What We Talk About When We Talk About ‘Industry Cloud’

The term “industry cloud” has a short, not particularly auspicious history. Like, say, information governance or technology-assisted review, it is a descriptor of uncertain meaning, prone to interpretation and, thus, prone also to manipulation. In a previous post, Esteban Kolsky described the term as, in essence, a clever marketing invention.

“Industry cloud,” to our understanding, is shorthand for “custom cloud,” which, actually, is the shorter variant. It is a cloud architecture that has been outfitted to accommodate the business, operational, regulatory, legal, security and other considerations with which specific industries or verticals must contend. This is in part why the first targets of the industry cloud campaign are the industries that have been traditionally resistant to plain old cloud — those being, among others, healthcare and financial services.

Here we ask Denis Pombriant, a leading technology analyst at his firm Beagle Research and contributor to Enterprise Irregulars, to trace the rise of industry cloud and the corresponding demise of on-premise technology using his forte, CRM, as a point of reference.

Some observers, even those associated with traditional software, have portended a similar evolution from on-premise to cloud to specialized cloud in the area of e-discovery, where, to paraphrase Pombriant, good terminology is also corrupted to the point it becomes useless. Other parallels between CRM and legal technology applications abound — and consuming the Q&A with that context makes for a worthwhile thought experiment.

Logikcull: There has been some talk of an “industry cloud.” How should it be defined?

Denis Pombriant: I can’t see why we need another term, or what that term would mean. The purpose of the cloud is to provide an era of computing that is more like an electric utility than something you buy, install, maintain, watch wear out, and repurchase. Cloud should be everywhere and be very powerful and we should not have to be reminded that it is somehow segmented.

There are certainly needs for vertical market solutions but they are literally applications to the base cloud platform in my thinking. They are parts of the cloud but not the cloud, the same way that a real cloud is not the sky. Too often in our business, good terminology gets corrupted to the point that it loses meaning. Cloud is on that trajectory.

“Cloud should be everywhere, and we should not have to be reminded that it is somehow segmented.”

Logikcull: It seems like industry cloud offerings are pushing the more resistant business sectors, like financial services and healthcare, to adopt cloud technology. Is this true? What characteristics of the industry cloud may have persuaded these reluctant sectors to adopt the cloud?

PombriantThere are many laws and regulations that I don’t pretend to understand regarding privacy and security that have to be worked through in every market at the market’s own pace and subject to the regulators. This was certainly true here. Also the verticals you mention are traditionally late adopters for this kind of technology so it doesn’t surprise me that they’re just coming onboard. But I’d also say, just looking at healthcare as an example, we’re now seeing doctors carrying laptops or tablets with them and doing some amazing things to look up patient records to, for instance, understand what drugs a patient is on or the results of a recent test such as an MRI or a simple blood test. All of this is giving us better and faster outcomes.

Depending on a provider’s setup, a provider can order and schedule outside testing or even look up the side effects of drugs and many other things. All of this required more than hardware or even software. It depends on the Internet and some very specialized apps out in the cloud. Those apps weren’t available until relatively recently, so the question of what benefit modern technology could bring to healthcare, for one, was up in the air until just a few years ago. So a lot of things have to come into position for some verticals to be able to take advantage of emerging technologies and that takes time. Often we overlook this.

Logikcull: What were the keys to the success of Veeva (which builds cloud applications for pharmaceutical and life sciences firms) as an industry cloud app?  What is Vlocity doing successfully now?

Pombriant: Veeva has led a charmed life and part of their success owes to the fact that one founder, Matt Wallach headed up the pharmaceuticals group at Siebel Systems (the once-dominant on-premise CRM that Oracle purchased in 2005) more than 10 years ago. Under him, Siebel cornered the pharmaceutical market for sales force automation/CRM because Matt really knew the business. When they started Veeva, several industry veterans decided to invent the next generation of pharmaceutical CRM adapted to mobile technology and other refinements. So Veeva is a great success.

Now, Siebel had over 20 verticals and former EVP David Schmaier spun up most if not all of them. Schmaier is a founder of Vlocity and the company is out to do the same thing Schmaier did when he was at Siebel — and he’s getting good traction.

