A couple of weeks ago I had a web demo with Steve from salesforce.com presenting our force.com based standard solution for online advertising sales. While appreciating it a lot to discuss and exchange our experiences in the media industry he incidentally classified our solution as a “Fourth generation cloud solution”.
Being surprised for a while I thought: “Hey, is fourth generation good or bad? And what generations were there before? If it is something positive this might be wonderful marketing claim we could use.”
So I began to think and cluster the different stages of our own solution history. Since we accompanied this development almost from the start of salesforce.com, we walked with our clients through the different stages of cloud-based IT projects and solutions in ad sales successfully.
In a digital world where technology life cycles develop, grow and mature much faster than ever, structures and phases are often hard to define due to their complexity and diversity. Especially cloud computing is for many companies still a black box. Nevertheless, although this document is just an examination of a small but fast growing niche segment of the media industry based on a single cloud platform, the essence can hopefully be transferred to other industries as well.
First generation cloud computing 2000 – 2003: Contact management and sales pipeline
In the beginning of salesforce.com, only minor customizing was possible. Nevertheless, a lot of particularly smaller companies used it due to the easy setup without any further costs. Especially Early Adopters who failed with other solutions – mainly Client-Server CRM-Software – understood the advantages of a solution that offered a lot of
- Account and contact management, opportunity forecasting (sales pipeline)
- Small Extensions
- Home grown customizing – often not structured (“10 fields are better than 3”)
- Sales pipeline with rough estimates and without often product and prices
As generation #1 was mainly contact and quote management in combination with first business flow adoption the interchangeability of the system was high because only core functions of a CRM solution were used. These functions are delivered usually by any CRM software.
However salesforce.com was and still is successful in many companies because of their stable multi-tenant platform and the innovation of the system. Even clients that still use salesforce.com as an island solution stick with it as they are satisfied with stability, innovation and flexibility.
Second generation cloud computing 2003 – 2006: Quote management and calculation
Although standard account and contact management as well as opportunity forecast used to be one of the main requirements of the generation #1 companies usually had individual requirements to be adopted. It was the time when cloud solutions were blamed to be very limited in customizing and expandability.
In our context quote management was one of the first extensions we developed in order to extend the core system. As there weren’t even formulas we had to extensively use the API in order to externally calculate discounts, net prices, taxes and write the results back to the systems. Our focus was at that time
- Quote Management, IO
- Product database
- Discount calculation: Using API, later formulas, validation rules, relationships between tables
- Manual exchange with other systems (automated csv – import and export)
- First high level interfaces to internal systems
Third generation cloud computing 2006 – 2009: Integration and business process adoption
The most important step in our company history: While being highly satisfied with the development speed and costs our clients decided to more and more shift not only external databases to salesforce.com but also business logic. With integrating ad servers as delivery systems all relevant information for sending out invoices and reports to agencies and advertisers existed in salesforce.com. Our focus at that time was
- Ad server Integration
- Shifting external databases to salesforce.com
- Billing preparation for external ERP systems
- Adoption of advanced business processes like artwork delivery
- Salesforce.com as the heart of companies IT environment
- International Quote and Revenue Management
The cloud platform itself offered more opportunities in order to extend the system like in our case APEX coding. Demand for complex ERP systems, especially those with vertical business process, dropped in client’s perception.
Fourth Generation cloud computing 2009 – 2012: Standardization and internationalization
Projects got more complex. Although based on the stable and standardized platform salesforce.com individual projects even in the same industry became harder to maintain. Furthermore, only larger companies were willing to spend six-digit-project-costs in order to setup salesforce.com and to integrate their servers. You can recognize this by reviewing our customer structure: Although working for 5 of the top 7 online marketers we were not able to attract marketers ranked from #10 on (the typical SMBs) at this moment.
