Goliath's Revenge

David, getting the better of Goliath, happens quite often these days, that it doesn’t seem paradoxical anymore. To start with, it should have been a paradox, at all. The agile opponent who has no memory or fear of failure, scoring points over his oversized rival, who is heaved down by the defensive armour and sporting a weakness, as glaring as an unguarded forehead, wouldn’t come as a surprise, would it? Add to it, the unflinching bias the 'underdog' enjoys from spectators and suddenly Goliath doesn’t seem a tough opponent at all, especially in the marketplace-battle field!


So when Youtube broke away from the pack of online-video-provider lookalikes, or when Netflix stole the mind-share and wallet-share of the home dvd viewers or when SFDC grew a near 100% three years in a row….we had many a Goliath watching aghast.


If Youtube and Netflix rung a bell and SFDC left you scratching your head, I won’t blame you! SFDC a.k.a SalesForce.com, is the Youtube/Netflix equivalent in the CRM (Customer Relationship Management) software market. The 100% growth was an exaggeration, the exact figures were 76%, 84%, and 88%. Quite impressive, I’nt it? The heavy weights SAP, Oracle were busy consolidating their businesses or buying out other rivals when Salesforce.com carves a niche for itself and almost single handedly makes a fortune out of a, till then non-existent market,..of Hosted Enterprise softwares.


Goliaths lead a tough life, if there is one thing they hate, it is to adapt to change. Elephants can’t dance, can they?

The SFDC model is pretty simple. Companies don't need to have costly Enterprise software installed at their sites (On-Premise), they could instead subscribe to Hosted applications. The Hosted/On Demand application provider would be all too happy to manage and maintain the applications for them in return for the handsome periodic subcription revenue.

SFDC announced 45,000 new subscribers last quarter (!!!). That worries investors though, (the previous quarter it was 48,000. The total subscriber tally is 444,000). .
Salesforce.com has been life’s gift to the Sales executive hard-pressed for time, wishing to make effective pitches assisted by information and intelligence on his company’s offerings without needing to be a technical expert himself and for the CEO who did not want an all too-mighty CIO.
All said, Salesforce.com is not having an easy ride either. They face lot of competition from other feature-rich vendors such as RightNow, NetSuite, SugarCRM, ( not so much from the big Vendors ). Also, inspite of the stellar growth, they are even smaller than many ERP/CRM technical implementation service providers (Indian companies like Infosys, Wipro, TCS, Cognizant etc) who specialize in technical consulting on the ERP/CRM software of the bigger Vendors like Oracle, SAP, Microsoft. A recent 5 hr Service outage makes many of us wonder whether this is too much, too fast. Considering the fact that, competitive pressures forces Salesforce.com to spend 10 times more on their Marketing budget than their Research and Development budget, I was personally impressed to know how Salesforce.com still manages to innovate. AppsExchange, their recent offering has already being ranked in the top ten technical innovations last year, sharing honors with Youtube (once again!). ( Courtesy Forbes.com)

AppsExchange, an online marketplace for complementary software includes more than 200 applications, from partners including Adobe Systems, Business Objects, Google, and Skype. AppExchange offers HR, marketing, finance, and other software, mostly from small vendors, that Salesforce doesn't make, and which runs inside Salesforce's user interface. To use these applications you need to subcribe to it, opening way to a whole new revenue stream for SFDC. Infact CEO Marc Benioff even calls their CRM, a Trojan horse !

I digress! I was supposed to write how Goliath (in this case Oracle, SAP ) could have his revenge!

An easy way would be to follow Google's example..buy 'em out. :)

Oracle , SAP could be inspired by store based movie rental giant ‘Blockbuster’s spirited fightback, which is no less interesting than any movie they sell.

Netflix, commands a great mind-share among movie audience and a huge market-share in the online dvd subscription market, which is blamed for keeping people away from movie theatres even! Over the years Netflix has carved out a neat little business for itself. For a monthly fee, online subscribers can rent DVDs that are sent out by mail. Each time a disk is mailed back to Netflix, a new one can be rented. There are ‘No late Fees ever’ or postal charges of any sort! This business model has fetched Netflix an enviable 80% YoY revenue growth over the past many years.

Nevertheless, Blockbuster is fighting back. They are out to prove that online dvd subscription and store based movie rental services can co-exist. Their flagship scheme, ‘ Blockbuster Total Access’, provides you all that Netflix does, with an additional convenience of exchanging movies at their 5600 odd stores, rather than waiting to email the dvds and get your replacement.

Wow!!

If you still aint convinced. Get yourself a copy of, one of my favorite reads

Who Says Elephants Can't Dance? Inside IBM's Historic Turnaround by Louis V. Gerstner Jr.

Netflix has drawn its swords too. They will soon introduce an online movie streaming service, to complement the existing subscription service. So would Blockbuster just copy this move or come up with something better!

This is as good as it could get!!


My take:

The best Defence is Offence!!