One thing to keep in mind is that these ex-senior Siebel people have a lot of contacts in the industry and in at least some cases they’re going back to their old customers with an entirely new take on vertical apps that leverages modern technologies and is well suited to the times.

Logikcull: Looking back at the demise of Siebel and rise of Salesforce, what in your opinion brought about the end of on-premise CRM?

Pombriant: On-premise reached a saturation point, just like the market for hula-hoops. It was so expensive to buy, install, and maintain that many companies simply could not afford it. Then it was undercut by Salesforce and some others with something better, faster, and way cheaper. What happened in front office software in the handoff from Siebel to Salesforce was really textbook Clay Christenson from his “Innovator’s Dilemma” series. I am sure it is being taught in business schools today.

“What happened in front office software in the handoff from Siebel to Salesforce was really textbook Clay Christenson from his ‘Innovator’s Dilemma’ series.”

Logikcull: You’ve written about Siebel being transaction based and today’s CRM being more “process” based.  What do you mean?  Can you explain for our lay audience?

Pombriant: Early CRM’s metaphor was the spreadsheet. Each cell in a sheet can contain one data item and if you change the data there’s no record of the old stuff. Such systems are useful for memorializing single events like a sale, i.e. a transaction. That CRM was right for the times. It was aimed at helping a hoard of emerging fast growing companies capture their first sales. But then everyone discovered that they needed a historical perspective on customers and that customers became discerning and sales cycles began to lengthen.

The movement started in customer service where you need to keep records of encounters with customers because you are dealing with a service process. People didn’t call you up simply to get a piece of information; they wanted and needed resolutions to their important problems and if they had to come back, it was just smart to be able to pick up where you left off. For that, you needed to capture more than a single transaction; you need to capture a process and the state of the process as you consider whether to send the customer to another specialist.

So that’s process and the need for process support has permeated all parts of CRM including sales and marketing. Customers don’t want to receive the same introductory information when they go back to a vendor with questions, so marketing systems have to take customers through a nurturing process that results in a handoff to sales.

Sales people need to be able to track where they are in a sales/purchase process with customers if they expect to land a deal. They also have to complete milestones that are somewhat idiosyncratic to their organizations and their products. Does the customer need a demo? When in the process is it best to do a demo? Before or after confirming with a senior executive that there’s budget for a product or service? It goes on and on.

Perhaps the greatest driver of process orientation is the subscription service. Since subscribers can opt out at almost any time, it’s critical for vendors to understand where they are in a lifecycle process with their customers. In my book I write that even if you aren’t dealing with a subscription service but with a traditional product driven company, you’ve been trained to think like a subscriber and smart vendors know this and treat you accordingly, through a lifecycle process, not a transaction. That’s why CRM is moving in the direction of process today.

“Perhaps the greatest driver of process orientation is the subscription service. Since subscribers can opt out at almost any time, it’s critical for vendors to understand where they are in a lifecycle process with their customers.”

Logikcull: It’s interesting that Vlocity built their product on top of the Salesforce1 platform. Was that necessary? Why did they choose Salesforce versus Oracle or SAP or Microsoft?

Pombriant: There are a number of compelling reasons to choose platform first. I believe the first decision you need to make today is what platform you’ll base your business on because platform determines everything else. I am not saying that other platforms can’t do what Salesforce1 does but I would say that it’s a good choice.

The platform determines where your apps run — for example, on smart devices, laptops, desktops, in the IoT which offers a different family of smart devices. Platform also determines what you can connect with through an ecosystem of other apps built to the same standards, which is really important when you’re trying to limit the complexity of your IT deployment.

Esteban Kolsky and I recently did some original research into cloud and discovered, no surprise, that businesses that didn’t pay close attention to their platform choices had more issues surrounding integration and synchronization than those that did. It represented a lot of complexity that most businesses and IT groups would rather do without.

So was it necessary for Vlocity to choose Salesforce1? I don’t know. You’d have to ask them.  Salesforce1 is certainly a leading candidate with a big ecosystem and leads in many innovative areas. Salesforce1 greatly limited the complexity that Vlocity had to deal with in its earliest stages and let the company focus on its knitting.

As written to Robert Hilson, a director at Logikcull. He can be reached at robert.hilson@logikcull.com.

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