Salesforce has a business-application strategy, and it's called Vlocity

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1 IMPACT REPORT Salesforce has a business-application strategy, and it's called Vlocity NOVEMBER BY ALAN PELZ-SHARPE Dreamforce 2014 saw the launch of Salesforce application firm Vlocity. Dreamforce 2015 offered a chance to see how real this initiative is, as well as the progress it has made in its first full year of operation. Although positioned as a stand-alone independent company, Vlocity is inextricably entwined with Salesforce the company, and not just in terms of funding it is also run from Salesforce's headquarters in San Francisco.

2 The 451 Take Salesforce is looking for an 'act two' how else can it continue to meet demands for growth with a historically myopic focus on CRM. Growth is essential to Salesforce, which has built its entire operating model on ever-increasing growth rather than profit. Vlocity will not be the answer to all these questions, but it could play a key role by getting Salesforce out of the pure CRM world and into the messy but highly lucrative world of documents, complex processes and case management in other words, hardcore business applications. Vlocity likely has a profitable future ahead of it; the question is whether core Salesforce can see the bigger picture emerging here and really commit to fully leveraging the applications and vertical expertise that Vlocity is developing. Context Vlocity was launched with quite some fanfare at the 2014 Dreamforce event. It then closed a first round of funding in April, totaling $42.8m and led by Salesforce Ventures. Vlocity has five founders, including chairman Craig Ramsay, who also sits on the Salesforce board, and CEO David Schmair, who, along with the other four founders, has a Seibel/Oracle background. Vlocity has been formed to do one thing: build and sell industry-specific business applications built on the Salesforce platform. These applications are what one might

3 describe as 'deep process' applications, running complex activities within a target vertical market for example, policy renewal activities within an insurance firm. It is, in essence, a Salesforce ISV, but is not an equal player in the general channel due to its symbiotic relationship with Salesforce. Salesforce itself has its foundations in CRM, a business application that does not typically require sophisticated BPM capabilities or deep-dive specific industry expertise. Over the years, Salesforce has been quite happy to leave the wider world of business applications alone, but as pressure mounts to continue to deliver aboveaverage growth, it needs to find a second act. Vlocity is certainly part of that effort, and the business-application market is in need of a refresh to fully embrace the combined impact of SMAC (social, mobile, analytics and cloud). But at this point, it's not entirely clear if this investment effort, although laudable, is enough. Although Vlocity is doing some great work, for it to truly impact the Salesforce world it would need considerably more funding and a steep ramp to develop, polish and deliver a wide range of deep-process applications. Technology Although Vlocity is built on the Salesforce platform (not Force.com), it specializes in case management applications, adding content and process management to the mix. Process management, in particular, has long been a weakness within the Salesforce platform because CRM systems typically do not integrate at such a deep and complex level within the application stack.

4 The Vlocity platform has four key components to it. The first is Omniscript, a templated programming tool for nonprogrammers. Omniscript is essentially a formsbased workflow system that enables a business analyst or end user to rapidly design and publish dynamic forms with embedded scripts (preconfigured) and rules. Second, the functionally named 'Industry Console' provides a relatively out-of-the-box management dashboard. Third, Dataraptor provides a JSON/REST environment for managing data structures and integrations. And fourth, Vlocity has 'Engines,' this is basically a series of rules management and search-related features bundled together to allow users to build smart business services. All of these elements have been underpinned by core analytics capabilities and have been designed for a mobile/cloudfirst world. All in all, this is a nice, focused and well-thought-out platform for building job- and product-specific applications. At present, Vlocity is building out its own process capabilities, but (in our eyes, at least) an acquisition by either Vlocity or Salesforce of a cloud-based BPM player would make a great deal of sense. Examples include firms such as Appian or even Pega. Competition Since most of the senior management at Vlocity has past connections with Siebel (owned by Oracle), it's not surprising that, in conversations with Vlocity team members, this is the most frequently quoted competitor. In reality, the key competitor to Vlocity will not be Seibel, but Oracle's Cloud CRM, which launched in late 2014 and has seen fast and solid take-up. The Oracle Cloud offers a very broad range of

5 business applications running on a pure Oracle stack. Beyond Oracle, and to some degree Microsoft and its Dynamics applications, are many other competitors, including BPM vendors deeply embedded in Vlocity's chosen industry verticals of insurance, health insurance, the public sector and communications, not the least of which are IBM and SAP. All that being said, the business-application market is going through a refresh and rethink. Although few major applications will ever be ripped and replaced, new application needs emerge all the time, and mobile and cloud-first approaches such as Vlocity's should get a good reception. SWOT Analysis Strengths Vlocity brings deep process and industry knowledge to Salesforce critical areas it has lacked to date. Weaknesses Despite the backing of Salesforce, Vlocity has a long way to go to truly challenge other major business-application vendors.

6 Opportunities The world of business applications is undergoing an upheaval as it adjusts to a SMACdisrupted world, opening many doors of opportunity in the process. Threats Salesforce is late to the market for deep process applications, and historic rivals such as Oracle and SAP have a good start in the race already. Alan Pelz-Sharpe Research Director, Social Business M&A ACTIVITY BY SECTOR M&A ACTIVITY BY ACQUIRER FIGURES SHOWN INDICATE NUMBER OF TRANSACTIONS COMPANY MENTIONS (PRIMARY) Salesforce Vlocity COMPANY MENTIONS (OTHER) Appian IBM Microsoft Oracle Pegasystems Salesforce Ventures SAP Siebel Systems CHANNELS Business Applications Cloud & IT Services Markets SECTORS All / Application software / General All / Cloud / Software as a service