Opinion

Market Implications of Salesforce.com’s Acquisition of Model Metrics

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Salesforce.com’s acquisition of Model Metrics has a number of important implications for the cloud computing and Software-as-a-Service (SaaS) industries. It is a sign of the stage of life of the “on-demand” services market. It is also an indication of the maturation of a key market leader in the rapidly evolving cloud/SaaS world. And it illustrates the growing importance of consulting services to broadening the adoption of cloud/SaaS alternatives across the mainstream marketplace.

Until salesforce.com made this move, it had kept its consulting services resources to a minimum, relying instead on its consulting partners to provide planning, design, implementation and management skills. Astadia and Bluewolf were born a decade ago to help enterprises adopt salesforce.com and integrate it into their legacy environments. More recently, Appirio won venture funding and rapid success in the market helping enterprises develop and deploy applications that tie together salesforce.com, Google Apps, Amazon Web Services and Facebook with their established systems and software.

Ironically, these companies along with Model Metrics and the mega-consultancies such as Accenture, Deloitte and Wipro have historically been the biggest exhibitors at salesforce.com’s Dreamforce conference, despite the promise of cloud vendors that their solutions are far easier to deploy and maintain than traditional, on-premise applications and systems. The growing significance of consulting services in the successful deployment and management of cloud solutions also became clear when salesforce.com decided to add a Services section to its AppExchange solution directory.

In this increasingly competitive consulting services market, Model Metrics has tried to differentiate itself by focusing on mobile and social apps. Although it has completed projects for clients of all sizes, Model Metrics’ experience working with large-scale enterprises also illustrates how the SaaS and cloud movement is quickly penetrating this key segment of the market.

As with any maturing technology wave, when large-scale enterprises decide they are going to make a strategic investment in a new area, they expect their vendors to have sufficient in-house skills and resources to guide the customer’s efforts. While there are a growing number of consultancies offering services to help organizations of all sizes across nearly every industry, many of the largest companies moving to the cloud want their cloud vendors to have “skin in the game.” Rather than rely entirely on an independent consultancy, the customer wants the added insight and expertise that only the vendor can supply.

Salesforce.com’s decision to acquire Model Metrics is driven by these escalating demands and the rising expectation of its largest customers. Instead of building its own consulting services cadre from scratch, salesforce.com has quickly gained a proven team with established skills and methodologies to meet its customers’ needs. Assimilating a consulting services business into a software company can pose serious problems in traditional product-centric organizations. However, the strong working relationship between salesforce.com and Model Metrics, as well as salesforce.com’s track record of success absorbing previous acquisitions should mitigate the integration risks.

In my view, the most important concern is if salesforce.com’s other consulting partners will view the acquisition of Model Metrics as a competitive threat. So far, that doesn’t appear to be the case.

First, they all recognize that salesforce.com doesn’t intend to make consulting a major part of its business. It appears that senior executives at salesforce.com proactively notified the other consulting partners about the acquisition and reassured them that they don’t intend to become a major competitor.

Second, there is overwhelming demand for cloud consulting services, which is only growing more rapidly by the day.

Third, customers understand the differing value of vendor-independent consultancies versus vendor-centric consulting services.

Salesforce.com’s acquisition of Model Metrics clearly demonstrates the pivotal importance of providing consulting skills and services to meet the needs of a rapidly expanding base of cloud customers.

It will be interesting to see how quickly more independent consultancies become acquisition targets of the other leading cloud vendors during the coming weeks and months.

Jeff Kaplan is the Managing Director of THINKstrategies and Founder of the Cloud Computing Showplace. He can be reached at jkaplan@thinkstrategies.com.

Comments

By Gary Damiano

Nice write -up.

My observation is that ModelMetrics represents a considerable amount of intellectual property regarding how to successfully plan & implement enterprise migration to cloud based solutions and the social enterprise. If SFDC can institutionalize that knowledge and use it to springboard Chatter and other cloud based solution implementations that deliver measurable impact, their social enterprise initiative will achieve the momentum needed to firmly establish the market category.. IMHO, this acquisition was less about driving professional services revenue and more about jump starting the adoption of social enterprise.

By Jeff Kaplan

Gary: I think your assessment is right on. There is no question that Model Metrics’ skills and experience can help SFDC accelerate its Chatter, social enterprise and mobility capabilities. However, it is unusual for a consulting firm to be acquired to serve this purpose in a product development role, and it does point out the growing importance of professional services in the adoption of Cloud solutions.

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