Expected to break through $1 billion in revenue this year, Zendesk is starting to look like a challenger that can join the top tier of CRM vendors. We spoke to CEO Mikkel Svane this week — he believes there's a growing appetite for a different kind of CRM software, focused on delivering a joined-up customer experience:
I think already a new generation of businesses — if you think about all the new economy businesses, the subscription-based businesses, the convenience-based businesses, the marketplace businesses — they think very differently about the customer experience.
Because these businesses depend so much on return business, ongoing business, there's no real sales transactions for these guys. It's more about maintaining the ongoing relationship. This is really where there's some interesting things and where we need a new generation of tools.
Although the digital trendsetters set the pace for its product strategy, Zendesk's 150,000-strong customer base stretches into more traditional industries too, including government, healthcare, telecoms, travel and hospitality. Around 40% of the business is "either of a size or complexity where you would consider them enterprise," says Svane, both business-to-consumer (B2C) and business-to-business (B2B). But while this is the same territory where the established players operate, in particular CRM giant Salesforce, he believes Zendesk appeals to customers that want something different:
Our customers know to get Salesforce implemented and just use a sliver of the applications is a massive integration effort. For some customers, it's worth their while, if they really want to do a massive implementation. But customers also realize that it's an anchor to the business and it's ultimately like a marriage. They're not usually getting off that platform again.
I think we are talking to a different audience that are much more agile, that needs to get moving quickly, that needs to constantly adapt to the changing landscape of customer experiences, and we feel much more comfortable with that kind of client.
Next generation headless CRM
The company had planned a big launch this week at its annual conference. With the event called off at the last moment due to coronavirus concerns, the product launch has gone ahead with an undeservedly muted fanfare. It comprises the latest iteration of Zendesk's relatively new sales product, a new version of its support product, now integrated with conversational and messaging channels, along with the flagship AWS-based Sunshine CRM platform. Fully available for the first time this month, customers can use Sunshine to aggregate data from other systems and link into their own custom development on AWS. Svane says the line-up stands as testament to Zendesk's ability to innovate in CRM:
If you look at us compared to a lot of different companies, we still invest a lot in research and development. The investments we're doing in something like Sunshine, which is truly a next-generation headless CRM, that can have the potential to change the landscape again.
These are the things that we believe will keep innovation high and will continue to make us a disruptive, innovative player in the market. That's the kind of stuff that fuels us, that makes us excited.
The term 'headless' implies that there's no requirement to use a predefined user interface, unlike traditional enterprise applications. The platform provides all the underlying data aggregation, event handling, core processes and technology required to support a customer experience, but the end result can be delivered either through third-party messaging channels or a customer's own custom applications. As Svane explains:
You have all the components, all the infrastructure, all the data, all the business logic, to build the experiences into your own applications, into your own services, and truly set yourself up for a different way of thinking about the customer.
This is the culmination of a journey from Zendesk's beginnings more than twelve years ago, when it first set out to offer a cloud-based application to help companies manage inbound support requests. Since that time, the advent of popular messaging channels and the trend towards more connected, ongoing engagement with customers has changed the proposition, says Svane:
We have evolved tremendously and at the same time, customer service is not customer service like it was ten years ago. [It] is a lot more immediate today, where it exists in many different pockets throughout the organisation. Sometimes it is much more tied to marketing, sometimes it's much more tightly tied into sales, sometimes it's much more tied to success.
Where one conversation stops and the next one begins across all these departments is much more ambiguous today than it was ten years ago. We optimize less and less for the departmental workflow and much more for the customer experience.
Supporting the entire customer journey
Adding sales, which Zendesk did through an acquisition in 2018, became an essential part of catering for that unified experience:
Being the world's best in one of the disciplines doesn't matter. You have to be able to help your customers support the entire customer journey, the entire customer experience. So we, as a company, felt that we needed to get our feet wet in sales software ... we needed to understand that space better.
We still have a lot to learn, but I think what the future brings is where we start to help businesses think differently about the sales and customer service experience — think about them much more as two sides of the same thing. We're really excited about investing there and trying to build that next generation of customer experience and customer relationship management systems.
Having a slightly different outlook than its neighbours in San Francisco, thanks to its origins in Denmark and a global footprint, will help Zendesk continue to bring a fresh approach, he believes.
I don't necessarily think about ourselves as a Silicon Valley company, I think of ourselves as a global company. How we work in Latin America, how we work in APAC, how we work in different places in Europe, makes me very proud of the international DNA we've created ...
It helps to see outside of the echo chamber and that's something that we care tremendously about.
As I've written before, Zendesk is aligned with the new breed of vendors such as Slack, Atlassian and Okta, whose software supports a much more connected, best-of-breed approach to enterprise applications. The support for a headless architecture and convergence of sales with customer service jibes with other trends we've covered on diginomica, in particular the rise of headless applications and the XaaS model of continuous engagement with customers.
All of this makes it seem to us that Zendesk has a good chance of shaking up the CRM market with its fresh approach.