Sunday, October 23, 2011

CRM Things To Come: The Release Preview Guide For Q4 2011

This came out a few weeks ago but is worth a going over because there is a fair amount of stuff coming. For those that have not seen it, here is the link. This is Microsoft’s vision for Dynamics CRM as at August 2011.

The Executive Summary

It is good to see they are still going with the ‘familiar, intelligent and connected’ line. As CRM becomes more social and collaborative these will become more and more relevant. They also introduce the idea of ‘waves’ which seems to be the term they will be using for the major updates. The only other observation is a linguistic one. The summary uses the word “you’ll”. They could have used ‘you will’ but went with the less formal version. The piece wants you to be a friend, not a cold analyst (I rarely contract in my blog because I want to pretend I am, at least, a little bit formal).

Background

They mention this is the fifth major release. By my reckoning it is the fourth (v1.2, v3.0, v4.0 and v2011). There was v1.0 as well so maybe they are including this one.

Improved Agility

Here they again confirm the twice yearly cycle for major releases. If you are thinking that every six months you will get the same kind of bang we got when CRM 2011 came out you will be disappointed but, hopefully, there will be a few goodies to look forward to each time.

Key New Capabilities

image

There is a lot of love for online here. Stuff either works online only or for both online and on-premise. No features for on-premise only. In terms of what all this means we have the next few sections.

Unified Office 365 Experience

While Microsoft lay it on thick with how awesome Dynamics CRM and Office 365 are together, the fact is these two products will be getting closer and closer together as time goes on. The Q4 release is the start of this. Sign up for one and you will be able to get the other. Rather than get two charges it will be one or, at least, that is how I am interpreting ‘Unified Provisioning’ and ‘Unified Billing’. The administration bit I think refers to Microsoft’s internal administration simplifying as the products come together.

Enterprise Cloud

Identity Federation

Today, you can log onto CRM Online any way you like as long as it is with a Live ID. This is a little annoying, especially if, like me, you have a Live ID for IM, Live ID for forums and then Live IDs for CRM logins. Q4 will allow people to use Active Directory, much like Lync does today. No more Live ID logins (hooray!)

Enhanced Data Recovery

I am a little underwhelmed by this one. They will be doing backups in the same region as the data centre. What I want is the ability for CRM Online customers to do their own backups. I do not really see this adding value but just achieving expectation.

Feature Enhancements

Enhancements to Dialogs

Dialogs have the shortcoming that, while you can input values into a dialog, the types of values you can enter are limited. This will be addressed in the Q4 update, meaning that lookups and dates can now be entered as input. Again, not so much raising the bar but achieving a baseline level of functionality.

The ability to generate dynamic hyperlinks is great. One of the common uses of workflows is for ‘reminder’ or ‘escalation’ notifications. The problem is that while you could tell someone about a new record or a record that has not progressed, you could not give them a link to click on to get them to that record. They still had to open up CRM, navigate, go to quick search etc. Being able to generate a dynamic hyperlink fixes this for dialogs and, hopefully, for workflows. I am not sure what is meant by “hyperlinks that guide users to…content in…external applications but I am intrigued.

Additional Business Intelligence Capabilities

We are getting multi-series charts! The new charting capability of CRM 2011 can already produce multi-series charts but you have to export the chart, hack the XML and then re-import. With the Q4 update it will be possible to configure such charts directly through the application; no more XML hacking. The sky is the limit with CRM Charting because the underlying tools are so feature-rich. I imagine each major release will give us a little more each time.

Extended De-duplication Rule Processing

Another shortcoming removed from the product. To understand the problem, try de-duplicating a contact on an e-mail address. You will see that any contact with a blank e-mail field is labelled a duplicate with any other contact without an e-mail address. The new enhancements fix this. If only they would also give us SOUNDEX matching…

Social Investments – Wave 1

While many of the improvements up until now have been ‘fixes’ in the sense that they bring functionality to the table that a general user would expect to begin with, the social investments are the meat in the Q4 update sandwich.

Microsoft introduces its social model of three communities:

  • Internal: communities within the organisation e.g. a company Yammer group
  • External Managed: communities involving the organisation and external parties in an environment controlled by the organisation e.g. a corporate Facebook page
  • External Unmanaged: communities in an environment not controlled by the organisation e.g.a fan page

Microsoft also suggest Dynamics CRM is the hub at the centre of these communities.

Activity Feeds

Essentially Chatter for Dynamics CRM. The way they describe it I am guessing the ‘Activity Feed’ is another entity with a special summary page akin to a Facebook wall called ‘Your Wall’.

Mobile Activity Feeds

Similar to the mobile express client (only hopefully a bit more graphically rich), Windows Phone 7 users will be able to check their wall via their phone and perform related actions. While I understand Microsoft want to leverage ‘the stack’, I think it is fair to say that there are at least a couple of CRM customers who use phones with different OSes in them. Maybe the mobile activity feed will make it to the iPhone and iPad some time in the future.

Leon’s Conclusions

There are some good ‘fixes’ in here. I am especially happy about the ability to generate links in dialogs and, hopefully, workflows. Also, the improvements to graphs is great and is very practical.

In terms of the social stuff, it is a good start and, while not necessarily a healthy slab of steak, it is a good quality piece of ham in the CRM sandwich. This is because I can see how the internal needs are considered in the activity feed but it is not clear to me how it addresses external managed and unmanaged requirements. Hopefully, the Microsoft team have seen Parrot and can take some tips from this for the external components.

