Finance and accounting applications have lagged behind CRM and sales force automation in their journey to the Cloud. But a new joint venture between Unit 4 Agresso – owners of Coda – and Salesforce.com for the latter's Platform as a Service (PaaS) strategy as a whole.
Salesforce.com CEO Marc Benioff (left) has always been adamant that the firm will stick to its core markets of Cloud CRM and sales force automation, but would instead offer the Force.com development platform for third parties to build their own Cloud applications and thus expand the Saleforce.com ecosystem.
Two years ago financial applications house Coda – part of Unit 4 Agresso – became the highest profile of such companies, developing Coda2Go as a complementary offering to its on premise applications. Take-up of the Cloud offering had seemed relatively show, although it has been adopted by some customers, most notably Telegraph Media Group.
But this week Coda and Salesforce.com took the market by surprise by announcing that Coda2Go would be spun off out of Coda itself and would be the main offering of a joint venture between Unit 4 Agresso and Salesforce.com. That new company is to be called FinancialForce.com – which is also now the new name for Coda2Go – and will be headed up Jeremy Roche, Chairman of Coda (below right).
Taking a stake
Salesforce.com has put its money where its mouth is by putting a financial investment into the new company to take a stake. Unit 4 Agresso has the biggest stake, but exact percentages have not been discussed, although presumably all will become clear when Salesforce.com makes its next filing with the US Securities and Exchange Commission.
Whatever the exact breakdown of holdings turns out to be, it's certainly the case that Salesforce.com is throwing its weight behind the new venture. Its EVP of marketing George Hu has taken a seat on the board. Salesforce.com will provide first-line support for FinancialForce.com – something goes wrong and customers phone Salesforce.com effectively - as well as taking what is described as “a more active role” in promoting and selling it. Narrow your eyes and squint a bit and it's hard to see how this isn't now Salesforce.com's financial applications business unit. That is inevitably what the rivals are going to allege...
It's entirely in Salesforce.com's interests for this to succeed as a validation of its Force.com-driven ecosystem approach...and by extension entirely against its interests for it to flounder. But why is all this happening now? Until very recently, Coda2Go was still being plugged as a part of the wider Coda portfolio; now it's Coda2Gone in its original guise. What can have changed to make both Unit 4 Agresso and Salesforce.com take this course of action?
Is it an attempt to kick start a section of the Cloud Computing market that has been more sluggish to take off than, for example, CRM? Or was the transition to a Cloud-based business and revenue model perhaps more painful and protracted than Coda expected?
“This sort of offering doesn't sit easily in the same sales team as other products,” concedes Roche. “I had thought we'd end up with another product to add to what we have and sell already. But this needs its own sales and marketing effort. We're actually following Salesforce.com's terms and conditions.”
But he adds: “The market has moved with us. There's a realisation that a market is emerging for and developing for accounting in the Cloud. With the CRM sector. Something like 30% of CRM implementations are in the Cloud; with accounting, it's still less than 5%.”
Opportunity or indifference?
Those sort of numbers can be read as a great opportunity in an untapped market. Or they can be read as something less encouraging: a lag in adoption by the financial applications users/ According to a study by NTT Europe Online in June this year, 44% of a respondent base of CEOs and CIOs, said that they expected to invest up to 15% of their IT budgets on Cloud Computing in the next two years.
But the areas of the business most likely to move to the Cloud were content management systems, sales/CRM applications, and those applications deemed ‘non-business critical’. On the other hand, over half – 55% - of the prospective Cloud Computing adopters felt financial and accounting systems should never be put into the Cloud.
Roche however believes that there is huge potential here. “We believe that we have a very good product and now we're getting additional backing from Salesforce.com and that shows Salesforce.com's commitment to the product. We get to tap into the Force.com and that's something we're very respectful of,” he says.
But surely the dependence on Force.com and the – now financial – relationship with Salesforce.com means that this is now an offering restricted to the Salesforce.com customer base? Clearly that's a pretty nice footprint in the CRM and SFA space, but realistically there are alternatives. Are these now effectively out of bounds?
“Not only does this represent a great back office to front office offering for Salesforce.com customers, it's a good option for others as well,” insists Roche. “To a non-Salesforce.com CRM customer, we can sell it as a standalone Cloud accounting solution in its own right. It will carry Force.com with it and be hosted by Salesforce.com.”
Compromised purity?
But the tie-up does at least compromise the purity of Salesforce.com's best of breed approach to the market, as opposed to the integrated back office-front office suite approach taken by NetSuite. While Salesforce.com has not directly diversified into a non-core market, it is pretty heavily involved, albeit one stage removed. This will surely be pitched by the likes of NetSuite and SAP as a change of tactic and an implicit backing of the suite approach?
“From my point of view, I think what we have is the best of both worlds really: best of breed and a single suite,” argues Roche. “If customers want to buy this as a single suite, then they can. If they want to buy the financial offering and run it with another CRM offering, they can; or if they want to buy Salesforce.com CRM and run it with another financial offering, they can.
“I think Salesforce.com have come at this in a very elegant way,” he continues. “This has come from our mutual collaboration together. We've been working together for over two years now so this is a very logical extension to the Salesforce.com applications.”
There's a wider market perspective proposed by Salesforce.com itelf. “Our view is that this serves as an opportunity to encourage something that we have hard a lot of demand for in the market, which is for people to be able to move their entire office into the Cloud,” says Tim Knight, Salesforce.com director of product marketing.
“This means that we can help accelerate that. It gives Unit 4 Agresso the opportunity to spin out a new company which means they're not having to justify a new business model within the company and can bring their 30 years of developer experience in the financial applications market to the new company. We saw a great opportunity to invest in something that customers have been asking for.”
That's not washing with rivals of course “The announcement does reveal that Salesforce.com acknowledges the future of Cloud Computing is the integrated business suite that NetSuite pioneered, and Salesforce.com is scrambling to cobble one together,” claims NetSuite CEO Zach Nelson (left) who dismissses this latest move as being too late.
“The market has already rejected the Coda approach of a building a rudimentary on-demand accounting product with no ERP capabilities. Just look at the spectacular failure of the decade-long US partnership of Salesforce.com with Intacct, and one can see the market has rejected basic accounting only applications, even when delivered from the cloud. In fact, two years after its launch, Coda2Go has only one customer success story to point to on their website.”
The wider picture
So will having the weight of Salesforce.com more evidently behind the offering formally known as Coda2Go potentially increase its appeal to the Salesforce.com customer base and validate the Force.com platform as a service strategy? It it does come off, both Unit 4 Agresso and Salesforce.com are set to benefit. It's also a move that could potentially kick start the wider finance applications Cloud market.
From Salesforce.com's perspective there is another longer term question that might yet come back to haunt it: what happens if (when?) other firms in other functional areas, such as HR or talent management for example, decide that they'd rather like some Salesforce.com financial backing to support their own Force.com-based efforts in the market. Might the firm have to choose one poster child from each functional area? But if it did that, that would in turn imply a tiering-system for firms within the Force.com ecosystem – some animals would be be perceived as more equal than others!
Of course, there would be a case to suggest that a highly suitable (almost inevitable) role for Salesforce.com is to take over from those that Oracle CEO Larry Ellison recently derided as “nit wit” venture capitalists and provide backing for a new generation of Force.com-centric Cloud firms. If a second generation of new firms built on the platform provided by one of the leading first generation Cloud apps emerges, then the Salesforce.com PaaS strategy becomes a brilliant reality.
But Salesforce.com might need some deep pockets in the process.
Post new Comment