Vlocity aims to be the biggest industry cloud of all

On the day in October 2013 that industry cloud pioneer Veeva Systems listed in New York with a near $5 billion valuation, David Schmaier was strolling the show floor at Salesforce's annual Dreamforce event in San Francisco. He was looking for similar ventures that would target other industry clouds, but was astonished to find no one following Veeva's playbook.

I was shocked that there were no vertical software companies. And yet the biggest of all 3,000 software companies [in the Salesforce ecosystem] is the one that went vertical.

So we decided to start Vlocity.

Schmaier joined up with the original founders of Veeva in January 2014 to create Vlocity and seize the opportunity in other verticals. Where Veeva had targeted just one industry — life sciences — Vlocity would target a clutch of them.

If Veeva was the first industry cloud company, we're the first multi-industry cloud company.

Vlocity's ambition is to replicate Veeva's success many times over. Less than two years later, it already has offerings in production for four target industries — communications and media, public sector, insurance and health insurance. All together, those markets are ten times larger than the life sciences vertical that Veeva addresses. And they all have a similar need for complex, industry-specific processes when dealing with customers. As Schmaier told me when we spoke by phone last month:

We picked these four because we picked the biggest markets that require the most customization per vertical.

Also we're helping the world. These industries have the worst customer services of all industries.

Faster customization

The essence of Vlocity's proposition is that it adds all the customization of the underlying Salesforce platform that companies in these industries would otherwise have to add themselves — what Schmaier calls the 'contiguous functionality' such as problem handling, workflow or product configuration that surrounds their core CRM needs.

Because Vlocity is focused on doing this for the entire industry, it can do it faster, better and for less cost than any player can do on their own, he told me.

If you look at CRM, more people are picking cloud than on premise. If you pick cloud, you get to build all this contiguous functionality yourself. You're taking a high performance automobile but you're kind of ruining it with all this customization.

We do all that for you. We can deploy immediately because the software already exists, and we give you innovation in the cloud and keep it in sync with Salesforce.

Because it's all out of the box, it's got to cost less and it's got to be faster [than doing it yourself].

The first deployments are living up to that promise, taking as little as 45 days to get up and running. In one of the largest so far, the customer had already signed a contract with Salesforce and was about to embark on a customization project of its own when the CTO saw a demonstration of Vlocity at Dreamforce last year.

Background and funding

It seems almost incredible that Vlocity should be demonstrating and implementing such complex projects less than two years after its foundation. As its name suggests, the company is clearly moving fast. Its ability to do so stems from the background of its founders and the scale of its funding.

Schmaier and his co-founders were key members of the management team at CRM pioneer Siebel, where he led the product team through its development of 24 separate industry-specific CRM products. The co-founders later went on to found the company that became Veeva Systems. They know the blueprint inside-out for industry cloud built on the Salesforce platform.

After an initial round in 2014, Vlocity raised $42.8m this April in an investment led by Salesforce Ventures with participation from Accenture. Compare that to the $7 million funding that was enough to propel Veeva to its IPO. Vlocity is keeping Salesforce close in other ways too, deliberately setting up headquarters in the same San Francisco skyscraper as the platform vendor's own development team.

It's the right time in the evolution of cloud computing to make a big bet on industry cloud, Schmaier told me.

Just like when Marc Benioff founded Salesforce the cloud made sense, [today] the industry cloud makes sense. It's very simply put — faster time to market.

Now that these cloud architectures have been around for a while, people are starting to specialize for these different markets.

There are now some 40-50 Salesforce partners focusing on vertical markets, Schmaier estimated. While Vlocity is making the biggest play, there is plenty of market opportunity to go around, he believes.

We're not competing with other Salesforce partners. Our competition is people building custom stuff themselves.

My take

This is a hugely experienced team that appear to have built impressively sophisticated applications in rapid time. They certainly seem to have the capacity and the funding to replicate Veeva's success in other industries and could quickly become a significant vertical industry cloud player. It will be interesting to watch their progress and I am set to speak to some customers at Dreamforce this year.

What is most striking is the cost advantage gained by building on the Salesforce platform. This is not a new phenomenon — in 2009 I called it The PaaS Shortcut to Application Development, quoting Jason Green of Emergence Capital (an investor in Veeva) saying of Maxplore (which subsequently became ServiceMax):

With $2 or $3 million, we can take them to a point that would have needed $10 to $15 million if they'd had to build it all themselves.

What's intriguing is to consider whether that means that industry cloud is only viable when vertical functionality is added to an existing multi-tenant cloud platform. If it does, that narrows the field of potential contenders quite considerably simply because of the small number of candidate platforms.

On the other hand, the likes of Plex Systems, which serves manufacturing industry with its own platform, provides an example of an alternative approach that appears to have some traction.

There's more to say, then, on this topic over the coming weeks and months, and I'll be writing about other examples both inside and outside of the Salesforce ecosystem.

Disclosure: Salesforce and Plex are diginomica premier partners. Vlocity is funding the author's travel to Dreamforce next month as part of a paid consulting engagement.

Image credit: Five cloud smoke stacks in blue sky © chungking – Fotolia.com.