Sunday, October 16, 2011

Extending Dashboards Without Code

If you have played with the new dashboard feature of CRM 2011 you will find that it is one of the jewels of the product. The ability to codelessly create a dashboard of graphs, grids and iframes, which show real time data, and allow for drilldown is simply fantastic.

However, the tool does have its limitations. One of the key ones is the limitation of only being able to display six panels. This can be circumvented with a little code for on premise. Here is an example from Amreek Singh’s blog.

Another more subtle one is with limitations to layouts. For example, if you want three squares on the top (maybe three graphs) and two rectangles on the bottom (maybe two grids). The closest you can get is the three-column multi-focused dashboard.

image

But if you want the three on the top to be equal in size it does not work. Your choice is boxes of quarter size or half size. Similarly, if you pick the three-column regular dashboard.

image

Your choices are columns of 1/3 or 2/3 but not of quarter and half.

The Solution: Loving The Iframe

This is a handy tip passed onto me by Microsoft’s Craig Steere. His official title is Dynamics Solutions Specialist but I know him as a guy to go for excellent Dynamics CRM information (he is also a pretty good source for information on competitors).

The trick is to display a secondary dashboard in an Iframe. So, say we pick the three-column regular dashboard and combine the bottom three windows into one window the width of the screen. We get this:

image

We now create a second two-column regular dashboard to embed via an iframe. This one we use only one row of blocks.

image

Getting The Child Dashboard’s URL

To embed the Child Dashboard in a URL we need to know its web address. Practically every form in Dynamics CRM has a unique web address and the trick we use with normal views and records also works for dashboards. However, for dashboards, we have to do it in a slightly different way.

image

From the left navigation bar we click the black arrow and find our child dashboard. We then right-click and have the option of opening in a new window. When it pops up we can copy the address straight from the address bar. We then add this to the iframe on the parent dashboard.

image

You will notice I turned off the cross-frame scripting restriction. When I initially tried to do this, I did not use system dashboards but personal ones. For some reason the embedded dashboard was stopped from showing. For personal dashboards the cross-frame tickbox is not editable. I tried with system dashboards, turning off the restriction and it seems to work.

The result is this:

image

You can get rid of the embedded scroll bar by increasing the height on the iframe, but the ‘Child Dashboard System’ title I could not get rid of.

Conclusions

If you have a specific format in mind or, if the grids you are working with lend themselves to a specific format, but the dashboard formatting is causing you some grief, this might get you out of it. Also, this will work online whereas the coded solutions, as far as I know, do not.

Finally, in theory, this opens up the possibility for a 36 box grid (six boxes, each showing a six box dashboard). If, and I have not tried this, you can embed dashboards another layer down, the number of boxes is only really limited by the screen resolution and size.

Saturday, October 8, 2011

Being An MVP

This week Microsoft renewed my MVP status meaning I am an MVP for another 12 months. This is my third year of being an MVP so I thought it might be a good opportunity to write about my experiences with the programme and the kinds of things I do to stay within the programme.

What Is An MVP?

An MVP (Most Valuable Professional) takes its name from the US sporting accolade of Most Valuable Player. For those of us outside of the USA, this is broadly equivalent to a ‘Man/Player of the Match’ or a ‘Best and Fairest’ award. The Wikipedia article sums it up pretty well:

The Microsoft Most Valuable Professional (MVP) is the highest award given by Microsoft to those it considers "the best and brightest from technology communities around the world" who "actively share their ... technical expertise with the community and with Microsoft".

The key thing to note is the reference to community contribution. What the award does not recognise is elite programming skills. As some of you may know I am not a programmer. I used to code C++ a long time ago but I am not a .Net programmer and yet I am an MVP for Dynamics CRM; a program built on .Net and extended using .Net .

Also, the award does NOT recognise those that exclusively drink the Microsoft Kool Aid. MVPs are often the most outspoken critics of the flaws in the products they work with. Microsoft welcomes this because, to stay competitive, they need to know what is not working with their products. While MVPs do not often post scathing criticisms on forums or in their blogs they do, behind closed doors, let Microsoft know in no uncertain terms where the problems are with their products. I will talk more about these closed doors a little later.

How Do I Become An MVP?

This is a question that is often asked and it is difficult to answer because there is no specific ‘track’ to getting the award. There is no set of certifications or qualifications which are needed. One thing that is required is nomination. In my case I was nominated by another CRM MVP and this was seconded by a Microsoft employee working with Dynamics CRM. Traditionally, this was how prospective MVPs were put forward (one external, often an MVP themselves, and seconded by a Microsoft employee). However, this is not necessary. Anyone can e-mail someone they believe is deserving of the award (including themselves). The details are here.

Once nominated, a panel within Microsoft reviews the application. I have no idea who is on this panel, nor where they are located (although I assume it is in Redmond). Community contributions from the previous 12 months and technical knowledge are considered. There are no official levels of activity required and it is presumably a subjective decision weighed against the relative merit of other candidates and existing MVPs. Intakes into the programme are quarterly (January, April, July and October).

Once successful, MVPs are reviewed on an annual basis and must be able to demonstrate community activity on par with that which got them into the programme in the first place. If an MVP stops contributing, they will not be renewed.

What Is Meant By ‘Community Contributions’?

