How Salesforce Missed their Golden Opportunity with Free Chatter

Today, January 31 2011, Salesforce made their Chatter product available for free to any company in the world.

There are certain limitations to the offer: there is no access to the reporting dashboards, no access to the AppExchange marketplace, and all user accounts must be in the same domain name.  Under this model, the first user that creates the collaboration community becomes the moderator, and she can then assign others to moderate the community; in addition, if a company finds out that a community exists without management approval, Salesforce will give the company’s IT moderator access to that community.

In bringing Chatter to compete into a crowded internal collaboration space with minor distinctive features and no innovation in the operating models, Salesforce proves that they are more focused on selling their applications than on building the platform they have been promising for a long time.  This is something they have hinted at from the beginning – claiming Chatter is “both an application and a platform”, closing access to Chatter only to those companies that were already Salesforce customers (essentially forcing those that were not to become Salesforce customers), and focusing on how to bring more people to use their applications.  Chatter as a platform, what I advocated to be their opportunity to success when I first wrote about it, is not where their focus is.

Before the accusations and complaints begin – I do understand the issues of “free and open access to anyone”: corporate espionage, leaking of sensitive and confidential information, compliance with internal and external regulations – including gubernatorial regulations and many more privacy, security, and legal issues.  It is not easy to create a truly collaborative enterprise that will allow collaboration among all stakeholders, user, customer, prospects, partner, suppliers, employees and basically anyone that wants to.  It is not about creating the community – it is about securing the platform (and one of the reasons why this model is so well suited to a real cloud computing architecture, where the security and administration of the data used in the community can be managed either at the Platform or Infrastructure level).

There are other issues, too many to cover in a short blog post, but suffice to say: a company the size of Salesforce, with their purported commitment to developing platforms, their embrace of the cloud computing architecture, and their desire to change the way business operate was the ideal candidate to bring something different to the table – and they did not.

What would I have done differently?

I would’ve have taken the exceptional talent they have in the Chatter product management and development team and focus them on creating the Platform and Infrastructure components that would allow anyone – without regards to their email address or their location – to collaborate (Socialcast can do this today, why can’t others?).  I would’ve focus their efforts in building the necessary integration with an existing Rules Server, or created a set of rules that would allow the data to be shared to conform to certain standards and principles: data would need to be classified as safe to share before it was allowed to be shared.  I would’ve ask them to make sure that the collaboration model they were building allowed anyone to come into the community, use the appropriate data, and collaborate to create complex solutions to the complex problems the organization is facing.

In other words, I would’ve focused on building a framework for a collaborative enterprise.

Salesforce had an opportunity to create a new model of collaboration, bringing the idea of a collaborative enterprise closer to fruition – and instead decided to become not only another “me too” competitor in the crowded space of internal collaboration – but one that won’t hesitate to sell out collaboration and communities in exchange for remaining in good graces with IT and the management that buys their applications.

They missed their Golden Opportunity.

What do you think? Am I off? Am I putting too much responsibility in their shoulders? Could that model be created? Is it wanted by the organizations? Needed by the users?

Would love to hear what you have to say.  Leave me a comment.

17 thoughts on “How Salesforce Missed their Golden Opportunity with Free Chatter”

  1. Excellent post, and very accurate – Chatter is definitely a me-too extension of the Salesforce app.

    However, I don’t think they meant to give it away for free – I distinctly remember one of the early webinars they gave about chatter in which they said it will cost $50 per user. I remember discussing it with my colleagues and saying that there is no way they will be successful selling it for that much when you can find the same functionality elsewhere for a few dollars per user. I think they realized that nobody will pay for it during their beta, and started to brand it as a value added feature that you get for free – Salesforce is great at marketing spin (I have to give it to them).

    The bigger question remains though… is that kind of collaboration really improves productivity? Or add to your data overload?

    1. Ami,

      Thanks for the read and comment!

