Is Salesforce Getting Serious About the Back Office?
Even as Salesforce aggressively seeks to consolidate its position as the leader of cloud-based front-office applications via a series of acquisitions, it is possible that 2017 could be the year the company uses some of the same purchases to make a strategic move. Salesforce soon may become a major player in the back-office financial management and enterprise resource planning market as well.
Speculation that Salesforce might expand its offerings to address the back-office needs of its corporate customers has been plentiful for a long time. Bridging the gap between front- and back-office applications has been the dream of corporate executives forever.
Prior to the advent of cloud-based Software as a Service solutions, most enterprises turned to Oracle and SAP to fill that need, with a complex and costly set of on-premises applications.
However, as the demands of the marketplace intensified with the emergence of e-commerce, globalization and the Internet of Things, the previous generation of legacy applications, which required extensive customization, fell short of meeting the needs of many enterprises.
New CFO Interest
Unlike VPs of sales and marketing, many of whom have embraced SaaS solutions to meet their escalating demands, CFOs generally have been reluctant to consider cloud-based alternatives to their on-premises back-office systems. They've been uncomfortable disrupting their existing operations, and unsure if a SaaS alternative could meet their security and compliance requirements.
Escalating market demands now are forcing CFOs to put aside their fears and look for a new generation of back-office systems that can be more responsive to rapidly changing customer expectations, growing competitive pressures and new organizational needs.
Salesforce's success in reinventing the nature of front-office applications via the cloud also has convinced CFOs that the time has come to adopt SaaS solutions to solve their back-office requirements.
The growing receptivity among CFOs toward cloud-based SaaS ERP and financial management solutions clearly can be seen in the rising growth rates of independent players like FinancialForce, Intacct, Kenandy and Rootstock.
Oracle's recent acquisition of NetSuite certainly reinforced the impression that the time has come for cloud-based back-office solutions to move front and center in the corporate priorities of enterprises. Both Oracle and SAP have reported significant jumps in demand for their cloud-based solutions.
Resisting or Heeding the Call?
While the cloud back-office market has been heating up, Salesforce executives have been firm in their public position that the company is not going to enter the fray. Marc Benioff has stated that there are still plenty of opportunities in the customer-facing world of customer relationship management, marketing automation, e-commerce and services.
Further, other company executives have admitted that there is still plenty of work to be done bringing all of Salesforce's front-office pieces together after a flurry of acquisitions and organic expansion into challenging new areas like analytics and IoT.
Yet some of the recent Salesforce acquisitions include functional capabilities that cross over into the realm of back-office systems. For instance, the Demandware acquisition gives Salesforce supply-chain and fulfillment capabilities in addition to e-commerce transaction processing functionality.
Steelbrick's quote-to-cash solutions also tie into corporate financial management systems by coordinating orders, billing, payments and revenue recognition.
Salesforce quickly could add more financial management and ERP functionality by buying FinancialForce, Kenandy or Rootstock, all of which have been built on the Salesforce platform.
A potential FinancialForce acquisition became particularly intriguing when the company named Tod Nielsen its new CEO and president in January. Prior to assuming his new position, Nielsen was the EVP of platform at Salesforce and CEO of Heroku, which was acquired by Salesforce in 2011.
There still may be plenty of reasons for Salesforce to stay clear of offering its own back-office solutions. Its sales team already has a lot on its plate to sell, and convincing CFOs to buy your solutions is a lot different from selling to VPs of sales and service or CMOs.
Mark Your Calendar
However, a growing number of corporate executives want to reduce the number of vendors they have to deal with. Instead, they'd prefer to turn to a strategic source that can satisfy both their front- and back-office needs -- just like during the heydays of on-premises systems.
Oracle and SAP already can offer a combination of front- and back-office solutions, albeit a mix of on-premises and cloud applications, and they are gaining momentum.
As more and more CXOs are adopting a cloud-first procurement strategy, they'd welcome a cloud-centric vendor capable of delivering front- and back-office solutions. Don't be surprised if Salesforce capitalizes on this opportunity.
I don't expect Salesforce to deliver a back-office solution in 2017, but a big-bang announcement at its annual Dreamforce conference in November promising a new back-office solution in 2018 is conceivable.
If it happens, you can say you read it here first.