Organic growth more fruitful than acquisitions.

Social media technology companies are snapping up consulting firms to quickly beef up their professional services.

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David Carratt
February 10, 2015 - 3 min. read

Despite this acquisition trend, Falcon Social remains focused on organic growth and product revenues. Growth by acquisition of consulting businesses brings cultural conflict, damages business models and would divert Falcon Social from offering SaaS solutions that are ready-to-use.

PRODUCT DEVELOPMENT

For large, incumbent players, like Salesforce and Oracle, the software market alone is not big enough, so they are expanding their consulting services. These consulting-led players have an incentive to make their products complex and requiring configuration, as they can then push professional services.

In contrast, as a young, fast growing company, Falcon Social has ensured its platform is simple to adopt and use. Our research and development team has developed a pure SaaS platform supporting all our typical customers’ needs. We have a very low percentage of professional services, as we don’t need to spend a lot of time with customers discussing their specific requirements, prior to, or during implementation.

Social media is such a new phenomenon that companies don’t have a lot of experience in managing campaigns. Organizations don’t have ingrained work practices or traditional business processes and can start from scratch when choosing social media solutions. This gives SaaS players an advantage, as they can offer complete, ready-to-use solutions from day one.

Falcon Social uses its extensive experience of social media to teach clients best practice. We also provide full training and support to ensure our platform is used effectively.

Many of our competitors rely on a consulting-led sales model because they have less complete products, or because they don’t have a clear vision of how to use social media effectively. They need large consulting teams to fill the gaps and spend endless hours consulting with clients on how social media could be approached. This model makes systems bulkier and more expensive than they need to be.

WEAK ACQUISITIONS

Social relationship infrastructure provider, Sprinklr, is consulting-led and has apparently been buying professional services businesses so it can grow quickly ahead of an IPO. It recently acquired Dachis Group, Branderati and TBG Digital. Many other social media companies are also on the acquisition trail.

But growing through acquisition is never easy. Sprinklr could face difficulties, as investors know the difference between consulting revenue and higher margin product revenue. A large percentage of acquired professional services could be seen as a sign of product weakness.

It’s extremely difficult to integrate products into an offering. You only have to look at the problems Salesforce has encountered following the purchase of Radian6 and Buddy Media, to see that integration into one product rarely goes smoothly.  

Software companies have to run lengthy research and development projects to integrate systems from acquisitions. Meanwhile they need to sell professional services to cover up any incompatibilities in the technology. This leads to lengthy waits before systems go-live and dissatisfied customers.

If you grow your consulting team by acquiring companies, you end up with a lot of internal cultural issues. Consulting firms work in different ways and consultants have strong personalities that are difficult to bring together under one organization.

STRONG PARTNERS

Falcon Social is recruiting sales people to grow in the US, Germany, the UK and France. A consulting-led model would restrict the speed we could distribute the platform at, as in addition to sales people, we would have to recruit a lot more professional services staff. This takes time and is very expensive.

We are focused on delivering easy to implement, ready-to-use platforms that don’t need consultants’ input, so businesses can hit the ground running and effectively manage the ever increasing flow of social media from the start.

Further Reading

 

How to Sell on Social Media.

Why use social selling, how to get started, and best practices.
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