How the SaaS upstart has become part of the establishment
silicon.com profiles software-as-a-service company Salesforce.com and takes a look at its technology, strategy and challenges.
Salesforce.com burst onto the tech scene 11 years ago, delivering its own brand of salesforce automation software to customers via the internet.
The concept of business software being accessed like that was brand new when Salesforce.com got started (indeed it's only hitting the mainstream now) but from the start founder and CEO Marc Benioff positioned himself as software as a service's most visible evangelist, insisting his company's approach represented the beginning of the end for on-premise software.
But now that software as a service has entered the mainstream, Salesforce.com is intent on continuing to surf the technology zeitgest, with its Force.com cloud platform and the social networking and collaboration technology for businesses, Chatter.
How it all started
Marc Benioff is the larger than life CEO of Salesforce.com who worked as a programmer at the Macintosh division of Apple before spending 13 years at Oracle where he rapidly rose to a senior position.
He left Oracle and set up Salesforce.com in 1999 to provide software via the web, gathering a group of developers together to build the first version of the online salesforce automation technology which was the source of the company name and still forms the core of the business today.
The original technology allowed staff to manage and monitor their activity around sales - such as completed deals, negotiations and average sales - using software they access over the internet.
The fact that the technology wasn't located on computers within the business meant sales teams could have a new system up and running quickly and didn't have to rely on their internal IT team to maintain and upgrade the software. The software was sold using subscription model, meaning companies didn't have to pay for the cost of the systems upfront.
Speaking recently at the company's Cloudforce user conference in London, Benioff reaffirmed the company's mission: "Our message is very simple - that cloud computing is the future. We are the evangelist of this new model," he said.
Salesforce.com: from upstart to major player
The company has continued to develop salesforce automation and CRM technology, as well as opening up its technology infrastructure in 2007 to provide the Force.com cloud platform on which more than...
...160,000 applications have now been built.
Salesforce.com went public on the New York Stock Exchange in 2004 and exceeded $1bn in revenues in 2009. It now has 82,400 customers and made more than $1.4bn in annual revenue in the last financial year.
And the company is continuing to grow at a rapid rate with Fortune magazine ranking it the fourth fastest growing company in terms of revenue in 2010.
Headquartered in San Francisco, the company also has regional headquarters in Dublin, Singapore and Tokyo. It has datacentres in the US and Singapore and intends to have a datacentre in the UK by the end of 2012.
Salesforce.com now has five broad technology areas that it makes available to customers on a per user subscription basis.
Salesforce automation and CRM
Salesforce automation and CRM remain core for the company with its Sales Cloud and Service Cloud products.
The subscriptions vary between $5 per user per month for the basic Contact Manager version of the Sales Cloud to $260 per user per month for the most comprehensive version of the Service Cloud.
Force.com and AppExchange
Force.com was launched in 2007 to allow customers and independent software vendors to develop and run applications on the platform using Salesforce.com's own Apex programming language. There are now more than 160,000 applications running on Force.com, which customers can access via the AppExchange web portal.
With Force.com, Salesforce.com expanded its scope from merely a provider of CRM to a cloud computing company providing the architecture for other applications whether developed by Salesforce.com itself, other software vendors and even customers.
Applications on AppExchange include Salesforce.com's own Sites technology for building and hosting websites as well as the FinancialForce accounting software (developed with Coda) and IT service desk technology from BMC. As well as ISV-developed applications, businesses can also build their own software tools on Force.com.
The company recently started to allow Java-based applications to be built on Force.com using VMWare's Spring development framework - a service known as VMForce.
However the company says there are currently no plans to...
...add the widely used .NET language to the platform, with Apex and Java considered to provide a suitably broad range of applications to be built.
Businesses can use Force.com for free if they just want to build and run a single application for up to 100 users with 1GB of storage. If they want to use applications on the platform they will have to pay $50 per user per month for Force.com Enterprise, which entitles them to use 10 applications from the App Exchange for more than 100 users. Force.com Unlimited is $75 per user per month and allows unlimited use of applications, increased storage and unlimited support.
Chatter and Jigsaw
The most recent technology to be added to the Salesforce.com armoury is Chatter, a Facebook-style business networking technology which has been integrated into the sales and customer service technologies and is available to all paying customers of CRM, salesforce automation and Force.com.
