Techaisle Blog

The first entry point to cloud for 51% of SMBs has been SaaS (cloud business applications). However, most businesses often obtain only fragments of cloud’s potential benefits because applications deployed usually lack the integration needed to enable a seamless enterprise-wide business process that supports agility, efficiency and growth. Discrete cloud solutions offer immediate relief from problems in many areas but disconnected cloud applications introduce friction. SMBs and midmarket firms are increasingly taking an integrated approach for a zero-friction future. The “rule of 5” refers to sources of complexity in an SMB and midmarket firm’s business related to:

1. Information timeliness/accuracy problems
2. The problem of incomplete information
3. Business process problems
4. Customer service and experience problems
5. Cost and consistency problems

This is where Zoho steps in. Zoho One - Zoho’s flagship cloud-solution, marketed as the operating system for the business, runs on a unified database with a unified data model with data pillars that enable seamless integration to deliver single truth for the business empowering users with a unified experience. A collection of 45+ apps running on a single database architecture and purpose-built on Zoho technology stack - services, software, hardware and network infrastructure - deployed on Zoho’s own global datacenters ensures performance, availability, security and privacy. Clearly, a visionary design architecture, which is being replicated by other CRM and ERP-focused vendors. But Zoho is ahead.

Why Zoho has the right solution to address the “Rule of 5”

Zoho’s secret sauce lies in its interconnected set of data pillars that feed all relevant apps. Each data pillar contains very specific metadata of employees, communications, customer information and opportunities, finance, assets, and inventory. Consistency has a lot to do with vertically integrated systems, a design paradigm that Zoho follows religiously. Although Zoho One is the holy grail for digitalizing business processes, most Zoho customers use a set of nine apps: CRM, Analytics, Books, SalesIQ, Expense, Invoice, People, Social, Inventory.

Zoho has the right solution to address the “rule of 5”.

On Monday, 10th June, Salesforce announced a definitive agreement to acquire Tableau bringing Salesforce one step closer to empowering analytics-driven digital transformation for its customers, enabling enterprise performance management, driving connected businesses and hurtling itself on a collision course with Microsoft and SAP. Microsoft’s Power BI is rapidly dethroning many analytics platforms including Tableau and SAP is taking giant leaps towards customer experience management with Qualtrics.

Besides adding to topline revenue of Salesforce, the acquisition will likely not have any significant material effect on revenue growth rate as Tableau’s revenue is less than 10% of Salesforce’s revenue with Q/Q growth rate only slightly more than half of Salesforce.

Salesforce began as a SaaS company in 2000 with its famous “No Software” logo and attention-grabbing advertising of a fighter jet striking a biplane. In the last seven years it has transformed into a leading cloud SaaS company with creatively created and strategically segmented solution offerings – Sales Cloud, Marketing Cloud, Services Cloud, Commerce Cloud and Analytics Cloud. But collectively these are only customer-focused applications that operate within the Salesforce platform. But the scope of SaaS impact mirrors the scope of activity in the enterprise itself. SaaS is being meaningfully applied to IT operations, to core business functions (finance, HR, business operations, ERP) in addition to customer-facing tasks (customer service, marketing and sales). There are dozens of discrete SaaS application categories and thousands of applications that address part or all of the requirements in a specific area, or which bridge across process requirements.

The true benefits arise when cloud applications are connected to each other. Connected applications provide businesses the benefits of agility, efficiency, collaboration, alignment, customer intimacy and innovation. This cross-functional visibility is important to diagnosing issues within the business and formulating enterprise strategy. Almost all businesses, from small to enterprise are on their digital transformation journeys. Frequently, a key step in the digital transformation process is to automate related tasks within and across business process. In the absence of adjacent SaaS applications such as ERP, HR, financial management - Salesforce was forced to acquire MuleSoft, the integration solution to help businesses of all sizes create connected applications.

But a key missing piece from Salesforce’s portfolio has been analytics. Regardless of the business issue, analytics provides an answer. Businesses are prioritizing a wide range of improved outcomes: improvement within existing operations and processes, expansion of customer base, profitability, creation and accelerated delivery of new offerings, reduced cost, and enhanced ability to manage the unknown. Remarkably, each of the issues can be addressed with analytics solutions – and indeed, businesses are using analytics to address each today. This provides analytics vendors with a powerful ability to link product/service capabilities with critical ‘care-abouts’. And exactly this capability was missing from Salesforce’s portfolio. Its AI-led analytics platform Einstein was not proving to be a true analytics solution but rather a collection of dashboards. And for that matter, neither is Tableau (which leans more towards data visualization than analytics). However, with some of its recent announcements such as Ask Data and updates of VizQL, when combined with Salesforce platform may prove to be very useful for new and common customers.

If connected cloud applications is a logical starting point for connect businesses then connected insights is the logical destination. A fact that I feel is being pursued by Salesforce. Most businesses are developing an understanding of the power of advanced analytics, and many are well along the path of installing a “data culture” in which facts are used to identify options, not simply to justify decisions based on instinct or anecdotal feedback. Many cherished but complex metrics, such as return on marketing investment or lifetime customer value, can be established by providing analysts and data scientists with rich data and sophisticated tools. Both MuleSoft and Tableau bring Salesforce closer to delivering an Enterprise Performance Management (EPM) system which will allow businesses to have a new attitude and culture that values and uses data analytics as the quickest way to gauge overall performance and specific areas of interest at a glance. And a key reason why SAP purchased Business Objects many years ago, Oracle acquired Hyperion and IBM absorbed Cognos and SPSS, but some fell by the wayside.

