SALESFORCE: CLOUD-BASED SOFTWARE Part I: In the late ‘90s, enterprise software was installed “on-premise” – on physical servers located in the customer’s Category Design building. Sure, if you wanted to install a copy of Excel on your PC, you could use a trusty CD-ROM, but for software that used a shared database (like CRM), you had to connect to that “on-premise” server. It was expensive, time- Should Be on consuming, and tedious to maintain. But buyers didn’t know anything different. Every Business That’s why when Salesforce introduced the idea of software that could be accessed remotely, over the internet, they Leader’s Radar need to set themselves apart from the “on-prem” software that buyers were familiar with. Instead of comparing themselves directly to on-prem CRM software companies, Salesforce broke free of that paradigm and defined themselves on different terms. Heres’s what that looked like: CATEGORY DEFINITION ON-PREMISE CRM CLOUD-BASED CRM Buyer Enterprise IT Small business operator Product Philosophy Software should be accessed on- Software should be accessed via premise and paid upfront the Internet and paid monthly Problem addressed Poor access to customer data SMBs cannot afford CRM software Value defined by Data visibility vs a non-CRM Installation time and cost of usage approach Had Salesforce told enterprise customers that it could provide a better CRM than the leading on-premise offerings, it would have failed. But by defining a new category that would later be defined as cloud-based computing or SaaS, Salesforce set up a new category where they could be first. Why do categories matter? This can be extremely helpful if you’re a software buyer. If your brain already has knowledge of a software We live in a complex world. There are so many brands category, you already have a handle on key information, and products competing for our attention that there’s such as: no way for us to evaluate each one on its own merits. According to researchers at Ruhr-University Bochum, • What that product is designed to do when we encounter something novel, we compare that • What that product is not designed to do thing to existing categories our brain has created, and • Who the product is for try to find a match4. In other words, we use categories as a shortcut for processing information about thousands • How the product is sold of products. • What similar products to compare that to The Newcomer’s Guide to Category Design 10