launch of FinancialForce ERP is just a relabeling of existing products rather than the introduction of anything new. And yet there's rich symbolism in asserting the availability of such a fundamental building-block of enterprise IT within the Salesforce platform on which FinancialForce products run — and that's strategically important for both companies. What's in a name? Today's
Salesforce is the pre-eminent system of engagement, in the lexicon promoted by business writer Geoffrey Moore. To have a complete ERP system that runs natively within the Salesforce platform is an act that inverts the traditional IT order, making the system of record a subsidiary function to the system of engagement.
For many of Salesforce.com's customers, this is an entirely natural development. They are already orienting their business around their interactions with customers. Their investments in Salesforce.com and related systems of engagement are far more strategic for their business than any system of record. Indeed, they often find themselves held back by the difficulty of integrating ageing back-office systems into the real-time, on-demand environment of their customer-facing systems.
Not your granddad's ERP
What better solution than embedding ERP natively into the primary system of engagement? As Kevin Roberts, GM of platform and alliances at FinancialForce.com explained to me in a pre-briefing a few days ago:
"This is not your granddad's ERP. We are embedding ERP inside the CRM, your system of customer engagement. Everyone involved in the customer journey can have that full picture.
"What we're seeing now is those systems of record supporting the systems of engagement. The ERP is serving the customer engagement.
"Fundamentally we have dropped the ERP into the CRM."
Today's announcement builds on the company's Q4 acquisitions of Vana Workforce and Less Software, which added human capital and supply chain management functionality to the company's product portfolio. Like FinancialForce.com's existing applications, both were built entirely on the Salesforce platform, which meant there was very little work to be done to bring together today's ERP product announcement beyond a rebranding exercise.
This easy integration on a common platform is a different world entirely from the massive divide that exists within most organizations as business processes and data move (or doesn't move) from one function to another. As Roberts says:
"Still today the vast majority of our customers today are using Salesforce for CRM. But then as soon as you get to the ERP today it becomes a bit of a rocky road."
"Historically that has been separate departments and separate technologies. The customer experience suffers therefore as you move from department to department.
"Inside the company you have different views of the customer. There isn't that consistency. From a customer relationship and customer support perspective, people are being sent from department to department and the process slows down as people start firing emails at each other to resolve the situation.
"The FinancialForce view is that there's a better way. We have built our apps within CRM. FinancialForce's role is to complete the journey into those ERP functions."
That's not to say there are no gaps at all in FinancialForce's ERP-on-CRM suite. Joining up processes from one application to another requires harmonization of data objects and definitions, for example as staff in HCM become resources in project planning in the professional services application. Analytics is an area that's less well catered for than in most ERP suites, requiring third-party add-ons for serious work. But the core plumbing is already in place, says Roberts:
"It is built on a common architecture from day one, so inherently all these applications are sharing the same database, the same security profile, the same analystics, the same workflow. Historically that's what you'd have been spending a lot of your time integrating."
Customers have chimed in with their stories of improved business processes on the integrated platform. US manufacturer Chambers Gasket spoke at Dreamforce last year about the benefits seen. In today's press release, Kevin Barth, director of operations at IT services provider Crown Partners comments:
"Our 2014 forecast shows that we will nearly double our revenue while only increasing our back office resource by around 20 percent.
"FinancialForce.com has given us the ability to track an opportunity from when it enters our pipeline to collecting cash, something which just wasn’t possible with our previous system."
Roberts revealed that there had been some agonizing within FinancialForce.com whether to go with the ERP branding, because of its negative connotations of old-fashioned, non-responsive IT:
"There's been much internal debate. Obviously ERP comes with the baggage, but people understand what it is.
"What we found was as we talked about the acquisitions and we explained what we did, they instantly said, 'What you've got there is ERP'."
He added that the use of a common cloud platform contributes an important difference from traditional ERP, in that it allows customers to adopt the suite incrementally rather than as a single massive project:
"I think it's different because you don't have to eat the elephant, you can pick the components you want on the one cloud platform."
Today's announcement also reiterated this week's earnings news from parent Unit4, which showed an 85 percent jump in FinancialForce.com revenues over a year previously, to reach a $30.6 million annual run rate. FinancialForce.com is a joint venture by Unit4 and Salesforce.com.
Bringing ERP to the Salesforce platform is as important for Salesforce.com as it is for FinancialForce.com, expressing a trend in enterprise cloud applications that I highlighted just last month:
... the subtle shift in investment towards systems of engagement is masking a more fundamental shift in which systems of record are increasingly taking a back seat.
In larger enterprises they still remain important systems and of course, like the mainframe, they will never go away entirely. But increasingly, and overwhelmingly so in smaller enterprises, they will gradually become subsumed into the larger and far more agile connected infrastructure of the systems of engagement that surround them and which connect the enterprise to its customers, staff and trading partners.
This is the overriding trend that's driving the shake-up of monolithic ERP recently identified by analyst firms Gartner and Nucleus.
For Salesforce.com, there's an implicit validation of what analyst Paul Greenberg recently identified in his CRM Watchlist Elite commentary on Salesforce:
What we are seeing (or at least I am seeing) is the maturation of their vision into a practical reality — an actual platform that all business applications can run on.
The quandary for Salesforce now is, does it move to acquire or build its own native ERP offering, or does it continue to work with FinancialForce.com (in which it has an equity stake) and other partners such as Rootstock and Kenandy, who are focusing more on the manufacturing end of ERP.
To see Salesforce.com as itching to add an 'ERP cloud' of its own would in my view be to predict the future based on looking at where IT has come from rather than where it's going in the future.
Salesforce.com has done the right thing by staying focused on building an all-embracing system of engagement while letting the likes of FinancialForce.com and others in its partner base worry about how to get systems of record tagging along.
Disclosure: FinancialForce.com and Salesforce.com are diginomica premium partners.
Image credits: Courtesy of FinancialForce.com