      The question you ask, productivity add-on versus data overload, is only answered when you look at the way people work. If the data that comes in is useful and necessary to do ones job, and the interface to it is not-just-another-application but a well thought out, integrated interface that relies on good filters to get the right data to the right place – the answer is that it helps. If the user is required to go to another application to read a stream, and then figgure out what to do with that data – it is data overload.

      Collaboration, as I said a few days ago in my previous post, is about letting the users do their jobs better, not about the data or the product that you need to use.

      Thanks for the read!

  2. Agreed that there needs to be more thought given to bringing in external conversations on Chatter. I said this months ago;
    “The second barrier I discussed with Holden is that of internal versus external. Many believe that for a social product to be truly social, it needs to include the ability of external stakeholders – customers, suppliers etc, to take part. At his stage Chatter is entirely an internal tool…” (more here – http://diversity.net.nz/chatter-goes-mobile-questions-about-adoption-still-remain/2010/09/08/)

    I guess the sfdc perspective is that they need to lowly bring enterprise to a position of feeling comfortable with social, and diving headfirst into a more open version of that will cause push back from IT. It’s fine balancing act….

    1. Ben,

      thanks for bringing a great perspective – chatter may just be the change agent, and not the change. organizations must become social before they can become collaborative, and chatter may just bring about that change. great point.

      thanks for the read and the comment, much appreciated.

  3. Spot on Esteban. Also keep in mind the conflict with their business model. The venture capital community has come to the conclusion that a SaaS company business model (which Salesforce invented) is completely different from a Freemium company business model (which they seem to be trying to emulate). It’s very difficult to start a new business with a business model that’s so different from your core business. Just ask the many perpetual license software companies put out of business by Salesforce despite their efforts to copy Salesforce.

    So your message here to Salesforce is this: “welcome to the other side.”

    1. Tony,

      As always, thanks for making my incomplete thoughts better. Yes, there is a potential upside to this – but one that may never be realized. I would advocate for an even bigger change: move to a per-transaction charge in the platform. Let’s see if they embrace/adopt/dismiss that one soon enough.

      thanks for the read and the comment.

  4. Esteban, I’ve been waiting for someone to write this post. As a user of Chatter and most of its competitors, Chatter does lack some of the user benefits found in other social platforms.

    BTW: I wrote about Chatter before its release here: http://www.seekomega.com/2010/05/all-you-need-to-know-about-chatter-%E2%80%93salesforce-com%E2%80%99s-collaboration-cloud/

    Your readers may want to check out Nimble as from what I’ve seen it’s built from the ground up to be social.

    1. Mark,

      thanks for the read and the perspective. I am interested in the fact that having used chatter, and probably most of their competitors as anyone else in CRM has by now, you think it is incomplete. I can tell you from the analyst perspective what is missing, what is good and bad, but i am not an end user. Would love to hear more about that, but we can take that conversation offline.

      Thanks for the time!

  5. Your points are very well taken; hopefully by SFDC. Instead of embarking toward a true Enterprise social forum without restrictions on stakeholders, participants and communities, Chatter is likely relegated to become quickly perishable and easily copied by competitors.

  6. Esteban, while everybody is all open this and that with ‘the need to be open’, Apple walks away with billions and Facebook becomes second only to Google in market cap. So lets look at who SFDC is a fanboy of shall we? Facebook !! and FB is fine with open, as long as it’s FB’s version of open (see semantic web). Apple is incredibly easy to use, because “we do your integration for you, so you don’t have to”. Locking down Chatter in the way they have could be to facilitate early ease of use, and future product path.

    In terms of Collaborative Enterprise, SFDC have zero interest in this outside of the fact that it facilitates Sales: getting sales, supporting sales, etc. The key here for Chatter ‘could be’ that it enables conversations around the sales processes. Set an alert for an account and the account manager and the sales director get notified, and are offered the opportunity to set up a video call (within SFDC) with the right ‘context information’ presented in tandem. Would this be better or more powerful if it were open to Gmail, Skype etc.? Yes. But could SFDC learn and iterate on its core platform to prove out the point? Maybe not. If Conversations around Processes proved to be a real winner, could it add a billion to SFDC? again, maybe. Could Chatter on its own add 1 billion in value? I doubt it.

