Salesforce.com's reach beyond the traditional CRM market continues with a deal to buy business contact data firm Jigsaw as CEO Marc Benioff predicts 'Cloud 1' is giving way to 'Cloud 2'.
The Cloud applications firm is to buy Jigsaw, a Cloud-based vendor of business contact data, for roughly $142 million in cash, spending some of the $500 million it raised for acquisitions in January. Jigsaw offers a searchable online database of companies and key employees, exactly the sort of data that Salesforce subscribers need, but unlike other contact information providers Jigsaw relies on crowd-sourcing to collect the data. Jigsaw has built a community of more than 1.2 million members with the result that its database includes 21 million professionals from 4 million companies.
The acquisition will allow Salesforce.com and its partners to create new applications that use Jigsaw's data. But it also seems to put Salesforce.com into competition with existing data services providers who partner with the firm already. For example, Hoovers has an application on offer through Salesforce.com's AppExchange. For its part, Salesforce.com says it will continue to work with other data services providers.
Salesforce.com plans to retain Jigsaw's senior management team, including CEO Jim Fowler. There will be close integration between the Salesforce.com offerings and Jigsaw, but the intention is to continue to sell Jigsaw data separately. Jigsaw will also remain open to other CRM products and vendors although again it's debatable how keen many of them will be to work with a Salesforce.com venture if they suspect it might allow Salesforce.com to get anywhere near a foot in the door at their customers.
But the deal makes a lot of sense, according to China Martens of research firm The 451Group. “I thought it was a definite option down the road, but was a little surprised at the timing, particularly with Salesforce.com having so much already on its plate with evangelizing Chatter and continuing the major push around Service Cloud,” reckoned Martens. “That said, it's a good move for both parties and it sounds as though Jigsaw will very much operate as a separate business unit for a while.
“It opens the door to an interesting possibility in future for Salesforce.com to potentially sell a combination of its CRM and Jigsaw's Data Fusion with an option to allow customers to specify the type of contacts they require in advance (re: location, industry, company size, titles of individuals, etc.), so CRM could come preloaded with relevant data. That could be a very powerful differentiator for Salesforce.com v its CRM rivals and another way to make it easier for sales reps to use CRM and keep using it. Increasing stickiness for CRM is definitely a major part of this acquisition. "I also like the idea that in future Chatter and Jigsaw Data Fusion could hook up so that Chatter could alert a user when a contact is outdated.”
Cloud 1 waffling away?
It's all part of the Cloud 2 vision expounded by Salesforce.com CEO Marc Benioff. "With Jigsaw, we'll make it as easy as Wikipedia to source data, as easy as iTunes to buy data and as easy as Facebook to stay updated as the data changes," he claims.
While many firms talk about the shift from on premise computing to Cloud Computing, Benioff wants to talk about the shift from Cloud 1 to Cloud 2. “We now have a fundamental shift in Cloud Computing itself,” he says. “Cloud 1 was Amazon, Google and eBay. Cloud 2 is Facebook, Twitter and YouTube. A lot of people missed Cloud 1 while a lot of Cloud 1 companies themselves are waffling back into irrelevance. The new generation of companies in Cloud 2, like Facebook and Twitter, are the ones dominating where people's minds and consciousness are in relation to the internet.”
“There has been a broad change in the way we use the internet,” he argues. “The Cloud 1 web sites are dropping away as the brands are changing and the user behaviour is changing. Facebook, YouTube and search are the three dominant categories now. And it's not just what we do, it's how we're doing it. We were using PCs and Macs, now we're using mobile devices like iPhones and Blackberries and iPads.”
He elaborates on his point, arguing that there are clear differentiators between the two generations of Cloud. “The core tenets of Cloud 1 were multi-tenancy, reliabiity, the democratisation of enterprise applications, customisation, mash-ups, web-based integration, development as a service and applications exchanges. They all came together and have been successful.
“Cloud 2 is about collaboration and new devices and real time,” he adds. “There has been this huge adoption of the Facebook and Twitter paradigms. We talk about social data, social documents, social applications, social platforms. We want real time – delays and batch processing are longer were computing is.”
All of this changes the aspirations for computing, he continues. “Back in 1990, we used to ask 'why isn't all enterprise computing like Amazon?',” he recalls. “We would look at Amazon and its web interface and tabs and it was easy to use. Today, when we look to the next generation, it's not Amazon – that hasn't really changed in 15 years – we look at Facebook instead. Now we ask 'why isn't all enterprise computing like Facebook?'.”
Education and evolution
For all this, Benioff still sees Cloud Computing's spread as evolutionary. “What we now call Cloud was first called online software,” he says. “That moved into on demand which move into software as a service (SaaS) which moved into Cloud Computing which encompasses SaaS, Platform as a Service and Collaboration as a Service.”
There's still a big cultural shift underway, he reckons. “A huge part of what I do is to educate and open the eyes of people,” he adds. “We have vendors who just don't want to do [Cloud Computing]. We have 75000 customers, including some of the biggest companies like JapanPost, Bank of America and Cisco. We serve those 75,000 customers using 2,500 PC servers. How many data centres would have to been purchased to serve by those companies, not to mention disks and network routers and having to maintain them all themselves.
“That's a lot of hardware and software and databases, so you can see why some companies have a vested interest in holding back Cloud Computing,” he says. “The vast majority of data, software and hardware is still within companies. Billions of dollars are spent on the corporate data centre.
“But Cloud Computing is cheaper, easier and faster. All 75,000 Salesforce.com customers go to a new version when we turn it on,” he concludes. “If you use older technology like Lotus Notes, then you're still way back on version x. I mean Lotus Notes was conceived before [Facebook CEO] Mark Zuckerberg!”
