Office 365, OneDrive and Windows Phone a fighting chance of getting a piece of the customer pie.

The cost to Microsoft comes in partner-direct sales of Dynamics CRM but, given Dynamics CRM is a ‘rounding error’ on the Microsoft revenue general ledger, and partner-direct sales are a fraction of this small fraction, I can see the logic (as a CRM MVP it does not mean I have to like it though). To survive, Microsoft partners will either broaden their offering to include Salesforce, focus more on consulting services than direct sales or become more customer-focussed and provide value to clients beyond the product.

Saturday, May 24, 2014

Salesforce: Newton’s First Law

I thought I would test my own mettle this time around and predict the financial results of this quarter before they were announced. Let us see how I fared and how Salesforce fared.

The Numbers

As usual, all numbers are taken from Salesforce’s web site or, in the case of historical cash and accounts payable numbers, from the official filings of Salesforce to the SEC.


2014 Q1

2014 Q2

2014 Q3

2014 Q4

2015 Q1







Subscription Revenue






Revenue Cost






Operating Cost






Salesforce Income






Revenue Growth # yoy






Revenue Growth % yoy






Revenue Growth % mom






Total Cost % yoy












Staff Growth (yoy)












Growth Difference












Accounts Receivable






The standout for me is the comparison of the Revenue Growth, year on year and the Total Cost, year on year. For the past four years, every quarter, costs have grown quicker than revenue, except for one quarter where revenue edged ahead by 1%. So, for both to be at 37% is progress. I want to see this happen for three quarters before I pop the champagne corks but it is a good sign.

Another positive sign is that cash is higher than the previous quarter and that money owed to them (Accounts Receivable) has significantly decreased. More of this later.

Unfortunately, before we get too carried away, they did make a loss of 97 million dollars this quarter, 44% of the loss for the entire previous year or, just shy of half the amount; they managed to lose in one quarter what took half a year, last year.

My Predictions

The day before announcement, I predicted, via twitter, the following numbers:

  • Revenue: $1.2-1.25b (at $1.23b, I was right on the money)
  • Operating Costs: $1b (about 1% off)
  • Revenue Costs: $280m (about 4% off)
  • Profit: -$100m (about 3% off)
  • Staff: 14k (about 2% off)

Overall, I am quite happy with my efforts. For the next quarter, I predict:

  • Revenue: $1.28b
  • Operating Costs: $1.06b
  • Revenue Costs: $310m
  • Profit: -$50m
  • Staff: 17k

Looking To The Future

For the next quarter, Salesforce predict revenue of between $1.285b and $1.290b (more optimistic than I am). GAAP loss per share is expected to be -$0.12 to -$0.13 per share on 618 million shares. Multiplying together, this gives a loss of -$77m. I am a little more optimistic for the loss, but it is hard to predict.

For the year, Salesforce expects revenue to be $5.30b to $5.34b and loss is expected to be between -$0.47 and -$0.49 per share on 622 million shares, giving us a total loss of just shy $300m. Their total loss for last year was a bit over $200m so profits are still heading in the wrong direction, according to their prediction.

Revenue and Cost Growth

This is a similar story to the previous results but costs have been tempered to be equal to revenue growth.


Cost growth is the green line, revenue growth is the red line. For increasing profits (or, in our case, decreasing losses) the red line needs to be above the green line which, in recent years, has been rare indeed and really has not happened in the past four years.

This quarter, the two lines have come together at 37% year on year growth. This has happened before and the green line has ‘bounced’ rather than break through the red but perhaps next quarter will be different. Based on Salesforce’s predictions for the end of the year though, I am guessing not.

Cash and Accounts Receivable

In the previous quarter, I was concerned with what appeared to be a blowout in Accounts Receivable (money owed to Salesforce from customers). Fortunately, this has come down and cash (reserves for a rainy day) have increased slightly. Overall, total current assets are about the same as the previous quarter. Using the filings by Salesforce to the SEC, let us look at the historical values for cash and accounts receivable.


Not surprisingly, Accounts Receivable has little bumps towards the end of the year, which coincides with the US financial year. My guess is credit terms become a little more generous as the year ends to close a few extra deals before the Christmas break. The ‘blowout’ in the previous quarter was simply the latest end of year bump.

A trend which interests me is, up until 2012 Q4, cash was always above accounts receivable. After that time, the two seem to be running side by side. Cash, in my opinion, is a better asset to have than customer credit (accounts receivable) so it will be interesting to see how these two trend in the future.

Earnings Call Buzzword Bingo

As before, the rule is the words on the list have had 10 or more mentions in the past five periods. No words added to the list but ‘Enterprise’ has dropped off.

  2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1
Number of words 2800 3500 3700 3700 2400
Customers/Customer 32 40 39 25 22
Revenue 32 37 37 29 19
Cloud 16 23 31 14 15
ExactTarget 0 24 21 15 7
Platform(s) 12 19 21 12 10
Service 12 14 19 13 13
Sales 9 14 16 4 6
Growth 13 12 14 12 9
Marketing 0 12 12 11 5
Cash 10 10 10 16 10
Mobile 16 11 7 5 2
Operating 9 9 7 10 11
Social 10 9 6 3 2
EPS 7 10 5 6 6
Salesforce1 0 0 0 11 6

The transcript used is the portion before questions and the Salesforce team were less verbose this time going from around 3700 words right down to 2400 words.

Customer(s) and Revenue still top the list and, Mobile and Social continue to drop.

No words are significantly more prominent but a few are getting less attention. Marketing seems to be of less interest, along with product plugs (ExactTarget and Salesforce1). There was a direct question asked during the call about how profitable ExactTarget had been in the quarter but the Salesforce executive refused to answer. It is possible the ExactTarget acquisition is not producing fruit as quickly as would be liked or perhaps integrating it with Radian6 and Buddy Media is proving more troublesome than initially thought. I expect time will tell.

