salesfore.com news
Salesforce.com Takes On The World
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Riding a wave of interest in "software as a service" and focused on the red-hot customer relationship management (CRM) segment, Salesforce.com's (nyse: CRM - news - people ) stock price continues pushing to new highs, with revenue nearly doubling since last year.
Now they're taking on a new challenge. Seeking growth, co-founder and Chief Executive Marc Benioff on Tuesday launched AppExchange, a system that allows the company to host and exchange applications developed by third parties, such as those by Adobe (nasdaq: ADBE - news - people ), Business Objects (nasdaq: BOBJ - news - people ) and eBay's (nasdaq: EBAY - news - people ) Skype.
It's an ambitious new angle on Salesforce.com's existing business. As opposed to the traditional packaged software sold and licensed to users, Salesforce.com essentially rents software to its customers, hosting the applications and data on its own infrastructure with customers accessing it through the Internet.
AppExchange functions much as eBay's site, which allows third parties to buy and sell items. For now, those applications revolve around the CRM space, but the system could easily be expanded to include offerings for non-CRM applications.
Salesforce.com would then become a kind of clearinghouse and development center for many different kinds of applications developed by many different kinds of companies. It's a strategy that could carry big rewards, but it is also risky. Rival Siebel (nasdaq: SEBL - news - people ), for example, also tried to move beyond the CRM space but without much success. The company is soon to be absorbed into Oracle (nasdaq: ORCL - news - people ).
"The transition to something bigger needs a lot of excellent execution and a lot of luck," says Robert Schwartz, managing director of equity research with Jefferies & Co. in Boston. He gives credit for the company's "innovative" management team and products but can't swallow a current stock price near $40--up almost fourfold from its debut in June 2004 and double what it was only four months ago. "We built what we thought was an aggressive model and could only justify a $33 price target."
But Benioff is comfortable taking risks; he's known for bold statements and quirky antics, frequently lambasting Microsoft (nasdaq: MSFT - news - people ) and his former employer, Oracle. He also draws a token annual salary of $10, gets no bonus and receives no options. He owns a quarter of the company's shares.
He found an underserved market in getting CRM software to small- and medium-sized businesses and attracting some large customers as well. Salesforce.com repeatedly touts its growth in users and subscribers as indicators that it is succeeding. At the end of October, the company had 350,000 users and 19,000 subscribers, with no subscriber counting for more than 5% of sales. Financial results have been solid; revenue for the most recent quarter was $82.7 million, with net income of $13.1 million. During the same quarter the year before, the company had sales of $46.4 million and net income of $2.2 million.
Still, the company needs to move beyond its core segment to keep creating these kinds of returns.
"There will come a day when they hit a wall," says Jeff Gould, chief executive with Peerstone Research. "And the day they hit that wall, they will be stepping on the gas. Their whole mind-set is built on growth continuing forever."
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anuary 17, 2006
Benioff floats the 'Business Web'
Marc Benioff outlined that latest info on the Winter '06 platform of salesforce.com and talked it up as the "Business Web"–on demand, software-as-a-service mixed with Web 2.0. Instead of "no software," the Business Web is now the theme, which at least shows some maturing in the marketing.
Basically, what was announced previously is now in production, and the two new data centers have been cranked up and the software platform has been rewritten, Benioff said. Mirroring between the two datacenters will begin next month. Salesforce.com has had some recent outages that exposed the soft underbelly of the company.
The big announcement was the launch of AppExchange, which Benioff expressed as the "power of social production." Application developers are creating their own content with mashups, blogs, Web 2.0, Benioff added. "The concept of the Web is social production. It's not just limited to open source–with standard platforms we can harness the power of social production. It should be just as easy as publishing blogs," he said. "We are encouraging customers to push their apps into the AppExchange. The Business Web is the future of computing," Benioff declared. Then he went into his usual prediction of the demise for competitors who haven't jumped on the Business Web–they are too vesting into their maintenance revenue streams and old models.
It's a stretch to call AppExchange a hub of social production. Like eBay, it is an exchange hub that can result in productivity. It's not social other than using in a common platform that requires subscriptions and platform fees for salesforce.com. At this point, salesforce.com hasn't fleshed out a plan that would allow customers to unbundle the salesforce.com CRM application and subscription from the development platform.