Most businesses including SMBs and midmarket firms that have used CRM and ERP systems within the past few years are familiar with the dashboards that are available with many of these applications, either embedded or purchased/developed separately. Dashboards will continue to evolve and be dynamic in several ways; the way they use data from subsystems like ecommerce and other real time feed sources, the way users can personalize the layout of their dashboards, and the ability to build KPIs “on-the-fly” by calculating variables on the screen and saving the result in a meta-repository for all to use. While several SaaS vendors allow this kind of metric building and start the user at a dashboard, we have yet to see anything targeted to the mid-market or SMBs that connects the performance across front office, production, fulfillment and customer service almost out of the box – so the future has been here for a while and we are waiting for the market to catch up. Microsoft fired the most recent salvo with Power BI and now Salesforce is responding. If only Salesforce bought an ERP firm or HR or collaboration or virtual workspace or customer experience/survey. It would certainly be a game-changer.

Techaisle SMB and Midmarket SaaS adoption data comparison from 2015 to 2019, illustrates that US SMB SaaS adoption went from widespread to practically ubiquitous. In 2015, less than 60% of microbusinesses and only 62% of all US small businesses were using SaaS, though the balance reported an intent to adopt software-as-a-service. In 2019, microbusiness use of SaaS has reached 77%, and overall small business SaaS use is up more than 29% to 80% of all US firms within the 1-99 employee segment. Looked at another way, growth from 62% to 80% means that within four years, over 47% of small businesses that weren’t already using at least one SaaS service adopted the technology.

The relative increase in the midmarket is even more striking. In 2015, 83% of US firms with 100-999 employees were using SaaS; by 2019, this figure has reached 98%, meaning that 88% of the 17% of midmarket businesses that hadn’t adopted SaaS in 2015 began using SaaS in the 2016-2019-timeframe, and leaving only 2% of US midmarket businesses without any SaaS services in use.

Data gathered from Techaisle SMB and Midmarket SaaS adoption survey suggests that the immediate planned progression of SaaS portfolios will be measured in the US but not so in most other regions. European SMB SaaS adoption is still tepid at 49%, Asia/Pacific is not far behind Europe at 46%, and Latin America is still only 36%.

As is generally the case with cloud solutions, SMB buyers who have purchased or plan to acquire SaaS applications most often approach the ISV directly. While SPs/MSPs have traditionally been the most common alternative source of SaaS solutions, new SMB customers are increasingly turning to consultants – and to specialized cloud brokers – if they are not engaging directly with the ISV. The data indicates that these cloud service brokers are emerging as an important force in the SMB SaaS market.

Add-on services represent a large and essential source of revenue for SaaS suppliers; license spend represents less than 25% of total SMB customer spending, while non-license spend on services accounts for over 75% of the total. Support for analytics/dashboards and system integration are the two most widely adopted add-on services. Current SMB users are looking to invest in systems integration, sales process design, disaster recovery and deployment services, while new SaaS buyers are adding maintenance and operations, systems integration and analytics/dashboards to their new SaaS solutions. Some services are ‘stickier’ than others. Survey also found that SMBs often drop services after initial deployment is complete, but backup/DR, data cleaning, security, and analytics support are each retained by at least three-quarters of initial SMB SaaS buyers.

Stickiness, however, is mainly a function of company size. Very small (<10 employees) businesses tend to dramatically reduce annual spend after deployment, while small and mid-sized businesses report relatively flat year-over-year spending.

System configuration (including designing reports, dashboards and analytics), customization, data and/or application integration, consulting (including sales process design) and training are the top five non-license services acquired by SMBs, as measured by percentage of total services spending.

Let us drill down into services usage with the adoption of CRM.

My days of being critical of Salesforce and their SMB strategy are over. With the introduction of Sales Cloud Essentials and Service Cloud Essentials, Salesforce has once again become relevant for SMBs, especially for the very small (1-19 employees) and overall small business (1-99 employees) segments. For an SMB, CRM is not only – or even primarily – a system used to manage pursuit of new accounts. The most common use of CRM is as a means of organizing customer services. Techaisle SMB & midmarket survey shows:

• 18% of micro businesses (1-9 employees) are using a cloud CRM solution
• Cloud CRM usage within small businesses has increased by 31% in the last 1 year
• 40% of small businesses are planning to use a cloud CRM solution in the next 1 year
• 15% of micro businesses (1-9 employees) are using a cloud Customer services solution
• Cloud Customer Services usage within small businesses has increased by 15% in the last 1 year
• 49% of small businesses are planning to use a Customer services solution in the next 1 year
• 73% of very small businesses (1-19 employees) using CRM are also using Customer services
• 56% of very small businesses (1-19 employees) using Customer services are also using CRM

Sales & Service together for better customer relationship management

Small businesses often struggle with processes around customer relationship management – maintaining contact with past buyers, preparing for renewals or new product upgrades, informing them of service releases, etc. – and a CRM system provides a central means of scheduling and tracking these activities with/for each customer.

The improved visibility resulting from cloud-based sales and marketing automation systems has in turn illuminated the need for a better-integrated customer management and support processes. This insight is prompting increased investment in systems automating customer support tasks.