“No Custom!” Or, How to Avoid the Phantom Costs of Developing Your Own Industry CRM Customizations: Interview with Vlocity’s CMO, Rip Gerber
At Dreamforce, we talked to Rip Gerber, Vlocity CMO, about how Vlocity can help companies become more efficient and increase customer satisfaction by delivering an industry-specific CRM layer that eliminates the phantom costs of developing on Salesforce. Vlocity has four solutions: government, telecommunications, insurance, and healthcare. Each cloud-based app is native to Salesforce, and extends the CRM platform with very specific business process applications for those verticals. These apps replace custom-built solutions, which Gerber explained are increasingly costly to maintain over time. Vlocity was founded in 2014 by experts on industry customized CRM software, who earned their stripes implementing on-premise Siebel systems. The company is backed not by venture capital, but by strategic investments from Salesforce and Accenture.
Give us an introduction to Vlocity—who are you as a company, and what do you do?
Vlocity is an Industry Cloud company. We deliver cloud and mobile software that embeds industry-specific functionality and processes, built in partnership with Salesforce. We enable companies to deliver an omni-channel experience, achieve greater sales and service agility, and capture faster value from the cloud. Vlocity is industry cloud apps built on the Salesforce platform. Our verticals are communications, public sector, insurance, and health insurance.
We’re 100% native and additive to Salesforce. We extend the Salesforce Sales Cloud, Service Cloud, Communities Cloud, and other clouds. We extend Salesforce with very specific business process applications for those verticals, from CPQ in the communications industry or complex case management in the public sector—really helping to extend the power of Salesforce deep into the enterprise.
So your customers are already Salesforce users?
They are either on-premise CRM platform users that want to move to the cloud and Salesforce, or they are existing Salesforce users that desire deeper industry-specific functionality to enhance their platform
What are some of the industry-specific needs you’re addressing?
For example, in the communications and media industry, customers like Fastweb and Sky Italia (similar to AT&T and Verizon here in the United States) have large B2B and B2C call centers. Many of these call centers are utilizing on-premise software, installed maybe 15 years ago. Their CRM systems might be Siebel, which by the way was created by the team that is behind Vlocity. But through the years these companies have had to customize Siebel in order to meet their unique industry needs. Today, these call centers want to move into the cloud; they want the agility, the functionality and the cost savings of the cloud. So they are looking at moving to Salesforce, but they also want very deep industry functionality—meaning software that's built specifically for a communications company. Those call center folks are focused on reducing the amount of time that agents are on the phone helping customers, and they are focused on increasing net promoter score, because they use those metrics to evaluate how well they're doing. They also want to utilize the best-of-breed software in cloud. These customers also want to eliminate what's called the “swivel chair issue” in call centers, where an agent is on one screen or one system and they need to swivel around and log in to another screen. Call centers managers want their agents working quickly, in one environment, and able to assist the omni-channel customer. Whether someone walks into the retail store with a question, or comes in through the website, or calls into the call center, the agent can handle them with a unified experience. Our software helps companies solve that problem by working on top of the Salesforce platform.
Can you give us some detail around the features that help do that?
Let’s look at Sky Italia’s B2C call center as an example. When a consumer calls in and wants to buy a new subscription plan, or they’re a new customer for cable TV, the call center agent can use our software to determine where the consumer lives and their premise availability for certain services, down to an apartment number and what kind of cable needs to go there to activate service. The agent can instantly see what kind of promotions are currently available to the customer, how that customer uses the Sky products to best package or bundle an offer that into a triple or a quad play, optimizing the product mix of TV, internet and voice offers. Basically, Vlocity software enables the call center agent to see who a caller is and what his or her needs are, guide an engaging customer interaction, and deliver the best offers and responses.
In the insurance industry, the agent needs to see what the customer has a propensity to want to buy, what his or her coverage levels are, what the most attractive offers are, and insurance determination factors such as where they live and how they drive. In the case of health insurance, we help agents compare plans across different providers in terms of available discounts and what's right for that family or individual. We've built something called Guided Interactions. Rather than going through weeks of weeks of training—“if you're a smoker, you get this package, if you're female, you get this package, if you're a family that lives in this state, you get this package”—the software can actually guide the agent through those decisions, without the agent really having to reference back to other systems or recall training from the past. Agents can toggle through to look at options right on the screen while talking to the customer, giving their customer an amazing experience that anticipates their needs.
All this is possible because the Vlocity software embeds business processes on top of Salesforce platform, and their processes are built with tremendous industry-specific expertise based on years and years of experience in the verticals we serve. We have folks who have spent 20 and more years in those industries, as well as engineering and CRM experts who built Siebel systems. Our team deeply understands business processes in those verticals and how they should work with CRM. Now, in partnership with Salesforce, we’re able to do it in the cloud.
What has driven your strategy in terms of which industries to focus on?