If mashups can be considered social, like meeting at a bar, then call them social, but that's a liberal application of the term. Henry Gomez, SVP and general manager of Skype USA, was on stage to show integration of Skype's conferencing application integrated with salesforce.com. Salesforce.com's chief demo man and vice president of developer marketing Adam Gross also showed off a number of integrated applications, such as Business Object's Crystal Reports. AppExchange is starting off with 50 components and 160 applications, Benioff said.
Henry Gomez, Skype; Marc Benioff and Adam Gross of salesforce.com
Benioff touted large deployments–ADP with 6,700 subscribers, Merrill Lynch with over 5,000, Cisco over 4,500, Sprint over 3,100 and Symantec with 3,900–as evidence that on-demand software is for real.
Steve Gillmor is blogging from the event:
Marc is technology's Marilyn Monroe, too pretty to be taken seriously but impossible to ignore. And just as her beauty resonated with a profoundly disruptive comic sensibility, so too does Marc's intuitive grasp of the opportunities of the network let him continue to sell first and then deliver on the promise. It's a high-wire act, but one that both depends on and leverages the loosely coupled nature of the multinodal synergistic nature of the Web 2.0 alliance.
Update: Here's a link to the Webcast of the salesforce.com AppExchange launch event.
Categories: Home, IT Management, Software Infrastructure, Web Technology
AppExchange Goes Live
Salesforce.com launches its online exchange of more than 150 applications.
January 17, 2006
Salesforce.com delivered on its promise to create an online applications market on Tuesday as AppExchange went live, allowing different software companies to host their own applications on the Salesforce system.
At an event in
AppExchange is an eBay-like platform for business applications. The online exchange, which Mr. Benioff touted as the “business web,” will become a one-stop shop for users to test, rate, and buy Internet-hosted applications directly from vendors.
“The consumer web is where the action has been driven by platforms [such as Google, Yahoo, and eBay],” said Mr. Benioff at the launch. “Why can’t we have an eBay of enterprise applications?”
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The San Francisco-based company, which was launched in 1999 as a provider of Internet-hosted customer relationship management (CRM) software, has slowly started making its transition into becoming a “platform” company for business applications—much like Microsoft which has made Windows a platform for all desktop applications.
The company has been a pioneer in what is known as on-demand software, or software that is hosted over the Internet and can be accessed anywhere in the world and updated easily, all at once, unlike traditional software that is shipped on CDs and has to be installed on a company’s IT system (see The Next Step for Salesforce).
During a presentation, Salesforce.com executives talked over a live connection with a developer in
One Year in Development
Executives and developers at Salesforce.com came up with the AppExchange idea in March 2005 and took less than a year to implement it, Mr. Benioff said.
As of Tuesday, about 160 different applications ranging from real estate to marketing solutions are available live on the Internet. In a matter of days, software vendors will be able to integrate their applications onto Salesforce.com’s AppExchange platform.
For example, a project management application can be integrated into the platform with data plugged in from Salesforce’s customer relationship management application.
Salesforce.com will not take a commission or a cut of the revenue from what vendors charge their customers but will charge a monthly subscription fee to its users to use the AppExchange platform. This is the way the company will monetize the AppExchange platform.
Mr. Benioff, whose company slogan, “the End of Software,” directly challenges traditional software companies such as Oracle and SAP, also announced new partners who will integrate their applications onto the platform (see Is Enterprise Software Dead?).
Skype, Adobe, Tata Consultancy Services, and even Business Objects, which is a traditional client/server software company, announced on Tuesday they will be integrating their software into AppExchange.
Users of AppExchange will now be able integrate the VoIP functionality of Skype into their business applications on AppExchange. For example, customers using Salesforce.com for managing their sales contacts will have a Skype icon next to their contacts and will be able to call them directly over the Internet free of cost.
Wall Street Validation
Analysts welcomed this move from Salesforce and said the actual implementation of AppExchange validates the company’s move into the “platform” business.
“This time around there is more integration, more proof points, more success, and more critical partners,” said Sheryl Kingstone, analyst at Yankee Group.
FTN Midwest Research analyst Trip Chowdhry said Salesforce.com is on the path to redefine what it means to be a big software company. Salesforce.com is driving a grass roots momentum with AppExchange, he said.
“It is proving that it is a next-generation company with important out-of-the-box thinking, outwardly focused versus a traditional company in yesterday’s world,” he said.
Just like Oracle’s acquisition of Siebel last September (see Oracle Buys Siebel for $5.85B) was a major inflection point in the enterprise software industry, Salesforce.com’s launch of AppExchange is the next one, said Denis Pombriant, managing principal at the Beagle Research Group.
