When to Use the Force
There is no doubt that Force.com, Salesforce.com’s platform-as-a-service (PaaS), is the leading cloud computing platform today. If you are an independent software vendor (ISV) or an entrepreneur looking to build commercial products in a public cloud, it’s probably on your radar already. Force.com gives you the potential to save on development time and get a product to market faster--even more important, the potential to build a business with fewer resources.
Does that mean you can create a profitable cloud business by building your product on Force.com? The answer is--not necessarily.
In reality, most companies struggle to see the return on investment after all their development effort. Here’s why: In a perfect world, seat sales through the AppExchange would happen at the same rate that consumers download music on iTunes. Business buyers, however, are harder to reach and take forever to convince. Both traditional ISVs and startups usually discover they have been overly optimistic not only about how fast they can sell but also about what price targets they can achieve. To make things worse, ISVs find the product development, maintenance, and delivery costs to be much more expensive than anticipated.
Why does this happen when the world seems to agree that cloud equals reduced costs? It happens because ISVs don’t ask the right questions before jumping into the cloud. All ISVs want to know is the answer to two fundamental questions:
- Is Force.com the right platform?
- How much would it cost to build our product?
These questions are good. However, they are only related to product development, not profitability. Looking to build a successful cloud business requires much more input than just developing an application. If you don’t ask the questions upfront to understand the cloud business model, you could be writing checks for years before seeing any reven Here are the most important questions you must ask before you begin building:
Business Model: Is the SaaS model the right model for us? Deeply influenced by all the hype, most ISVs view this exercise as just another language or architecture to learn. They join the bandwagon expecting that the cash registers will start ringing once their product is built and launched. They don’t realize that SaaS is not about selling a product--it is a mechanism to help you provide a service. Business customers demand much higher service levels from a cloud offering. Understanding the most significant aspects of service delivery you will be forced to deal with before jumping in will help you decide if the SaaS model is right for you.
Financial Model: Will we make money off of our Force.com service? After building their product on Force.com for $100K, for example, ISVs may anticipate selling the solution to 70,000 subscribers in three years. If that’s the kind of math that your financial model stands on, think again. All expenses must be factored in. The cost of building, maintaining, implementing, supporting, and upgrading all versions of your service will be much, much higher. You also need to be realistic about the number of subscriptions you will sell and the price and number of seats you will get. Otherwise, you will be losing money and hair.
Partnership: Will Salesforce.com help us sell our cloud service? Building a product on Salesforce's platform implies significant dependency. Ideally, if you catch the Salesforce.com marketing wind, you’ll have a ready launching pad. Conversely, Salesforce.com's direct selling team may become your biggest competitor if your service is perceived to impinge on their own offerings. Several factors around strategic alignment may make or break your strategic alignment with Salesforce.com:
- investment potential;
- marketing plan;
- sales alignment;
- existing versus new Salesforce.com customers; and
- product roadmap.
Customers: Why will anyone buy our cloud service? Don’t assume that you know your customers--the expectation from a Force.com-based cloud services is very different from your on-premises product for various reasons:
- Your market segment may change.
- Your customers will demand constant improvement.
- Customer expectations may be related to features provided by Salesforce.com.
Before you build your offering, it’s very important to know what your customers want. Don't waste your time with “feel good” visual or technical prototypes. Invest in a proof of concept designed to help pre-empt customer expectations and create a real product strategy.
Ability to change: How long have we been selling on-premises products? Typically, the longer you’ve existed as an on-premises software vendor, the harder it will be to switch to the cloud. Immediate challenges include:
- significant changes in every function of your organization before any customers will be happy;
- fierce opposition from marketing, sales, product and support functions; and
- operating the on-premises business simultaneously.
So, can you still change? Yes, but it won’t be easy. Success will require you to turn each of your functional heads into key stakeholders of your cloud service right from the beginning.
There are also other key areas to explore such as the platform fit, architecture, partnerships. However, they will need to be dealt with later. You must do first things first. Spend your time in figuring out the intricacies of the cloud business model and whether it makes commercial sense. You may also find it easier, like some ISVs, to let a cloud service provider assume a front-line role in your transition to reduce your risks.
About the Author
One of the top Cloud Computing experts today, Alok Misra is the author of the whitepaper “The Dos and Don’ts of The Transition to Cloud Computing” and a cofounder of Navatar Group (www.navatargroup.com). A longtime partner of Salesforce.com, Navatar Group is a leading Force.com reseller in financial services as well as a global cloud service provider helping ISVs build, launch, sell, and support commercial SaaS products. You can follow Alok’s blog at www.navatarforce.com.
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