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Salesforce.com made a surprising announcement of its agreement to acquire Rypple, a software company that defines its product as a social goals application. I call this a surprise because although Salesforce has been extending its reach beyond sales and customer service to IT in providing a platform, tools and a database for building applications and storing data in the cloud, until now it has not entered directly into other lines of business. After its annual Dreamforce conference last summer, I analyzed the company’s strategy and products. Now I want to consider what this acquisition means for Salesforce and the human capital management market.

Rypple provides a new type of application that operates within the confines of cloud computing that enables managers and team members to collaborate in accomplishing specific objectives in an interactive manner. Perhaps Rypple’s largest challenge has been waiting for potential customers to catch up to this innovation and be willing to try a new approach to coaching team members. Unlike traditional HR and talent management applications, Rypple addresses goals and objectives, coaching and feedback, and performance reviews in a social environment.

I decided to check out the application for myself and ensure my analysis is as accurate as possible, which I think its uniqueness makes necessary to understand what Salesforce.com has acquired. Rypple focuses on three key activities: coaching toward defined objectives, recognition of work accomplished and feedback on the performance of the individual who has done it. The application runs in the cloud, which no doubt pleases Salesforce. It took me just minutes to set up in its cloud computing environment with the application and engage members of my team with it, even accessing it with its native application on the Apple iPhone. Rypple provides a comfortable user experience and intuitive methods for people to work toward common goals and socialize the focus.

Rypple has been active in getting testimonials from its customers, which include Facebook, Spotify, Rackspace, Kobo, Jive Software and other newer companies mostly in the Internet technology sector. Rypple had a simple pricing plan that offers some basics for free and charges $5 to $9 per month for more functionality for goals and reviews, coaching and feedback along with enterprise-level integration and support. Rypple also provides integration with Google, iPhone, Jive and Pivotal Tracker, which demonstrates its ease of access from other environments.

Now the question is what Salesforce.com plans to do with Rypple. It will create a new business unit and rename the produce Successforce and is likely to integrate this with Chatter as part of an effort to make that an enterprise backbone for social collaboration. This layering of applications complements Salesforce’s strategy for Chatter as it has done with its Service Cloud. In the short term I doubt that Salesforce will jump into the larger market for talent management and try to sell Rypple to human resources departments; this requires focused investments into this line of business, which it has not been doing as much as it has with IT. So the impact of the acquisition on the human capital management software market is  not clear. Salesforce  will also need to address the future of its partnership with Jobscience which applies aspects of CRM to administer and support HR and human capital management and has been providing them some significant proof points of its efforts.

Salesforce’s customers in sales and customer service should be eager to examine this application as should those looking to build upon its use of Force.com in the enterprise. Rypple also could help Salesforce gain an edge on Oracle’s Fusion for HCM that I assessed and its recently announced Oracle Social Network that lacks the vision and demonstration as this announcement. This move puts Salesforce.com more in line with the direction of what Saba and SuccessFactors (which is being acquired by SAP) are doing to advance social collaboration into human capital management. At the moment it is not clear if Salesforce will continue to support the existing stand-alone offering and pricing of Rypple, let alone the free version, so users should be cautious until the deal is final and Salesforce communicates the new direction. In any case this is an interesting move as Salesforce continues to surprise the market with its progressive applications of social collaboration for enterprise lines of business.

Regards,

Mark Smith – CEO & Chief Research Officer

 

NICE Systems last week announced an agreement to acquire Merced Systems, a provider of business applications for customer service and sales organizations. This acquisition slipped by with little fanfare, but it marks a significant milestone for NICE, a major provider of applications and technology for call centers and a player in their evolution into multichannel contact centers. Building on a good 2010, as my colleague Richard Snow noted, NICE expects to reach almost $800 million of revenue in 2011, which would make it one of the largest companies in its segment. NICE has made multiple acquisitions to build its software portfolio, including purchases of Actimize, CyberTech, eGlue and others mentioned below. It recently won our 2011 Ventana Research Leadership Award in the contact center category with its customer deployment at Alliance Data. NICE Systems plans to have Merced Systems as a foundation of its enterprise systems and a complement to its contact center workforce optimization offering. This purchase builds on its other acquisitions, including FizzBack recently and IEX and Performix in 2006, which helped NICE establish its customer service and back office agent performance management software. That area has not grown as quickly as NICE would like, mostly due to marketing that was not aggressive enough in attracting customers. NICE recently rebranded its NICE SmartCenter for helping agents, as Richard noted, and is leveraging its assets into the back office, which he also assessed. Our benchmark research on contact center technology found that companies’ priorities for future investments match up well with NICE Systems’ focuses on expanding customer service agent applications and analytics applications.

Merced Systems brings to the deal a strong foundation based on analytics and metrics: areas we have benchmarked in the contact center and sales among others. While software for customer service and contact centers motivated this acquisition, NICE Systems plans to expand into sales organizations through Merced’s sales performance management. In agent performance management NICE and eight competitors all have comparable ratings in our Value Index for Agent Performance Management. NICE is rated near the top, but it has struggled in its marketing and sales. This is part of why it needs to retain Merced’s team to continue its market momentum. On the sales side, with a smaller number of dedicated providers, Merced ranked in the middle of the Value Index for Sales Performance Management but is part of a significantly larger organization worldwide with access to a large number of organizations using NICE.

Customers of Merced Systems should look for affirmation that NICE Systems will include their needs in its product roadmap before they make further purchases and deployments. They should look for continued operations of Merced as an entity and availability of its applications. Potential purchasers should restrain themselves to ensure the Merced products they are examining are part of the future NICE enterprise portfolio as the company evolves its application architecture. Existing NICE customers will find a new portfolio in agent performance management and sales performance management, which appear to put NICE’s existing performance management applications at risk or position them to receive lower priority. On another front it will be interesting to see if NICE will continue distributing Merced Systems’ new analytics offering built on an OEM of MicroStrategy, with which the company has built applications that also operate on smartphones and tablets.

NICE Systems made a wise investment in acquiring Merced Systems, especially at the price it paid (approximately $150 million and $20 million in cash), considering the company’s profitability, growth, products and customer success. Now NICE must retain Merced’s key people and grow its investment in the newly acquired company. NICE can extend its current reach to grow its business significantly, pending effective investments in marketing and sales. 

Regards,

Mark Smith – CEO & Chief Research Officer

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