Salesforce.com’s financial standing has been showing a fast growth since 2004 when it went public. The company’s revenues during fiscal 2006 to date are $218 million, 80 percent higher than its revenue during the same period last year. The company’s stock has jumped more than 200 percent in the last year with its highest stock price about $40
| anuary 18, 2006 Opinion: Salesforce.com is counting on its new data centers and its AppExchange software-as-a-service platform to drive future growth. But its strategy could fail if the new facilities don't also deliver reliable services for its basic CRM service. | ||
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The company has confirmed two services outages, one lasting nearly 6 hours on Dec. 20 that affected most of its customers and what it called a "minor" overnight outage in its Europe, Middle East and African market. But as a number of customers have told eWEEK, problems with Salesforce.com's online CRM (customer relationship management) application service weren't limited to these two incidents. Instead, they said they have had to repeatedly contend with "outages" and performance slowdowns in recent months. The problems call into question whether Salesforce.com, or any on-demand application service provider, can deliver consistently good service and meet its service-level agreements. But the company officially has been very tight-lipped when it comes to talking about the cause, scope and solution to the problems. That attitude conflicts with the reality and the goal of the on-demand application market, which is that customers need to have the utmost confidence in the service's reliability. Salesforce.com CEO Marc Benioff says company system uptime has never fallen below 99 percent, but some of its customers may take issue with that claim when subscription renewal time comes. You know whose head should roll when the application totally crashes. But whom do you blame when your Web application slows down? Is the fault of the hosted service provider, or is it due to local Internet conditions? However, when a company stakes its credibility on the quality of service on the Internet anywhere on the globe, blaming it on local Web conditions or the quality of the ISP's service isn't an acceptable excuse. It's not just a question of Salesforce.com's long-term success and prosperity. The viability of the whole software-as-a-service concept is challenged when customers complain about application performance and availability.
Granted, so far it appears that it isn't Salesforce.com's biggest companies that are complaining the loudest. But major customers like Phoenix Technologies and Analog Devices have noticed performance problems and have expressed their concern. While they say they remain generally satisfied with the service, they also indicate that their patience is limited and they wouldn't want to see performance problems continue for months more without end. Benioff contends that Salesforce.com has plenty of large-scale customers that it works overtime to keep happy, including Cisco Systems with 4,500 subscribers, Automated Data Processing with 6,700 customers, and Sprint Communications with 3,100 customers. | ||
| Salesforce.com Needs to Focus on Fundamentals | ||
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That's why Tuesday's announcement about the introduction of the Winter '06 release of Salesforce.com's online CRM service and the general release of its AppExchange on-demand applications platform is important to the company's future growth. To prepare for this release, Salesforce.com spent $50 million to build two new data centers with new servers and networking equipment. It plans to mirror these two data centers in February so that customer data is automatically backed up for added data security and availability. It was the launch and debugging of the new data centers that caused at least some of the performance problems that customers experienced. Benioff says it will be these data centers that provide the capacity, scalability and reliability that will enable the company to grow to 1 million subscribers.
But it's AppExchange that gives Salesforce.com the best change of reaching that goal. The company says that AppExchange gives it the opportunity to become the eBay of software as a service because it will be the interface through which any company can launch on-demand Web applications. Salesforce.com is pitching AppExchange as a Web operating system that can serve as the development platform for countless business applications in the same way that Windows serves as the operating system for desktop PC applications. The company launched AppExchange Tuesday with in excess of 160 applications and more than 50 Salesforce.com add-on components. The development of software as a service is spearheading the development of what Salesforce.com calls the "business Web" as the successor of the "consumer Web" that evolved in the 1990s.
Salesforce.com contends that AppExchange and its entire on-demand infrastructure will be robust enough to handle not only its expanding population of 351,000 subscribers but also a nascent community of development partners and nearly 19,000 customers who all can be contributing to applications to AppExchange. Ideally this will generate a critical mass of "social" application production in which any of Salesforce.com's customers or subscribers could be contributing new applications. But the big test will be whether Salesforce.com's newly tested and presumably debugged data center can deliver the robust service required to support all of this activity. Salesforce.com's ambitious plans will all come to naught if the basic features of its.com platform don't leap onto the screen with every mouse click. John Pallatto is a veteran journalist in the field of enterprise software and Internet technology. He can be reached at john_pallatto@ziffdavis.com. Click here for an archive of John Pallatto's columns.
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