Occasionally, Microsoft do release a document talking about the activities considered to be contributing to the understanding and appreciation of the product by the broader community. Typically, the kinds of things mentioned include:

  • Participating in the online Microsoft forums
  • Blogging
  • Tweeting
  • Giving talks at user groups or conferences
  • Organising events for the public such as user groups or public demonstrations

Of these, the forums are the easiest one for Microsoft to measure. You need a live ID to login, meaning it is easy to track how long you are in the forums, and the forums track who proposes answers and whether they are acknowledged as an appropriate answer to the question being asked. The most difficult of these for Microsoft to measure are public appearances. If you are running a user group in a remote foreign land, this is much harder to verify than your forum activity.

What Are The Benefits Of The Program?

Certainly there is no money in it so if you are looking for some kind of monetary reward for getting on the forums and blogging excellent code, you will be sorely disappointed. In my opinion, the biggest benefit is an invitation to the MVP Summit held in Seattle each year around February-March. While it is up to the MVP to pay for flights, accommodation is subsidized and Microsoft keep all attendees fed and watered for the entire time. You get to meet the product team, you get to tell them what you really think and you also get to find out where the product is heading (under an NDA agreement, of course). You also get to go to the Microsoft Shop at the Redmond Campus and buy Microsoft goodies at staff rates.

Throughout the year MVPs also get access to exclusive email groups where they can raise issues they may be having and get ideas from other MVPs and from the Microsoft product teams. The MVPs also use these channels to provide feedback on improving the product. With the sheer volume of communication that occurs in these channels, it would be fair to say the number of messages I try to get across has probably doubled since getting into the programme. However, for understanding the finer aspects of a product, there is no better source of information.

Other benefits include a subscription to MSDN/TechNet, free Microsoft support tickets and free or discounted software from third parties.

What Does Leon Specifically Do To Remain Active In The Community?

Obviously there is this blog. I try to write an article once a week but will often give myself one weekend off so that I generally put out three articles per month. Articles mostly fall into one of three types:

  • Codeless solutions or handy, lesser-known features of Dynamics CRM
  • Commentary on how CRM is stacking up to its competitors (you know who you are)
  • General thought leadership of marketing and business practice

I also tweet when I come across something I feel would be of interest to non-coders involved with Dynamics CRM (users, non-technical administrators, buying decision makers etc.)

I try to propose answers for at least ten forum questions a month but, with the friendly rivalry between the forum participants, it is difficult to get to a question before someone else has answered it. It is really surprising if a question does not get some kind of response within an hour or two.

I will talk at any event about Dynamics CRM and often do so for free. A great example of this are the online Decisions conferences. A number of CRM MVPs regularly present at Decisions with no compensation other than the satisfaction of getting a soapbox to stand on for 30 minutes. If you are looking for a speaker on a Microsoft product, I strongly recommend approaching an MVP. Generally they present well, are knowledgeable and very friendly. As I often say, I will attend the opening of an envelope if it means I get to speak on Dynamics CRM.

To provide content for my blog and tweets, I read a lot of articles on Dynamics CRM and the CRM industry in general. These come to me, almost exclusively through Outlook and are sourced from RSS feeds, Google alerts, LinkedIn groups and tweets. I also read the posts to the forums, via an RSS feed in Outlook.

These are my personal Outlook folders I read every day:

image

Using Outlook rules, messages get diverted to ‘holding bays’ for reading when I have time. As you can see, there are literally thousands of messages I have waiting to be read and while I will not get to read them all tonight, they are in my PST waiting for me when I get bandwidth (airport terminals and plane flights are excellent for this). For the tweets, I use TwInbox, an excellent product for tracking tweets in Outlook.

All of the above I generally do outside of working hours as I have a full time job. I also have a wife and two kids so I often do things like read articles once the little ones have gone to bed. As an example, I am writing this blog at midnight on a Friday night. The television is on (showing Conan) but I am watching it over the top of my laptop screen.

My Experience With The Programme

My experience has been very positive. I am yet to meet an MVP I did not like. By their very nature, the are smart, eloquent and willing to share information or talk to others, especially if it is about the product they got awarded for.

In terms of the work involved in maintaining the award, to be honest, I would be doing these things anyway. I tend to be a little obsessive-compulsive when it comes to knowledge and learning so squeezing as much information as possible into my brain at every possible opportunity is kind of who I am.

Also, getting to see the human side of the Microsoft ‘machine’ in the form of online discussions involving the CRM product team is great. It is all too easy to consider Microsoft as a faceless engine pumping out software and making a few bucks along the way but, like every organisation, Microsoft is made up of people and getting to know these people is a rare and welcome experience.

If I did not enjoy it, I could simply resign; an option that is available to every MVP but I have no motivation to do that at this time.

Final Thoughts

If you are looking to becoming an MVP as a badge of honour, you will struggle. The fact is, to become an MVP and keeping the MVP status requires a lot of work in terms of maintaining relevancy and expertise. It also requires a paradigm of being willing to share this hard sought knowledge at the drop of a hat. My advantage in this regard is I did a physics degree, not an IT degree so the academic philosophy of sharing knowledge for the benefit of the many is hard wired into me. There are many people in IT who are experts but who hoard their knowledge to maintain an advantage over others. This is not the way of the MVP.

If, after all this you think the MVP programme is for you, I wish you the best of luck. It is a lot of work but I enjoy it immensely and I look forward to seeing you at ‘Summit’.

Saturday, September 24, 2011

Why The Customer Is Not Always Right

One risk when doing a CRM project is giving the client EVERYTHING they ask for. This might be a strange thing to say. After all, isn’t the client always right? The answer is an emphatic “no!”

