Today, salesforce.com announced it had entered into a definitive agreement to acquire Model Metrics. When we started Appirio in 2006, Model was one of the leaders in the space and the company we most respected in the ecosystem for their approach. Since then Appirio has grown into the largest independent cloud services provider competing regularly with Model Metrics. While we offer our sincerest congratulations to Adam and the entire team at Model on the acquisition, admittedly, we are somewhat relieved to know they will be focused on driving the social enterprise and mobility for Salesforce (and therefore with us), instead of being our most worthy competitor.
At Appirio, we’ve felt for some time that we are in a perfect storm. Our cloud focus, our investments in technology and community, and our incorporation of social and mobile capabilities into our core offerings have enabled us to be one of the few providers innovative enough to help global companies use the cloud to transform their businesses. At the same time, we have become the only pure play cloud solutions provider with global scale. With the acquisition of Model Metrics, salesforce.com further highlights the growing importance of cloud, social and mobile among customers and removes one of the leading services competitors from the ecosystem.
So why is Salesforce doing this, how does it relate to their previous actions (e.g. investing in Appirio in 2008 and before Dreamforce 2011), and how will it impact their ecosystem?
1. The social enterprise opportunity is just that big
Since early this year, Salesforce has aligned their entire company and all of their considerable marketing might around the social enterprise. The social enterprise was the theme of Dreamforce this year, and is the theme for almost every event that Salesforce puts on. Salesforce sees social as a way to change the conversation from providing very good technology for CRM and related processes to being a part of a strategic discussion about a company’s future. While many have admired Marc’s leadership in doing this, they have missed the point that Salesforce believes this is transformative and the key to their becoming the dominant player in all of enterprise IT. It’s more than just an extension of their product strategy, it’s key to redefining the entire marketplace. By adding Model’s mobile development and UI capabilities to their team, Salesforce will be able to make the social enterprise vision tangible for customers.
2. Appirio (and the ecosystem) are pragmatic vs. evangelical about the social enterprise
Here is where it gets tricky. On the one hand, Appirio (and companies like us) are incredibly excited about the social enterprise. We believe in the vision and have seen the impact it can have on companies. We love how strategic it can be for businesses and how it helps us uplevel our conversations with customers.
At the same time, we gravitate towards customers who are already somewhat bought in to the ideas of the social enterprise. Those customers are willing to engage and ready to push forward initiatives that make the social enterprise a reality for their companies. But, this is still a relatively small part of the market.
For the majority of enterprises, there are a few steps before building a broad social enterprise vision. At this point, the mainstream has bought into the power of cloud applications and are starting to see the results. For most companies, there’s a substantive benefit from adopting cloud applications and replacing inflexible on-premise applications with modern, cloud applications. So, Appirio (and others like us) are working hard to satisfy that demand now – creating commercial value for both us and the customer. But, this often defers the more difficult task of investing heavily to help them see and experience the broader social enterprise vision.
With Model Metrics, Salesforce has the ability to invest proactively in helping customers “see their future” because it will drive longer term license revenue and position them as a strategic vendor for the forseeable future. It lets them further accelerate their next wave of growth even as a broad base of customers are just beginning to experience the benefits of the previous one.
3. The Global SIs need help with social enterprise enablement
While we continue to see Salesforce more aggressively highlighting Global SIs like Accenture, Deloitte, and Cap Gemini (at Dreamforce and regional Cloudforce events) in the marketplace, the Global SIs’ business models compel them to focus on their much more profitable services related to on-premise software. They are too vested in their massive on-premise relationships to want real change. While GSIs have been more vocal and committed to the social enterprise, it’s only because they see a massive opportunity for a return to the eight and nine figure transactions of the past (let me re-engineer your whole company) – yet most still have a hard time spelling Twitter. In fact, in the short term GSIs may benefit by being able to lean on Salesforce (Model Metrics) to help them gain the skills and model necessary to rapidly deliver social enterprise results for customers.
At Appirio, our collaboration with Salesforce has always worked because we are aligned on our vision for the future of enterprise IT and hopes of transforming an entire industry. Their investment in Appirio in August was a testament to that collaboration and a desire to accelerate our strategy of consolidating smaller cloud providers across the globe. We look forward to the same, deep relationship with the latest addition to Salesforce and in continuing our path to being the leading, global, next generation cloud services provider.