    Maybe I’m being overly simplistic.

    1. Paul,

      First, thanks for three things: reading, commenting, and taking an opposite point. I love the smell of debate in the AM (well, my AM since you are so far ahead of me in time).

      Second, very interesting point – I am going to take the Apple and FB point out of the equation, since we are talking about enterprise software, but I understand how you tied that to Salesforce – interesting way to get to the point. I liked that.

      Now, for the rebuttal (isn’t there always one?).

      I take your point, but you are really making a point that is entirely true in the “as always has been” world. True, Salesforce has not incentive to move away from the model that created a 1.5BB company, but the question I was getting to was not whether they would – if you let them the answer is exactly what you wrote above: no. They have no reason to move beyond their business model, none whatsoever — what’s the worse case scenario? they are considered masterful executors of “the cloud” (intentional comment marks), prime example of “SaaS” (ibid), and the best all-around sales and CRM company for their flexible “platform” and now collaboration! The best part, they work the way their customers work – simple data entry, reporting for management, command-and-control of processes and data. Worse case for them, they stop growing near the 2.5-3BB in revenue — I’d take that any day of the week without much consideration.

      Now, let’s assume for a second that they want to embrace the real cloud computing model, the one that relies on a real infrastructure-platform-software as a Service and on openness and integration. Could they have started with making Chatter a platform and leap ahead of their closest competitor by magnitudes and potentially win the game? Yes, says I – but we will never know. They prefer to continue as they have, with more “cloud” and “SaaS applications” leading the way, collecting licenses instead of per-transaction fees.

      My post lamented the fact that they missed that golden opportunity to “own” a market for a long period of time, improve all our lives, and mark the beginning of a new era in Enterprise Software. Instead they chose to continue their modest growth in applications-that-are-not-real-cloud-but-pretend-well-enough-to-be-called-SaaS. Their loss, but I wanted to call attention to that.

      Thanks for the interesting POV – I am afraid you are probably closer to the ground that I am on this one, but i still like my vision.

  7. Esteban,

    Good post. As I was reading, the words that kept coming to my mind were “time to market”. I try not to spend too much time in the technical details of the platform, but I do know that re-architecting the plumbing in the platform is likely a monumental task. By the time they’d get that done, they would be late to a fast moving market.

    Salesforce.com has an awesome revenue growth trajectory, but their profit margins are narrow. They stay in business based on licensing/subscription revenue and their model is being tested. Price wars have heated up – MS CRM is putting a TON of price pressure on the core CRM product, and the E20/Collaboration vendors have caused Chatter to drop to free to be interesting.

    They are also likely caught smack dab in the middle of “The Innovator’s Dilemma” where the investment dollars and resources are being allocated to the most clearly profitable projects and initiatives, making doing things like you suggest “illogical”, at least in the short term world of quarterly measurement and keeping all the analysts and investors happy.

    They have a lot of work cut out for them over the next 5 years, integrating the technologies that they’ve already acquired, and sustaining the move of an organizations entire information architecture to the cloud. I wouldn’t be surprised that this latest chatter move is the move that is akin to changing the tires while the car is moving, and the new super duper car is still being engineered for future release.

    You have the right idea, but my take is “the story hasn’t played out yet”. Let’s revisit this conversation in 2013. I’ll set at Tungle meeting. 😉

    1. Brian,

      Excellent comment. Agree, we can talk back in 2013 — I still think they missed an opportunity to set a beach-head, but you make good arguments that cannot be easily contested by me. I said this to Paul
      S in a previous comment — I still think my statement and vision is right, but I think you make the strongest case for why it may be worth taking it easier and simpler.

      Great, thanks a lot for extending the value of this post!

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