A similar situation may be happening with Salesforce1, given the drop in mentions of Salesforce1 and Mobile.

Google Trends


“Dynamics CRM” is the blue line and “” is the red line. Dynamics CRM continues to be the more popular search term worldwide and appears to be breaking away.

Geographically, the highest countries remain the same as last quarter.

Insider and Institutional Sales

Again, the trends remain the same for share sales. Institutional sales appear to be tapering though.


2014 Q2

2014 Q3

2014 Q4

2015 Q1

Insider Sales





Institutional Sales





Still no one buying despite the average analyst rating being more of a buy than a sell. It is lucky the institutions are freeing up all these shares so others can follow the recommendations and buy the shares.


Newton’s First Law states: “An object either remains at rest or continues to move at a constant velocity, unless acted upon by a force”. In other words, Salesforce continues on its trajectory with little changing, based on their own predictions for the year. It will take an impulsive force for things to change and it is clear, based on the exuberance of the executive, this force will not come from within.

The institutional sales will slowly apply a force to the Salesforce share price, as will shareholder sentiment. Also, if there is a takeover of Salesforce through merger/acquisition, the new owners (say Google or Oracle) will apply their own pressure to the Salesforce body. With the share price having a lot of optimism built in, it is unlikely to be a takeover target in the near future so this is unlikely to be an applied force any time soon. As for the shareholder sentiment, no one can predict this.

While not having the drama of a telenovela, I enjoy watching Salesforce, like watching a comet move gracefully across the sky. Some comets cross the skies for millennia, others burn out or crash and, for me, the excitement is seeing which Salesforce will be. Whatever the outcome, I find my gaze fixed and will file my report next quarter on this radiant body.

Tuesday, May 13, 2014

The Iron Triangle and its Effect on the Tender Process

As a follow-on from last week’s article, where I talked about the Iron Triangle, in relation to CRM Projects, this article explores the Iron Triangle in relation to CRM tenders and the problems tenders produce, even before a contract is signed.

Iron Triangle Recap

The Iron Triangle is a concept familiar to project managers which says of the three elements, you can control two of them but the third becomes a function of the others. For example, set the scope and the schedule and the required resources becomes a quantity which cannot be changed.

The Folly of the Tender

A common way to acquire larger CRM projects is via a tender process. Unfortunately tenders do their best to ignore the Iron Triangle.

  Client’s Perspective Vendor’s Perspective
Cost/Resources Client has a fixed budget but does not communicate it To make the bid as cheap as possible, but cover the costs of responding
Time/Schedule Client has a fixed deadline and communicates it in the tender To ensure that what can be delivered meets this deadline
Scope Broadly understood and communicated Understood but not at a level to design to

Knowing that two can be controlled, but not the third, generally the client believes they are controlling the scope and the schedule and the appropriate cost will come out in the responses.

From the vendor’s perspective, the pressure to make the bid as cheap as possible means the scope is interpreted to err on the side of simplicity with the cost being low and improving the chances of winning the bid.

Although the price tag is low, the client will never get the best possible value for money because there is always ‘fat’ included to cover the bid cost. It can literally cost tens of thousands of dollars of opportunity cost to complete a tender response and this is always passed on and inflated, based on the chance of winning.

The end result is padded bid responses which propose to deliver the least possible functionality to meet the scope. Once delivered, change requests flesh out the skeleton of a solution, blowing out budgets and timelines. There must be a better way.

Fixing the Tender Process

The key issue with the tender process is the lack of trust between the client and the vendor. The obvious solution to make the tender process more practical is quite simple; include the project budget in the tender papers.

With a known budget and deadline, the vendor is free to focus on delivering the most feature-rich solution for the price. The responses become a battle of value rather than a battle of corner-cutting.

Generally the reason the budget is NOT included is a fear of a vendor pricing their solution at the budget but delivering inferior functionality. Given there are usually multiple, independent responses to a bid and given without knowledge of the budget, inferior functionality in a response is an inevitability, this seems like a poor reason to exclude it.

The main disadvantage with this approach is the client is still paying for the time and resources in delivering the response. From my perspective the better solution is to abolish the tender process altogether. However, to provide the veneer of transparency and even-handedness, resorting to a tender process may be inevitable.

I refer to this as a veneer as it is all too common for a vendor to have an existing relationship with a client and to get the ‘inside track’ on a tender providing an insurmountable advantage to their response. Generally this advantage is in having a more refined understanding of the scope and budget, leading to a response more closely aligned to the client’s needs, at the right price.

The end result is the vendor with an existing relationship winning the work and the client paying for the response time. Cutting to the chase of simply engaging the winning vendor directly, rather than through a tender would save everyone time and money.

Another option is a hybrid approach, directly engaging the vendor with the pre-existing relationship and also producing a tender stating the vendor will be engaged but that if a better proposal is presented, they will be replaced. This process removes the cost of a formal response from the incumbent but provides alternative approaches from competitors to keep them honest. I have never seen this approach used but, to my mind, it provides the best of all worlds.


No vendor likes the tender process because it is time-consuming and discourages providing value to clients. The tender is simply a hurdle to overcome before a meaningful engagement can begin. However, in jumping the hurdle, the relationship is already compromised.

If a direct engagement can occur outside of such a process, all parties benefit and trust can develop. At worst, a formalised invitation to the market to compete against an incumbent will ensure the best possible value is being delivered, while minimising the tender overheads passed onto the client.

I am sure there are approaches which provide transparency without compromising value and trust. However, the tender response process is not one of them.