There’s a whole history leading up to our reasoning behind these particular verticals. We’re fond of saying that the company was started almost 30 years ago, when Craig Ramsey hired Marc Benioff out of college to work over at Oracle. Craig Ramsey is our chairman and founder. Craig is a very famous guy in software circles and CRM. Many of these folks started out at Oracle—Marc was there back in the day, David Schmaier was there (our founder and CEO), Craig Ramsey was there, and Tom Siebel was there. Tom left Oracle; he was a sales executive and he wanted to build SFA software (which became CRM), so he created Siebel Systems. David Schmaier was a product executive, and he joined Tom as the number four employee over at Siebel. He became the second in command as they built that to an 8,000-person company and dominated the CRM space many, many years ago. Craig Ramsey was their head of sales. Two of the Vlocity board members, Mark Armenante and Young Sohn, also worked there. They built a huge CRM company that basically created the vertical CRM software market. At one point, they had 20 verticals issuing software in 24 different languages, and they owned communications, insurance, utilities, and the public sector for CRM software.
While Siebel was defining CRM, Marc Benioff wanted to do something different: cloud for small business, a public cloud for everybody. Back in 1999 he said, “I'm going to do cloud, and developed the now famous “No Software!” campaign. At the time this was a crazy idea. One of his first board members was Craig Ramsey. At one point, Craig recommended that the cloud needed to verticalize – that is – go deeper into large industries, and so he helped start a separate company working with Salesforce called “Verticals On Demand.” That company was later renamed Veeva.
Veeva was founded by Craig Ramsey and several former Siebel executives to build vertical, industry-specific CRM software for pharmaceutical companies, all in the cloud and with Salesforce. It is one of the most successful cloud companies after Salesforce: over a $3B market cap, over $300M in annual revenue. We call Veeva our sister company, and we’re very close with both Veeva and Salesforce. So there is a lot of rich history behind Vlocity.
Veeva demonstrated that there was a strong market need for industry-specific cloud CRM. Two years ago at Dreamforce, David Schamier was walking this floor and he’s seeing that while there were over 3,000 companies on the Salesforce AppExchange, one of them, Veeva, clearly dominated in size and success. It was the only app that went really deep into an enterprise vertical. That led David and Craig to think about doing more verticals on Salesforce, similar to what Veeva had done in pharmaceuticals. David wanted to focus on verticals where his software could have the biggest positive impact: government, telecommunications, insurance, and healthcare. Hence the four verticals where Vlocity is building industry-specific cloud software.
Now, why those verticals? There are three reasons:
1. If you look at all industries broadly based on overall customer satisfaction, at the bottom of the satisfaction scale are government, telcos, insurance, and healthcare. Generally customers are not happy with their experiences when they interact with companies in these sectors. That means industry-specific CRMs can have a big impact in these verticals.
2. In those four industries, a lot of software that was built under Siebel is still installed; it’s now called Oracle, but it’s still in place in those industries. But it has been heavily customized, it is expensive to maintain, and it is thwarting these businesses from moving faster to serve their customers. The team under David includes many of the original designers and builders of enterprise CRM software. So who better to provide an industry-specific, cloud-based CRM offer than the people who built it for you before. These companies in these verticals have a lot of respect for the people who created the CRM software market; they have confidence that Vlocity is the best team to help with that migration to the cloud and Salesforce.
3. Also, these four verticals are large markets for CRM software. If you add up the total CRM market opportunity across those four verticals, it’s ten times the size of the pharmaceutical market that Veeva serves. So the Vlocity total available market, or TAM, is ten times the size of Veeva. These four verticals alone are big worldwide markets for Vlocity.
Any plans to move into other verticals?
There may be business processes in other verticals that behave very similarly to the ones we are building today. From a software perspective, the subscription model we use for communications companies is relevant to other industries. A cable company is not unlike a utility company. A utility bill is a lot like a cellphone bill, and activating a cellular plan is a lot like activating gas or water. That is another powerful advantage that the Salesforce platform brings, the flexibility of the cloud. But for now, we have plenty of opportunities in our current vertical portfolio.
How many customers does Vlocity have?
We now have more than 20 customers deployed. We launched our first version of the product at Dreamforce last year. One year later, we’re in version 4.0, and we have all four verticals live and commercial.
What are your plans in terms of funding?
On the funding side, Vlocity is a unique company in that we are not venture-backed. Once David and Craig got together and decided to create Vlocity, they and the co-founders put in the initial seed capital. Within a year, the company had already built the software and closed several big customers and partners, enough to close a significant strategic round from Salesforce and Accenture. Because we build our software on the Salesforce platform, and go to market with them, it made perfect sense for them to be our strategic investor.
What is the advantage of building on Salesforce?
