Is Salesforce.com sitting pretty for cloud wars?

Comment: Software giants face a well prepared foe

Although Salesforce.com has yet to beat the traditional software makers, Tim Ferguson says the software-as-a-service pioneer is one step closer to realising its CEO's cloud computing vision.

Salesforce.com has long fancied itself a force for change in the software industry - and it's becoming increasingly hard to argue against the logic of CEO and founder Marc Benioff.

The former Oracle exec has been at the forefront of the software-as-a-service trend since he founded Salesforce.com in 1999 and began preaching about the end of traditional packaged software.

The company, which sells on-demand CRM software, has grown rapidly. It now counts more than 47,000 customers - including big names such as Citigroup and Dell - and recently hit $1bn in annual revenue.

But it's last week's product announcement at Salesforce.com's Dreamforce user conference in San Francisco that suggests the company could deliver on Benioff's vision of businesses running their entire operation in the cloud.

Force.com Sites allows developers to build and run external websites on Force.com - the platform, launched last year, which allows third party developers to build their own web applications for their organisations.

The announcement means internal corporate applications can be built on Force.com while customer-facing websites can be run on salesforce.com servers.

As Salesforce.com's director of platform research, Peter Coffee, put it: why would a start-up business want to invest in expensive servers when they could run bespoke applications and websites on Force.com and use Google Apps (which was recently integrated into salesforce.com) for email?

But before getting too excited, it's worth considering that salesforce.com's model won't work for everyone.

Firstly, organisations that have invested heavily in a server estate and use more traditional software won't want to waste that investment by ditching it for the cloud immediately.

Others may feel they're not ready to put everything in the cloud - that they're concerned about putting data and operations in the hands of a third party vendor after years of having everything in-house.

Although companies will be building the apps, the information would still be hosted in one of salesforce.com's datacentres. That may be OK for a few applications - such as CRM - but not for more sensitive information such as company financials or HR data.

Another obstacle for enterprises could be Salesforce's pricing model which in some cases means it's not as cheap as continuing with traditional software.

Salesforce.com charges customers by the number of users and log-ins which, for a small company not wanting to invest in servers, would be fine. For big companies, however, with huge server estates already in place, buying software in this way for thousands of workers could actually prove more expensive.

So while it could be some time before businesses make the switch from tried and trusted vendors like Microsoft, Oracle and SAP - if indeed they ever do - Salesforce.com could eventually accomplish something significant.

That said, the traditional software vendors have now woken up to cloud computing and are rolling out their own on-demand offerings - but they've got their work cut out.

At Dreamforce Marc Benioff was quick to point out the shortcomings of his competitors, criticising Microsoft for only making its Azure cloud OS compatible with its own technology and SAP for delays to its Business ByDesign SaaS ERP offering.

And while the CEO is hardly an impartial source, Salesforce.com is clearly embodying the cloud computing ethos more than the traditionalists - and thus potentially better placed to take advantage of the cloud phenomenon.

While Salesforce.com and other cloud specialists have their share of obstacles to break the dominance of Microsoft, Oracle and SAP, it's these traditional vendors who, more than ever before, need to keep looking over their shoulder.