The reason I say this is, often in CRM projects, the client asks for everything which would be ‘nice to have’. The client does not always realise that to give them precisely what they ask for will, to put it plainly, cost a small fortune. If you are building on top of a platform, like Dynamics CRM, some things are easy to deliver, some things are more difficult. The value a consultant brings to the table is separating one from the other.

The trick is to always consider the cost of delivering an item and the benefit it is going to bring.

How Accurate Do We Have To Be?

My personal feeling is absolute accuracy is not essential as long as the cost-benefit is being considered by the consultant and the client. For example, it is common for a client to ask for a Word template to be converted to work within CRM. This is a relatively easy procedure taking, say, a couple of hours, depending on the complexity of the template. However, it is also pretty easy to export a list of contacts out of CRM and then point the existing Word template to it, saving that consulting work.

The question is not whether it can be done (it can) or whether the client has asked for it (they have) but whether the cost is worth the saving in time and the general convenience. In this case, the client and I guessed exporting the spreadsheet and using this would add an extra five minutes to the process. This process was done around five times a day, taking just shy of half an hour a day. This then equates to about two hours a week, or almost a day of work each month. In consideration of that, a couple of hours of template rework suddenly seems reasonable.

In another case the client wanted to add a button to the ribbon so that when a set of contacts are selected, their e-mail addresses were copied to the clipboard for pasting elsewhere. Setting up this little gem is not simple and would take, say, half a day to a day. An alternative would be to simply highlight the records in CRM and use the Excel export to get them out of CRM. From Excel it was then a case of copying the e-mail addresses. When the alternatives were put to the client, the client agreed the Excel export was a better option for them as they did not do the process that frequently and the cost would not save significant effort.

Every project has elements like this where the “developer’s solution” may give the client exactly what they want but not what they need.

What Is So Bad About Giving The Client Exactly What They Are After?

From a consulting perspective, what I am suggesting sounds like suicide. I am suggesting, as a consultant, is to push back on work a client is more than willing for you to perform. Here is the problem. Your job, as a consultant, is not to do stuff for people without question; it is to be a trusted advisor.

The client who spends a fortune in phase one of a CRM solution will not sue you and will acknowledge you have delivered nothing they did not ask for but when it comes to phase two, there will be no phase two. When it comes to recommending the software they will say “it works really well but it wasn’t cheap and you might want to shop around”. When it comes to recommending you they will say “he was really friendly and helpful but now that we have used the product we are finding we do not need half the things we asked for. It is a shame he did not tell us about the features and push back a little more”.

Conclusions

Never be afraid to tell the client they are wrong if it is in their best interest. Your job, as a consultant, is not to tell them things CAN be done but whether they SHOULD be done. If the client is asking for functionality which, you suspect they will never see benefit from, tell them or, even better, lead them through the exercise of working it out for themselves. By doing a quick cost-benefit consideration you not only validate your thinking on the subject , you generate client buy-in for the ultimate decision.

The other benefit of such an exercise is the transparency it brings to the process. With a choice of meeting their needs exactly, using out-of-the-box functionality plus a little effort or abandoning the requirement completely, the decision can be made with all eyes open.

While the system will not be the Utopian vision they WANTED, no software system ever is and it will be the system they NEED. More importantly, the client will see significant benefit and will respect you as a trusted advisor.

Sunday, September 11, 2011

Dynamics CRM vs Salesforce: User Adoption July 2011

Last year I reviewed the subscription numbers of Dynamics CRM and salesforce. At that time I came to a few conclusions:

  • Your average Dynamics CRM customer has about 50% more subscribers than a salesforce customer
  • Average company size for both is growing but appears to be tapering to 30 for salesforce and 50 for Dynamics CRM
  • Subscriber growth continues to grow and the market has not yet matured
  • Based on the subscriber and customer ratios, Dynamics CRM is catching up on salesforce
  • Salesforce will make 3 million subscribers by October 2010 and Dynamics CRM will make 1.5 million subscribers by December 2010

If you saw my “Microsoft Dynamics CRM vs Salesforce: The Main Event” presentation at Decisions Spring earlier this year, you will have also seen me predict:

  • Subscriber difference appears to be tapering
  • Subscriber ratio is heading towards 1.5
  • “Dynamics CRM” is catching up on “salesforce.com” in Google trends
  • Microsoft’s numbers will be buoyed by their international online rollout

Given Microsoft released some figures at the Worldwide Partner Conference and salesforce recently released figures as part of their second quarter results, I thought it was a good time to revisit. Unfortunately, with Microsoft only intermittently releasing numbers and salesforce confirming, in the quarterly results call, this would be the last quarter where they release customer numbers, it will be difficult to do this kind of review in the future. However, as salesforce is diversifying outside of their stock ticker namesake (CRM), a direct comparison of numbers is becoming less relevant, unless we start bringing in the Microsoft ERP, CMS and BI solutions as well.

