If you’re watching trends in the enterprise software market—or living them as I am—you’ll agree it’s been an eventful year. As the ongoing battle between “on-premise-turned-cloud” solutions and “born in the cloud” solutions continues, there have been interesting developments in our space alone that suggest the born in the cloud providers are gaining the upper hand.
Over the last year, Oracle has made several attempts to play catch-up to Salesforce, including its $871M acquisition of the cloud-based marketing automation software provider Eloqua. This week, Oracle made news again when it purchased the cloud-based configure price quote (CPQ) provider, BigMachines for an estimated $400M. Also this week, we heard that Cameleon, another cloud-based CPQ provider, was acquired for $33 million by PROS, a big data software company.
These recent developments in our industry are exciting, but if you take a step back, you’ll see that we are not alone in this trend. Across the board, legacy, on-premise software vendors are making big moves to bring their solutions to the cloud—or at the very least, to adopt some elements of cloud functionality. However, although a lot of money and work is being put into these transformations, a successful outcome is yet to be seen. Providers who came late to the cloud are struggling, and those who are born in the cloud are growing like crazy.
Why NetSuite and Veeva succeed where SAP and Model N struggle
Take the enterprise resource planning (ERP) industry as an example. In the same year that Gartner called NetSuite, “the fastest growing financial management software vendor globally,” SAP cut back on the development of Business ByDesign, SAP’s organic attempt at cloud ERP.
Another example can be seen in the recent IPOs of two software companies targeting the life sciences—Model N and Veeva. Both companies filed their initial public offering this year, but while Model N came crashing down within months of going public, Veeva has exceeded everybody’s expectations. Both companies had an initial public offering that closed at $20 a share; today, Model N’s shares are worth less than $10 per share, while Veeva shares are now worth $43 per share, and the company is valued at over $5.2B.
Why the market increasingly demands the benefits of “born in the cloud”
In both the above cases, you can spot the trend—the company that tries to be “cloud” is no match for the company with cloud in its DNA. In the last year we’ve crossed a line, and the market is no longer questioning cloud solutions; rather, it is saying loud and clear that cloud is what is preferred. Customers want speed, ease-of-use, easy upgrades, fast deployment, and a global footprint. If legacy solution providers can’t keep up with these demands—if upgrades are challenging, if data isn’t easily accessible, if the interface isn’t intuitive—customers will take their business elsewhere. This fact is most clearly illustrated by salesforce.com’s 100k+ and growing customer list.
The problems with legacy systems persist. You can’t just move your data and application to a hosted server and call yourself cloud. There are real benefits that true multi-tenant cloud solutions offer that legacy systems can’t deliver. Pricing model flexibility, best ideas from the customer base driving new capabilities, frequent releases, hassle-free upgrades, lower cost of ownership, support for multiple languages and currencies have all become table stakes in the eyes of customers. Once they experience the difference first hand, they are not willing to compromise. When cloud solutions are an option, customers are no longer willing to accept clunky, legacy systems that get in the way of business.
Something Old, Something New, Something Borrowed…
As I think of the union between BigMachines and Oracle, I am reminded a little bit of the old wedding rhyme that begins, “Something old, something new, something borrowed, something blue.”
Something Old: The old Big Machines solution that supports most of the customers who came on board before 2012. These customers are now facing expensive upgrades, or re-implementation of their customizations. They will surely get re-platformed by Oracle as part of a Standard Operating Procedure in Redwood Shores.
Something New: The latest BigMachines release. Unproven to date, but still relies on proprietary BigMachines technology and requires resources that may or may not be available in coming months.
Something Borrowed: BigMachines Express. The application is built natively on Force.com and designed for small businesses but has no migration path to the primary Big Machines product as customers grow in size and complexity. Is Oracle interested in supporting customers running on a platform borrowed from a competitor?
Something Blue: Clearly the customers’ mood at the time of renewals.
With Dreamforce’13 right around the corner (November 18-21) there is a great opportunity to learn how truly native cloud solutions enable unparalleled business speed, agility, and performance. As a fully cloud-based provider of CPQ, we invite existing Big Machines and Cameleon customers to visit one of our several booths to learn firsthand how our born in the cloud suite of quote-to-cash solutions—including configure price quote—are delivering exceptional results and exceeding customer expectations.