On September 18, 2013, Salesforce.com and Workday announced a strategic alliance promising to deliver a lot of the capabilities of the PeopleSoft component of Oracle® entirely in a cloud Software as a Service (SaaS) offer. When I put together this deal with Salesforce’s partnership with Oracle, announced in June of this year, I have to congratulate Salesforce on closing two very potent alliances.
The specifics of the deal, which I am not going to touch on here, can be found in an article, Salesforce and Workday form Cloud Alliance, authored by Quentin Hardy, and published, same day as the announcement, on the New York Times website. What piques my interest in this story is the lesson the chief marketers at Salesforce.com (probably Marc Benioff, the CEO and founder) are giving on how to leverage application scale to boost the revenue torque represented by SaaS cloud subscriptions.
As I’ve written elsewhere, the difficulty in all of this for mature ISVs is precisely the paltry torque of cloud subscriptions. It’s very hard to part with revenue models built on sales of juicy on premises software licenses for cloud subscribers who usually pay a mere fraction of these prices in the form of monthly subscription costs. But what if the same infrastructure, and the same applications, could be promoted to an ever increasing set of enterprise prospects by negotiating alliances with other ISVs with complementary product offers? From what I’ve read of this deal and the earlier deal with Oracle, I think this is where Salesforce.com is taking us.
Of course, if they succeed and start to demonstrate substantial growth in revenue, per subscriber, over the next few fiscal quarters, then mature ISVs looking for a method to successfully attain an adequate revenue base from cloud offers to fuel continued growth and profitability will have a model worth following.
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