Customer Size

Here are the numbers for salesforce taken from the salesforce detailed financials:

Year

Month

Subscribers

Customers

Average Company Size

2003 Q4

Dec-02

76,000

5,700

13

2004 Q1

Mar-03

85,000

6,300

13

2004 Q2

Jun-03

96,000

7,000

14

2004 Q3

Sep-03

107,000

7,700

14

2004 Q4

Dec-03

127,000

8,700

15

2005 Q1

Mar-04

147,000

9,800

15

2005 Q2

Jun-04

168,000

11,100

15

2005 Q3

Sep-04

195,000

12,500

16

2005 Q4

Dec-04

227,000

13,900

16

2006 Q1

Mar-05

267,000

15,500

17

2006 Q2

Jun-05

307,000

16,900

18

2006 Q3

Sep-05

347,000

18,700

19

2006 Q4

Dec-05

393,000

20,500

19

2007 Q1

Mar-06

438,000

22,700

19

2007 Q2

Jun-06

495,000

24,800

20

2007 Q3

Sep-06

556,000

27,100

21

2007 Q4

Dec-06

646,000

29,800

22

2008 Q1

Mar-07

742,900

32,300

23

2008 Q2

Jun-07

800,000

35,300

23

2008 Q3

Sep-07

952,500

38,100

25

2008 Q4

Dec-07

1,100,000

41,000

27

2009 Q1

Mar-08

1,177,200

43,600

27

2009 Q2

Jun-08

1,287,900

47,700

27

2009 Q3

Sep-08

1,398,600

51,800

27

2009 Q4

Dec-08

1,500,000

55,400

27

2010 Q1

Mar-09

1,660,400

59,300

28

2010 Q2

Jun-09

1,769,600

63,200

28

2010 Q3

Sep-09

2,000,000

67,900

29

2010 Q4

Dec-09

2,102,500

72,500

29

2011 Q1

Mar-10

2,319,000

77,300

30

2011 Q2

Jun-10

2,554,400

82,400

31

2011 Q3

Sep-10

2,790,400

87,200

32

2011 Q4

Dec-10

3,000,000

92,300

33

2012 Q1

Mar-11

3,321,800

97,700

34

2012 Q2

Jun-11

3,640,000

104,000

35

Here are the Dynamics CRM numbers:

Month

Subscribers

Customers

Average Company Size

Mar-06

150000

6000

25

Jul-06

200000

7000

29

Oct-06

250000

8000

31

May-07

400000

10000

40

Mar-08

500000

11000

45

Jul-09

1000000

20833

48

Apr-10

1100000

22000

50

Jul-10

1400000

23000

61

Apr-11

1700000

27000

63

Jul-11

2000000

30000

67

Numbers in red are my best guess, based on the known numbers. Essentially I have estimated the customer size and then used this to generate the subscriber size. I thought it was important to include my large tables of numbers, rather than just show the pretty graphs so others can see how I generated them and also slice and dice them as they see fit.

As can be seen, Dynamics CRM’s average customer is now almost double the size of the salesforce average customer. Graphing the company sizes, we see my previous thoughts that the sizes were tapering was unfounded, both are increasing and it appears Microsoft’s are growing a little faster as the ratio has now gone from 1.5 to 2.0.

imageimage

Market Maturity

Here is the apples to apples combined data.

Month

SFDC Subscribers

SFDC Customers

MSFT Subscribers

MSFT Customers

Subscriber Ratio

Customer Ratio

Difference in Subscribers

Total Subscribers

Customer Size Ratio

Mar-06

267,000

15,500

150000

6000

1.78

2.58

117,000

417,000

1.5

Jul-06

315000

17500

200000

7000

1.58

2.50

115,000

515,000

1.6

Oct-06

366700

19300

250000

8000

1.47

2.41

116,700

616,700

1.6

May-07

482000

24100

400000

10000

1.21

2.41

82,000

882,000

2.0

Mar-08

742,900

32,300

500000

11000

1.49

2.94

242,900

1,242,900

2.0

Jul-09

1324809

49067

1000000

20833

1.32

2.36

324,809

2,324,809

1.8

Apr-10

1696800

60600

1100000

22000

1.54

2.75

596,800

2,796,800

1.8

Jul-10

1878243

64767

1400000

23000

1.34

2.82

478,243

3,278,243

2.1

Apr-11

2449000

79000

1700000

27000

1.44

2.93

749,000

4,149,000

2.0

Jul-11

3819600

106100

2000000

30000

1.91

3.54

1,819,600

5,819,600

1.9

***STOP PRESS*** 2011-11-18 Leon says: There is an error in this table and the catch up graphs below. I’ve fixed this up here.

In this case I have extrapolated the salesforce data to match the month the Dynamics CRM numbers were announced. So if the Dynamics CRM number was announced one month after a salesforce quarter announcement, I guess the SFDC customer number and then use the guessed average customer size to generate a subscriber number.

Total subscribers across both products know no bounds and both products continue to bring on subscribers.

imageimageimage

It is fair to say this market is still far from maturing with no signs of populations tapering.

In terms of my previous predictions, the trending of Excel came through with the goods. Salesforce made three million subscribers somewhere between September 2010 and December 2010 (I predicted October 2010). Dynamics CRM made 1.5 million subscribers somewhere between July 2010 and April 2011 ). I predicted December 2010.

For my next set of predictions, I believe salesforce will make four million subscribers before the end of the year but after the Q3 results. Dynamics CRM will make 2.5 million subscribers before the end of the year and probably before November.

Is Dynamics CRM Catching Up?

***STOP PRESS*** 2011-11-18 Leon says: There is an error in the market maturity table and the catch up graphs below. I’ve fixed this up here.

So the big question is if Dynamics CRM is catching up on salesforce. The answer, unfortunately for those of us on the Microsoft side of the fence, is no. The boost in numbers from the international rollout has either not happened or has been insufficient. Here is the evidence.