Salesforce is the number one CRM platform in the world. We’re all about the cloud and CRM, and the cloud gives users a lot of agility, lower cost, and increased omni-channel capabilities. But if you look at all the various cloud software companies that are out there, in terms of market share dominance and leadership, Salesforce is by far the best cloud platform to be building on. If you look at the innovation in terms of Wave Analytics, the Lighting App development, now Thunder and IoT, it really is the go-to enterprise platform.
What is your marketing and growth strategy?
Great question. What's interesting about our business model is every time we sell a seat license, Salesforce gets paid. We go to market with Salesforce because we’re an application that's additive on top of their platform. The Salesforce community has an incentive to bring us along when they go talk to customers. We’re primarily a product company, so most of our employees and our investments are on the product side. We go to markets through channels, including Salesforce, and software implementation firms such as Accenture, Deloitte and IBM. They take our software to their established accounts and say, “We have a better mousetrap for you. It will transform your business.” They end up selling us in. That’s how we go to market, with partners.
Who is your buyer, in terms of role?
In enterprise software, we usually see a committee of buyers, decision makers, and gatekeepers. But primarily, we are brought in by the business decision makers—someone who owns the call center or the operations, or the overall customer experience, who has been investigating how to leverage Salesforce and cloud technology to improve the customer experience. It’s a pretty senior level or C-level decision maker. The CIO or the CTO, depending on the industry, typically gets involved because it’s a technology purchase. There are also a lot of other folks who get incorporated into that decision. At smaller companies our buyers seem to be at the CEO level because our software has such a high impact on the top-line customer experience. In the larger companies we have a more of those contract negotiations that are typical with enterprise software. Ultimately, we hear from the most senior business decision maker who has a P&L or revenue responsibility or owns customer experience, and the senior technical person who is looking at technology trends and knows how to make bets. A lot of these buyers are champions of the cloud.
Who are your primary users?
Users can include anyone in the company that touches the customer. And with the Salesforce Community cloud, we can go self-service so that our customers’ customers can actually access the software. But our standard users inside a company are typically salespeople or service people.
How have you talked about the benefits or the ROI of using Vlocity?
The rally cry here is: “No custom!” A lot of the enterprises love Salesforce, but they need to customize it for their own industry. We say, why custom build on top of Salesforce when we have spent $40M building a product that does exactly what you're trying to build on your own? We say: trust us, we know what this product needs to do. The integrators doing custom build come to us, because they would rather put our product in place for their customers to change the game for them. The biggest value of the Vlocity apps on Salesforce is a much faster time to market, a lower total cost of ownership, and the agility of a product that stays in sync with Salesforce all the way through. Those are huge benefits from an enterprise perspective.
From an end-user perspective, I mentioned what we call “omni-channel”—being able to understand the customer, no matter where they come into your company. At any touch point, having all of their information integrated into a single solution platform is a big benefit for sales people and call center agents. They can use guided interactions, and we make sure the right screen will automatically pop up when someone calls in. Information is intuitively at their fingertips. It makes the operation much more efficient on a customer service or sales basis.
Who are your competitors?
Our biggest competitors today are the people custom building on top of Salesforce. The business challenge is getting those folks to work with us to provide our product to their clients instead of creating temporary fixes. My job as CMO and head of alliances involves working with companies like Accenture, Deloitte, and IBM to convince them that they can make more money and add more client value with Vlocity, rather than pushing and maintaining custom-built solutions. Our product often cuts back millions of dollars in development fees. It is an interesting sales process, because to these integrators we say, “You're going to make less money today, but you're going to make more money tomorrow, because you will be adding much more value for your clients.” The innovative cloud integrators understand the model and change coming.
Most companies don’t realize they pay a lot of hidden costs for maintaining custom code on top of Salesforce. Salesforce has up to three releases per year. Our software always stays in line and in sync with Salesforce. But if you’re custom building, you have to do three releases a year yourself just to make sure everything stays in sync. It's expensive. Our competition—custom code or templates—has to deal with those phantom costs of developing on Salesforce.
You just announced a partnership with DocuSign—can you give us some background on that?
It’s a great partnership. We love DocuSign. We actually started our company on DocuSign. Our five founders were in five different countries when they decided to start Vlocity. They used DocuSign to get all the signatures, to get all of the PDFs trust-verified and distributed.
As we go into company verticals like public sector and insurance, there are requirements for documentation and authentication and secure document processing with PDFs. DocuSign is the leader in those areas. We embedded DocuSign easily into our business processes and apps. We announced that on Monday. It’s interesting—there's a lot of history between the founding team of DocuSign and the founding team here at Vlocity. We’re old friends working together again in the cloud.
Megan champions research at TrustRadius. Her mission is to ensure we gather the highest quality data from authenticated reviewers, and provide useful curated reports for prospective software buyers. Prior to joining TrustRadius, Megan was Director of Sales and Marketing at a media company. She holds MA degrees in Journalism and Latin American Studies from the University of Texas.