It's not supposed to be a buzzword, but I'm calling today's industry 'channel 2.0'. If you look over the last 20-30 years we went from the mainframe, where there was a certain type of partner that worked on that class of applications; you then had the client server; then you had the big outsourcers that came and went; then the folks who moved over onto Web architecture. And now if you map to that, it's the way the channel made money. They used to make it selling hardware; then they made money selling software; and then they made money trying to sell solutions but they couldn't scale those solutions because everyone had different business processes. It ended up a case of round hole, square peg. Now everyone is making money selling services. And software-as-a-service is that intersection where I think we can put the value-add back into the value-added reseller.
With SaaS, we take care of a lot of the hardware and infrastructure so that partners can really focus on innovation and services higher up the stack and do things the customer can find rewarding. This could be business process re-engineering or process optimisation. And customers can invest in those because the budget dollars are available. If you look at a small or large shop, $4-$7 out of every $10 goes towards hardware, software, support and maintenance. The partner's left figuring out how to take out $2-$3 and make it work. That's why there's budget overruns, that's why solutions don't meet user expectations. SaaS cancels the upfront costs.
Skills resellers need to be a SaaS provider
I think first and foremost it's about being capable. Because we don't resell, we have a strong co-sell model. Our partners tell us that's great because they don't have to invest so much upfront time and money into the selling process.
The second thing you need is the skill sets to configure, customise and integrate Salesforce. com into other applications. If you're selling into a small business that has Great Plains, SAP or Oracle, you need to be able to integrate with it so customers get full usage of our application.
The third set of services we see as necessary are the ones around pure consulting, business process re-engineering, sales transformation and sales training. We had one partner in the US -Thekos - that is our training partner also for Asia. We also bring partners in and put them through sales boot camp two to three times a year. This is based on the same training our sales people go through. That allows them to get closer to the business and roll up their sleeves so they know how to pitch the technology and solutions.
SaaS adoption today: which channels are embracing it
On-demand is in demand. I think both the industry and the partners are clamouring to know more about it and how it's going to affect their business. The more we educate the end user, the more I think it will help educate the partner and reinforce their plan to get there. For a traditional ISV, it's going to be really difficult to switch over. The way they build software is really complex. It's fundamentally the wrong business model [for SaaS], wrong internal DNA, wrong financial structure. That being said, some of the smarter ones are trying. Business Objects is a perfect example of where they have stepped up and embraced SaaS as a new route to market. This transition also allows for the next generation of ISVs to come up and be innovative and really think about what applications they could build to take advantage of it.
On the systems integration side, I think the strong always survive. We have seen that over a number of years as the smart business people spot the evolution and make bets. I think that's just typical evolution to be honest.
Where on-demand fits
I would argue many people have been doing SaaS for a long time by outsourcing their payroll. And that touches all markets. It really depends on the class of application - whether it's HR, ERP, CRM. With the launching of our [AppExchange] platform, we are seeing so many new use cases we hadn't thought of ourselves: from creating a form online so an employee can fill out how they're going to take vacation, all the way down to recruiting organisations using it to put in a pipeline and frontal management of applicants. If you look at the benefits - I don't have to buy the hardware, I don't have to worry about updates or upgrades, and I get to take advantage of the same software that Merrill Lynch is dictating its sales force buys, and I could be a five-person shop.
The biggest challenge in triggering take-up
It's really about education and what it means to them [customers and resellers]. I think the more we get partners with domain subject matter expertise to go into vertical markets with us, the bigger the impact we'll make. We could never go after Cisco VARs for example, without Cisco partnering with us. They would not respect it. We are educating them as if we were a Cisco product - we're using their infrastructure.
Salesforce.com's role going forward
We have been the leader for eight years with a very dominant position. We have the number one on-demand platform in the world and over 50 per cent of the CRM global market. Our goal is to manage all of the business information on the Web. Part of our goal for the platform is to allow the next Salesforce.com to be born. In the last 12 months, we have spent $US75 million in infrastructure. Our hope is the next company X comes along and builds out and takes advantage of our platform.