Sales Force: May the Force be With You

Last week I had a chance to hear Marc Benioff and his team rev up the SalesForce.com faithful at the Tour de Force in the Palace Hotel in San Francisco. Among the speeches, panels, and even a guest interview with Marc Andreessen (Ning), there were some new products as well as an alphabet soup assault of acronyms like Force.com, Platform as a Service (PAAS), Cloud Computing Architecture (CCA), etc.

Behind the deluge of products there were a few unique announcements and some traces of SalesForce.com strategic directions. Much of the focus was on improved developer tools in Force.com. These are all critically necessary for developers and the ISV community if SalesForce.com is to be successful in establishing itself as a platform player and moving away from being just a CRM vendor. What was unique was making this an on-demand development offering.

What I found even more interesting was the new pricing they announced. Over the last decade software and service pricing has evolved multiple times with more than 15 different models and variations. One of the biggest problems has been value pricing for the use of enterprise applications –specifically for infrequent users. No one has really cracked this nut.

Now SalesForce.com has announced special “per log-in” pricing for apps built on Force.com. The intent is to charge for a person who only logs in to use an application occasionally. These are the “non-power users“ of applications. In the past I’ve referred to this as the Occasional Use Pricing (OUP) dilemma. You want to let people use the product occasionally, but you can’t charge them the full value of the software. And if you lower the price to the level they are willing to pay, you undercharge the power users and leave money on the table. Salesforce may not have completely solved this problem, but they are trying a new approach that could help.

The intent is to charge $5 for each time a user logs in to use an application rather than the monthly dollars per user fee usually associated with SAAS pricing. (As a special introductory offer they are charging only 99 cents per log in.) As Marc pointed out, they expect to learn a lot from this experiment. I’ll also be following this new initiative closely.

This approach really addresses two distinct types of occasional use: occasional users and occasional usage. Occasional users are the ones that use the application on occasion, perhaps a few times a month, but don’t want to pay a high monthly fee. Occasional usage applies to those people who don’t really require ongoing use of the application, but due to a special circumstance have what amounts to a one time need. By addressing these two needs with this new Occasional Use Pricing (OUP), they may be able to attract more users and extract greater value from applications. This should also benefit other ISVs and the developers in the SalesForce.com ecosystem. You can expect to see more of this, even if it is only moderately successful.

Finally, as I step back and look at the overall announcements, I was struck by the breadth of their strategy. SalesForce.com is continuing with their focus on the CRM platform. They’ve moved into offering the platform as a service (PAAS). In addition to bringing out their own developer environment (IDE), they are also entering the utility computing fray with their Cloud Computing Architecture (CCA).

Although I like the direction of the strategy and the strategic adjacency of these new initiatives, I can’t help but wonder if they should ameliorate their risk by partnering with others. Not just with their developers, but some of the other major players. These relationships could speed time to market, further accelerate revenue growth, reduce risk and add credibility to the SalesForce story.

Now, they are competing on multiple fronts with the old line platform vendors (MS, SAP, Oracle), the new platform vendors (Google and Facebook), IDE companies (MS), as well as CRM companies (Oracle, SAP) and utility computing or cloud computing companies like IBM and Amazon. That’s a healthy dose of competition.

So even if this strategy seems to be a stretch, I congratulate Marc on the boldness of his vision. May the Force be with you as you pioneer new aspects of the SAAS model. I just keep thinking there may be lower risk, higher leverage opportunities to partner with key players and turn them into partners instead of potential competitors. Let me know what you think about these strategies as well as their new pricing experiment.