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Salesforce's stake in Financial Services Cloud is firmly CRM – partners needed

Derek du Preez Profile picture for user ddpreez September 16, 2015
Salesforce recently announced its first vertical cloud - the Financial Services Cloud. But how is it planning to build this out and get customers on-board?

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A couple of weeks prior to the craziness of Dreamforce week in San Francisco, Salesforce dropped a pretty big (but somewhat expected) announcement that it will soon be launching its first vertical cloud offering – the Financial Services Cloud.

My colleague Phil Wainewright covered the story and took a deep view of what it means for Salesforce's vertical approach in the cloud market and what it will take for the Financial Services Cloud to be a success.

However, some questions remained about the future direction of the offering – most notably that at the moment the Financial Services Cloud isn't really a full suite for the financial services market at all. In fact, at present, it's just focusing on wealth management.

Which is, of course, not a problem. But it does prompt us to wonder in what areas Salesforce will be expanding into in this extremely diverse area. How deep will it go and how much breadth will it cover?

If you look at IBM, for example, it has been chosen by the Co-Operative Bank in the UK as a core replacement across its current banking platforms and infrastructure. Could we expect something similar in the future from Salesforce?

Unlikely. Salesforce's SVP and GM of financial services, Simon Mulcahy, took the time at Dreamforce this week to explain to me that whilst wealth management is the current focus, and that retail banking is in sight, the cloud company's stake will remain firmly in CRM. It will be relying on its partner community to fill in the remaining blanks.

Mulcahy said:

We are not going to be a silver bullet, because that would just be crazy. We have 20,000 people at Salesforce now and they wake up and think of nothing more than how do we solve CRM, how do we super-charge customer engagement? That's the biggest force and that's our area of expertise and we will continue to focus there.

What we have to do though is connect to that all the other ancillary needs that these organisations have. Outside of Salesforce they're not all using IBM, they're using hundreds of providers that are very specific to their business. My job is to find those partners and partner with them and make it easier for our customers to get that information.

Whilst Salesforce isn't going to tell partners what to do, Mulcahy did say that he doesn't expect to be competing with any on the CRM and customer engagement front in financial services. Instead, he notes, the clarity around Salesforce's position will allow it to guide partners into logical areas for expansion. He said:

I think what we are not going to do is create exclusivity, we want to create a very vibrant marketplace and that means in many cases there are choices. We are really clear that we are going to own the customer success platform. Partners can go in if they want, but we advise them not to.

There are so many other areas where our partners can go into. But once the partners know where we are, it creates so much clarity to the rest of the ecosystem. Now the rest of the ecosystem is coming in and saying they are going to build all these components. We're not just doing it with partners, we are doing it with customers and partners together.

Anything to do with any financial transactions, products, portfolio management, insight, data, complex highly specific workflows – I'm not going to touch those. I want the best in the world to come in and build those.

Convincing customers

simon mulcahy
Simon Mulcahy

Diginomica regularly writes about the fraught nature of the financial services industry. Banking systems are failing left, right and centre and customers are regularly left without access to their information, or even worse, their money.

Mulcahy says that following the financial crisis in 2008, the industry put its head in the sand and didn't do what it needed to do and aggressively pursue modernisation plans and keeping up with the rate of innovation happening in the market. However, he believes that this has now changed. He notes:

What's really exciting is that these organisations are waking up and saying they have to change. And the imperative is not coming from super, high-end experts that sit in their white lab coats in the basement.

This is CEOs saying that the company has to change. It's CEOs and boards hammering on the table. And if the boards see that the CEO is not acting fast enough, they're sacking the CEO. This is the world we are living in today.

However, Mulcahy admits that getting customers to change quick enough so that they don't miss out on benefits they could be achieving now, is a challenge. He notes that the financial services industry tends to over-complicate their simplification programmes.

With the customers that we are working for, many of them have just got used to a slow pace of change. It's convincing them that when you're moving from complex to simple, fast change is actually really possible. Most people have moved from highly complex, to slightly less complex.

But when you're moving to something that's going to get you better face time to customers, reduce effort for you – this is stuff you can do quickly. We have proven this again, again and again. The hardest thing is getting people over that hump. It's just about whether you have that vision or move in that direction. There's a lot of companies that still want to build themselves.

You need a direction, you need a true north. But what you don't need is a 400 page, 5 year plan document. Good is significantly, monumentally better than perfect. There's not such thing as perfect. By the time you get to 'perfect' you're lightyears out of date.

Wish list for Dreamforce 2016

I also wanted to get an idea from Mulcahy where he would like to see himself and the Financial Services Cloud when it comes to Dreamforce this time next year. Remember, the product has only just been announced and is in the final phases of testing and optimisation and is only due to be launched early next year. There is still a significant amount to do until Salesforce can claim that it has a broad 'Financial Services Cloud'.

Salesforce Dreamforce
Mulcahy said:

[I would like to see] customers who have made the bet and are on the Financial Services Cloud, two iterations of our roadmap and a really positive validation from our partners and our customers that this is the right roadmap.

He would also like to see Salesforce making some headway in the retail banking sector. Mulcahy notes:

Number two is retail banking – off the back of the Thunder platform (Salesforce's recently announced IoT platform), that's a really ambitious journey we are embarking on there. It's now a 'things' scale. Imagine all the information you are pumping out in real-time about you, imagine that being captured and a bank being able to be relevant at the perfect time and proactively reach out to you before you have that problem.

I think that IoT, the language, it puts a 'thing' in the middle of everything. It feels like that 'thing' has to be tangible. But it doesn't. A 'thing' is a bank account, an insurance policy. So what happens when you're driving in a car and somebody rams you – now my car is connected to the Internet-of-Things, so my policy should know I've been crashed into.

Why have I got to put a claim in? Why isn't my policy reaching out to me asking me if I'm okay? It's not just about scale of transactions, it's about changing the mindset. Insurance is going to be a very different experience.

My take

I would be a bit nervous if I was Mulcahy. Whilst Salesforce has plenty of experience and has lots of relationships in the financial sector, being the first one up to go full steam ahead with a vertical cloud must be a bit daunting, Exciting, but equally quite a bit of pressure.

Cloud in the financial services industry is also tricky. Data is key and I believe some institutions will simply not be willing to take that risk in the short to medium term. Or I should say the 'perceived risk'. Because, as we know, they're hardly doing the best job of managing the technology themselves.

I also agree with Mulcahy that getting financial institutions to change at a rate that is quicker than multi-year, is going to be a challenge. I've read through many bank IT transformation programme documents and they are long and the projects are expensive. They're also very much about modernising in line with the ideas of traditional on-premise IT. Changing that mindset and culture will be difficult.

Having said that, this isn't a particularly crowded market and as we know, Salesforce has benefited from being a first-mover before. And if CRM is the name of the game for them in this industry, then they've got the reputation to pull it off. Encouraging the partner ecosystem and getting it balanced will be key.

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