***Begin erroneous speculation due to my inability to combine numbers into one table correctly***

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The subscriber ratio (SFDC subscribers/MSFT subscribers) was dropping or, at least, was stable at just under 1.5 until the last quarter where salesforce has jumped away. The subscriber difference tells the same story. While there was a possible turning point in mid-2010, this appears to be an aberration with salesforce running away.

So what has happened? Has salesforce become really good and left Dynamics CRM in the dust? Is something else at play?

It is true that salesforce has been making a lot of acquisitions but, functionally, the differences in the Sales Cloud and Service Cloud products are more on the edges than at the core and equal on both sides. Salesforce has Chatter, Dynamics CRM is soon to have a Chatter equivalent but has SharePoint and Lync instead. Dynamics CRM has better Outlook integration but its browser client is limited to Internet Explorer (until early next year) and so on. This idea of equivalency is also confirmed by the Gartner and Forrester reports which rate both products very highly.

My speculation is the reason the salesforce numbers have leaped is because of the mix of products that make up the totals. The salesforce numbers cover all their products, not just the Sales Cloud and Service Cloud products. They include Chatter, Jigsaw, Heroku, Radian6 and so on. I imagine it only includes paying Chatter clients but it is not clear. Unfortunately, with salesforce announcing they will not be regularly releasing customer figures any more, it is difficult to know.

***END ERRONEOUS SPECULATION***

As for popularity, Google Trends suggest Dynamics CRM is still catching up with salesforce in terms of search results.

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This is a graph of the search popularity of “dynamics crm” and “salesforce.com”. As can be seen, the gap is narrowing.

Any Financial Insights?

I talked last week about my concerns for any company selling ten dollar bills for nine dollars. Combining the finances with the subscription numbers we see something else of interest. Back in May I noticed that subscribers are becoming increasingly less profitable for salesforce. Here is the graph.

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Here I have taken the salesforce subscription numbers above and the financial numbers from the detailed summary I used in last week’s blog. ‘PUPM’ stands for ‘per user per month’. So, in the case of ‘Revenue PUPM’, this is the revenue received by the average subscriber each month. In this case the number has tapered to around $50 and has been stable for the last 12 months. Revenue Cost is a figure salesforce use claiming it is the expenses directly related to the revenue, ignoring those inconvenient operating costs of sales and marketing and research and development. The revenue cost per subscriber per month is at around $10 and has been there for almost three years. Those pesky, expensive operating costs (sales and marketing, research and development and general and administrative costs) have hovered at around $40 per subscriber per month for about two years.

Doing the maths, the profit of a subscriber is $50 (revenue) – $10 (revenue cost) – $40 (operating cost) = $0 (profit). The variable for profitability appears to be the operating costs per subscriber. While it is hovering around $40 per subscriber per month, if this could be reduced, this would bring salesforce into profitability.

Conclusions

Both products are growing without obvious bounds and the market still appears to be growing for the two products. In terms of customer size, Microsoft CRM is penetrating the enterprise more effectively than salesforce products with the average Dynamics CRM customer size now being double the size of a salesforce customer.

In terms of catching up, it seems as if the range of salesforce products is getting away from Dynamics CRM, but that is ok. Without a clearer understanding of how the salesforce customer and subscription numbers are broken down, the comparison has only limited value. As for ‘front of mind’, Google Trends suggests Dynamics CRM is catching up on salesforce.

Finally, the financials for salesforce mean that they are not making money from their subscribers and the financials seem to be settling at around breakeven. Without reducing their operating costs, it is not clear how this situation will change.

Saturday, September 3, 2011

Does Salesforce Have Their Head In The Clouds?

This week I was going to do an update on the subscription numbers for Dynamics CRM and salesforce. However, the Q2 results of salesforce have something in them which means the numbers will have to wait another week.

Salesforce’s Q2 Announcement

If you want to see my thoughts on the salesforce financials, I recently wrote this blog. However, there is something disturbing, beyond the financials, in the latest update which is worth calling out. To see the Q2 results, here is the link. Here is a high level graph of the financials thanks to this nice summary.

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The scale on the left is a logarithmic scale. This is not smoke and mirrors, it just makes the issue at hand really, really obvious. Because the most recent quarter was a loss it does not show here (log scales cannot handle negative numbers). We can look at a normal linear scale to see the same data with the latest quarter included.

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So, first we play a game of spot the difference and see that while revenues and costs are moving in the same direction, because total costs are growing faster than revenues, the income is dropping. Salesforce is not demonstrating any economies of scale. In fact, they are acting like a reverse internet start-up. Generally internet start-ups run at a loss initially and then become profitable as they scale. Salesforce is doing the opposite.

However, the problem I have is not that salesforce is making a loss, although that is not good for any business. The problem is not that cash is flowing out of the business rather than in (as evidenced by the Q2 cashflow statement). The problem is not that salesforce promotes non-GAAP reporting which excludes the cost of giving shares to employees as compensation to ‘align their interests with those of our stockholders’ (here is Warren Buffett’s thoughts on hiding stock-based expenses).

The problem is they are not calling out the fact they are losing money and explaining what they are going to do about it in the long term.

The six bulleted highlights for Q2 mention nothing of making a loss for the first time in at least two years. Three of them refer to revenues (which are up), two of them talk about customer numbers (which are up) and the final one talks about operational cashflow (which is up but is dwarfed by the massive cash leaving the business through their purchase of Radian6).

I will not exhaustively go through the rest of the text other than to summarize each section with a bullet point.