Businesses can also choose to use Chatter in isolation if customers aren't yet using Salesforce.com's other technology. If this is the case, customers pay $15 per user per month.
Unlike Facebook and Twitter, Chatter is a private network and can only be accessed by a company's employees and business partners only.
It also allows users to follow projects within the business and automatically receive updates when certain developments take place. Users can upload documents relating to particular areas of work which followers of the project in question are alerted to and can access via Chatter.
The company recently announced that Chatter will be available on the iPhone, iPad, Android and BlackBerry platforms so users can access their feeds while away from the office.
Salesforce.com's fifth area is the Jigsaw business contact and data cleansing technology. Salesforce.com acquired Jigsaw in April 2010 and has integrated it into the platform so sales and customer service teams to keep their contacts up to date.
As well as these five areas, Salesforce.com has also acquired technology that can be bolted onto the main platform.
In addition to Jigsaw, the company bought...
...content management technology maker Koral in 2007 - now called Salesforce.com Content - and knowledge base provider Instranet in August 2008, whose technology has been renamed Salesforce.com Knowledge.
Salesforce.com: what the analysts say
"It still talks a good story, it markets well, it looks after the majority of its major third-party application providers and it is generally pretty good on customer management," Clive Longbottom, founding analyst at Quocirca, said of the company.
According to Tony Lock, programme director with analysts Freeform Dynamics, the company benefits from a broad mix of customers in terms of size, industry sector and geographic spread.
Lock however believes that Salesforce.com could do more to promote the Force.com platform and the AppExchange. "It's far more important than actually any single application or linked set of applications can be," he said.
Greater awareness of Force.com could not only boost user numbers but could potentially encourage more software developers to build applications for the AppExchange.
Greater engagement around training would also be a good step, according to Lock, as it would mean users not as familiar with web apps could be helped and customers could see how they could change their business processes to fully take advantage of the technology. "Any opportunity that people can get to gain from the experience of people who have gone before them is always beneficial," Lock said.
The other main area which experts feel Salesforce.com needs to be wary of is pricing.
Senior analyst at Forrester Research Stefan Ried said that for heavy users, the subscription charges represent pretty good value but for more occasional users of the applications, prices are a little high - something that different editions of the Sales and Service clouds does not solve.
"Long term [Salesforce.com] needs to move into a role based pricing similar to SAP today, which offers usage role to the same application but depending on the scenarios and thus the intensity of certain groups of people," Ried said.
Quocirca's Longbottom also has reservations about...
...pricing. "It seems that pricing has been creeping up, and although the base entry level appears reasonable, once you start to look at a full functional environment, the costs can quite easily get out of hand," he said.
Longbottom said Salesforce.com should be looking at greater clarity around pricing with more functionality "out of the box at a sensible price".
The future for Salesforce.com
Forrester's Ried believes that as Salesforce.com was an innovator in software as a service it will soon face the innovator's dilemma: competing in a market that it's created with other companies who provide similar technology but in a more cost efficient way.
According to Quocirca's Longbottom, the company may need to investigate whether the unique architecture that it's created could become a hindrance in the event that a standard cloud computing protocol is agreed in the future. Although such a protocol is not something currently being developed, it could be if cloud computing becomes the de facto way of delivering technology.
"[Salesforce.com] has shown that it can react in the past - but any major changes could have a massive impact on its user base now," Longbottom said, adding that the company has created an abstraction layer between the hardware and its own software code so that any changes to the cloud architecture necessitated by standardisation could be carried out with less disruption to existing applications than previously.
There will be new vendors appearing in the next few years that will provide greater competition, Longbottom said, especially with Microsoft's Dynamics and BPOS likely to see greater uptake. One way of remaining competitive is to market itself as "a thought leader" in cloud computing rather than becoming "the old boy of the SaaS market", Longbottom said.
He added one potential approach for Salesforce.com in the future could be to morph the Force.com into a computing platform similar to Amazon's EC2 which provides processing power for tasks rather than just supporting applications - allowing it to offer a standardised hosting, communication and information creation tools similar to Google Apps.