To counter this situation we came to the conclusion that the gap between a sophisticated business solution and immense costs can only be closed by standardization. We developed technology approaches that enabled access to a core cloud-infrastructure at lower costs for every company size. While cloud-based standard island solutions (generation #1 and 2) and individually integrated cloud IT infrastructures (generation #3) were available to only a small audience, the combination of both solutions leads to a multi-tenant cloud environment (generation #4) accessable to a broader target group. As it displays the whole business process in one seamless work-flow within one system this cloud generation connects different departments of the company and generates thereby added value.
- Platform based standard solution
- Integration as a standard (“out of the box”)
- Standard quote management
- Heavily using internal APEX coding for media plan configuration (targeting)
- Standard business processes
Fifth generation cloud computing 2012 – 201X : Standard solution for larger entities based on Enterprise Edition
The end of individual approaches: Industry processes become more and more complex and international which leads to an even higher demand for standardization. As an example the exchange of electronic quotes and confirmation of them as well as the electronic transfer of the reporting back to the media agencies will become more important for our clients and their agencies. Integration to any company’s system performed by a strong middle ware is standard.
Global CFOs be aware of: Focusing more on international KPIs makes controlling easier between competitors and subsidiaries. The challenge will be maintaining a global fitting standard even in larger cross media entities.
Conclusions and across industry perspective
Top down vs. bottom up
Building classical software industry solutions with companies like Oracle or SAP seemed to be more a top down concept in the past (starting with the Fortune 500 and the attempt to sell it to the medium sized businesses). Cloud computing thrives more from bottom up. Even Salesforce.com itself started with SMB (and is attracting more big shots with their rapidly feature growing solution in the last couple of years).
From our understanding integration is the crucial brick in order to either anchor a cloud solution in the companies IT-architecture as well as to build up standard industry solutions. Without integration into the companies business process a cloud solution will always be an island solution where the advantages are just used to a small degree. The replaceability of the system is and will be high in this system environment as long as business processes are not adopted.
With deep process integration cloud solutions become to Third Generation Cloud Solutions and this is the start point of generating real value to the company.
Cloud Computing is said to be a paradigm change. Cloud IT-projects and solutions are definitely different to classical client server projects: More agile at lower costs. The B2B-Cloud-Standard-Solutions are probably still in the early beginnings. Compared to B2C paradigm shift with widely accepted companies like Amazon, Google or Facebook our B2B business seems to lag behind about 5 – 7 years. Even compared to classic client server based standard industry solutions the cloud solutions lag behind. But don’t get that wrong: With adopting complex business processes and logic as well as integration cloud solutions become a powerful threat to existing installations and solutions today and may eliminate a lot of them in the next few years.
Internationalization and market perspective
There is a clear shift to lean IT infrastructures and the willingness to outsource IT resources. Companies want to focus on their business not on taking care of their IT. The topic Software as a Service (SaaS) in B2B is still young but already holds immense possibilities for increasing the productivity of companies. Cloud Computing based on a fully featured multi-tenant platform like force.com is a powerful instrument to integrate with and to merge overcome IT systems to. For smaller entities an “industry dependent out of the box solution” like our online advertising sales solution ADvendio is a valid alternative as they usually have to stick otherwise with paper work…
Traditional client server solutions are more dependent on local markets – mainly because supporting it is more complex. By using cloud infrastructure the potential market gets global without the need of running an office in any country of the world in order to sell and support your solution.
Marc Benioff from salesforce.com used to question how likely it is to receive venture capital today for client server based solutions in order to stress the innovation power of his company’s platform. It is definitely more likely to capture capital to built up something similar to salesforce.com, no matter how bold this plan might be.
When we observe companies’ traditional IT-Infrastructure that has been overcome by the last couple of years and has to be replaced in order to be fit for digital business and its requirements there seems to be quite a big market. Add the thousands of companies that could not afford bigger projects in the past and may now benefit from cost efficient platform based standard solutions, you can easily understand what tremendous opportunities in B2B-Cloud-Computing are available.
But there are hundreds of niches where an industry solution based on the infrastructure of Amazon or salesforce.com can be a valid business. Maybe venture capitalists should focus more on B2B in the future …