  • Dreamforce plug
  • Revenue
  • Earnings Per Share (a heady combination of GAAP and non-GAAP numbers without reconciliation)
  • Customers
  • Cash (nothing about the overall loss)
  • Deferred revenue
  • Guidance
  • GAAP – non-GAAP reconciliation per share
  • Conference Call plug
  • Salesforce plug
  • A big section on their use of non-GAAP measures “Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures”
  • Safe Harbour Statement
  • Financial statements
  • Unaudited additional metrics
  • GAP – non-GAAP reconciliation (seems strange to have this right down the end but maybe it is normal)

Other than the financial statements, if you were to follow the text, you would think everything was fantastic for salesforce and there was nothing to stop them flourishing. Incidentally, GAAP is simply a convention on how to present financial information so that different company financials can be compared. Non-GAAP accounting is a divergence from this convention.

What About The Earnings Call Transcript?

You can read the transcript here. One disappointment in there is they say they will not be reporting customer numbers any more so my upcoming update of the subscription numbers will be the last for quite a while. While I can understand that the acquisitions will make the numbers a little muddy, even indications would be nice.

By their own admission, figures discussed in the call were non-GAAP. If “non-GAAP financial measures are not meant to be considered in isolation” why would they do this?

So what did Marc Benioff, Chairman and CEO of salesforce have to say about the financial loss? Here is a summary:

  • considers the Q2 results to be ‘strong’
  • talked about revenue growth justifying their growth strategy
  • talked about non-GAAP earnings (not mentioning the GAAP loss), revenue, operating cashflow and customer numbers
  • talked about some big deals signed
  • talked about his travels
  • talked about the cloud
  • talked about some more recent deals
  • talked about Chatter and Force.com
  • talked about the market potential
  • talked about Forrester’s predictions
  • talked about Dreamforce

In short, nothing about the loss in earnings.

Next was Graham Smith, CFO of salesforce. Here is what he said:

  • considered it an ‘exceptionally strong quarter’
  • talked about revenue and the drivers behind it
  • talked about revenue from different regions
  • talked about what the components of the revenue were
  • talked about their non-GAAP gross margin
  • talked about expenses, admitting they were up, attributing it to mergers and acquisitions and ‘aggressive hiring’
  • talked about how ‘aggressive hiring’ would continue for the rest of the year
  • talked about how R&D is the fastest growing expense and this ‘investment’ would continue
  • talked about how sales and marketing expenses were up and suggested this expense would continue for ‘building awareness’
  • mentioned a legal settlement which he quantified in per share terms but not in dollar terms
  • talked about how general and administrative expense had increased and how they intend to reduce it ‘in the long term’
  • talked about how the non-GAAP operating margin was down which was attributed to acquisition
  • talked about the non-GAAP tax rate
  • talked about non-GAAP earnings per share
  • talked about operating cash flow
  • talked about capital expenses due to acquiring office space
  • talked about cash being down, due to acquisition
  • talked about deferred revenue
  • talked about receivables
  • talked about the Radian6 acquisition
  • talked about non-GAAP guidance
  • talked about Dreamforce

The GAAP loss did not rate a mention. The closest to a profit strategy was the intent to reduce the general and administrative expenses, but that was it. No comprehensive strategy was mentioned for bringing the company back into profit. Nothing specific was mentioned for arresting the growth rate of expenses, relative to revenues.

What About The Q&A?

After the presentation, the audience of analysts had an opportunity to ask questions. Mark Moerdler from Sanford C. Bernstein & Co, Inc. got to the crux of the matter, forcing the issue of GAAP profit. Asking about the expected loss for the full year (around 10c per share) he asked what contributed to this. For more of Moerdler’s thoughts on salesforce, there is this nice summary.

Marc Benioff replied and made it clear why there is no focus on the loss and, in fact, why it is actively ignored (along with Moerdler’s question). Here are a few quotes:

  • “my job … is not to focus on that GAAP profit number”
  • “if we were focused on the GAAP number … we would be probably running a much leaner machine”
  • “the ultimate number and the most important number is the top line” (this means revenue)

To translate, at this point, Marc has no interest in ensuring salesforce runs at a profit. His focus is on revenue (top line) growth. The problem I have with this is there is no talk of how the company will move to profitability or how long they can run at a loss. The non-GAAP accounting simply gives us the measures salesforce believe are important for its future success. The GAAP numbers tell us what is needed now to run a profitable business and the fact is salesforce is not profitable and, based on the trends in my graphs, it will not be so for quite a while.

So Why Is It Such A Big Deal To Be Profitable?

In the short term it is not such a big deal. If you suffer a loss in a quarter, you simply dip into your cash reserves to cover the difference. The problems occur if this is on-going. If you continue to dip into your cash either you run out of cash (also known as bankruptcy) or you must find more cash (generally through borrowing from a bank or issuing more shares). If this continues either the banks refuse to lend because they are not confident you can pay them back or the share price drops so low as to be worthless.

For three plain English measures to ward off bankruptcy, here is an article worth reading. While salesforce has plenty of cash (around half a billion), the key concern I have is that of viability (over time the business must be profitable). It is well and good sacrificing profit for growth but there must be a plan for long term profitability and I cannot see it.

Surely Those Stock Options Are Aligning Staff To The Shareholders So Profits Will Come

This is where things get a little troublesome. Warren Buffett calls out the fundamental problem with stock options as a tool for behaviour control; while normal shareholders have used their own cash to buy their shares, stock option recipients sacrifice nothing for their options; they have no skin in the game. Moreover, the goal of a stock option holder is to get the share price as high as possible at the point where they can exercise the option (buy the share) as they can then immediately sell the share for a profit. This is not necessarily the same as ensuring the future viability and prosperity of an organisation, which is the goal of a long term shareholder.

At this point let me put a massive disclaimer here. Firstly, I have no position in salesforce stock and have no intention of getting one in the next 72 hours (which is the disclaimer I see on other blogs like this one). Secondly, what I present is not an allegation, simply a discussion of how stock options can lead to poor behaviour.

Firstly, if we see employees of a company receive shares through options and then immediately sell them, this has to be for one of two reasons:

  • they need the cash or
  • they believe the price will go no higher

There have been a lot of sales by directors at salesforce. You can see them all here. In fact, the CFO from the quarterly update is one of them. Unfortunately in terms of buys, there appear to be none happening. In contrast to selling, people buy shares when:

  • they have the cash
  • they think the price will go higher

For our inside sellers, the motivation is to ensure, on the day of sale, the share price is as high as possible. Therefore, they are not motivated to talk about financial loss and expenses growing faster than revenues because this could lead to the share price dropping. Moreover, they are not motivated to change the formula for ‘success’ as this could affect market perception and also kill the share price.

While I am sure salesforce does have a strong desire for revenue and are deeply focussed on the idea of ‘build it and the profits will come’, with the structures in place, there is no motivation for anyone receiving stock options to question how much growth is sustainable for the business and whether salesforce should focus resources on stemming expenses over growing revenues.

Incidentally, the accountants do have a measure of a sustainable growth rate. This is the rate at which a company can grow its revenues without borrowing additional money. My calculations put this at 9% for salesforce, in contrast to their growth rate for Q2 of 38% year on year.  

Conclusions

Salesforce is very happy with their Q2 results and, while revenue growth is great, it must be sustainable. To be sustainable, focus must be given to long term profitability. In the case of salesforce, the CEO is clear that profitability is not his focus at this time. To this end, salesforce has other measures which they use to monitor the health of the business, the so-called non-GAAP measures and while these measures may provide an insight which GAAP measures do not, they do not make $1 equal $2. The business still made a loss this quarter for the first time in over two years.

While a cynical man may assert that their pre-occupation with the non-GAAP accounting is, in part, driven by their motivation to deliver good news to the market and maintain the share price for exercising their stocks, I do not personally believe this to be the case. I believe Marc and Graham are just very optimistic about salesforce’s future, based on their non-GAAP measures, and the directors of the company are offloading their shares simply because they need the money in these hard times.

The problem is, while I want optimism in my directors, if I was a traditional shareholder, I would like to know that salesforce do not have their head in the sand in regards to their financials and have a plan for long term profitability. I would also want this clearly communicated as part the quarterly updates.

As an extreme example, let us say I start a business tomorrow where I sell $10 notes for $9. I imagine my customer base would grow rapidly (like salesforce). I imagine my revenues would also grow rapidly (like salesforce). I imagine my costs would also grow in line with my revenues (like salesforce) but this does not alter the fact that every time I am selling a $10 bill I am making a loss and selling more of them will only increase my loss. Even if I create different accounting measures which more accurately reflect the health of my business as I see it, the fact is I am buying something for $10 and selling it for $9 and, unless I change something, my business will never be sustainable and I will go bankrupt.

I like salesforce as a competitor and I want them to be around for a long time to come. Therefore I do not want them to sell something for $9 which is costing $10 to supply, because it is simply not sustainable.

Saturday, August 20, 2011

A Codeless Way To Complete Activities in the Mobile Express Client

One of the great drawbacks with the Mobile Express client for Dynamics CRM 2011 is how restricted you are when working with activities. Things like completing Appointments, once you have met with a prospect, are not possible with Mobile Express. Hopefully, the new client that Microsoft made mention of at WPC and in the last Statement of Direction will fix this. Until then, here is a nice trick for letting your sales staff complete Appointments, and add how the meeting went, all from within the Mobile Express client.

How Does It Work?

The trick comes from our ability to add Notes to an Appointment and using a workflow to complete the Appointment for us.

Making Appointments Visible in the Mobile Client

Firstly, we will need to be able to see Appointments in the mobile client. Most entities can be made visible in the Mobile Express client by ticking the ‘Mobile Express’ tickbox on the entity detail form.

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Once you do this, you will see the entity, along with the others.

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Opening an Appointment reveals the limitations inherent to the Mobile Express client. There is no ‘New’ button and no way to edit existing records. The only thing you can do is add a Note.

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and therein lies our ‘backdoor’. By constructing a specific workflow, we can complete our Appointment and add details on our meeting.

The Workflow

Here it is:

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The process runs on Notes on their creation. It checks the title of the Note and if it equals ‘COMPLETE’ it copies the description of the Note onto the Appointment and sets the Appointment status to Completed.

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What Happens?

The upshot is if our travelling salesman adds a Note to an Appointment with the title ‘COMPLETE’ and puts in some text in the description box,

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Our meeting will automatically close out with the text added.

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Sorry about the unavailable warning. I ran a test Appointment first before writing the blog to make sure it would work. You generally will not see this.

Conclusions

There you have it. A relatively simple workflow which makes the Mobile Express client a little more practical. I have used the Appointment entity here but the same trick should work with pretty much any other activity type. Also note that, generally, the title field is automatically populated by CRM when you create Notes through the full client so it is unlikely that a non-mobile user will inadvertently close out an activity.

Enjoy.