Salesforce.com Builds Momentum, Targets Large Companies

With the recent release of Summer 04 and positive earnings news, Salesforce.com seems poised to capture more of the enterprise market, including larger companies that it has not targeted in the past.

Founded in 1999 by a former Oracle executive, Salesforce.com provides customizable CRM applications and services and has approximately 168,000 subscribers. In the years ahead, many analysts say they believe, the company will continue to grow and add more subscribers, especially from sizable firms.

One indication that it is moving in the right direction came on Friday, when company shares rose after the news that it posted a quarterly profit.

Yankee Group analyst Sheryl Kingstone told CRM Buyer: “The traction for Salesforce.com will definitely continue. It’s been chaotic for a few years in the industry, but the company will emerge well from that.”

Lows and Highs

Gaining traction has not been effortless for Salesforce.com. Barely a month after it became a publicly traded company in July, the firm was sued by several shareholders for misrepresenting its business performance.

The company issued a warning in July that profit and revenue for the entire year would be lower than expected. However, even with that caveat, second quarter revenue rose 88 percent, to $40.6 million, in the last quarter.

With those results, the company has increased its earnings expectations for the fiscal year, now anticipating per-share earnings of between 2 and 4 cents.

Despite the rollercoaster projections and pending litigation, some analysts said they believe the company should see smoother days ahead.

“The products have matured, and they have more breadth,” Yankee Group’s Kingstone said. “Because of that, we’ll see more growth in larger deployments. They won’t turn away from their base, which is small to midsize companies, but they’ll expand.”

At a recent analysts’ briefing, Salesforce.com CEO Marc Benioff confirmed the company’s move toward larger customers. He noted that when Salesforce.com was recently trying to choose whether to target small, medium or large customers, it made an ambitious choice. “[W]e decided we wanted them all,” Benioff said.

Summer 04

A base for that expansion will be the company’s Summer 04 release, which will feature a set of technologies that increases support considerably with a new architecture. Targeted at global companies, the release is being especially touted for its customization abilities.

Tien Tzuo, Salesforce.com’s chief marketing officer, told CRM Buyer, “We’re emphasizing that CRM can be easily integrated and customized in many companies.”

The release includes Enterprise Edition 2.0, which includes a cache server that stores user-level preferences and customizations. It will also support development environments from BEA, Borland, Microsoft and open source.

“Every customer has a unique need,” Tzuo said. “Our focus will continue to be on making our CRM the easiest to use and customize. Our goal is to make sure ours is the best.”

Potential Implications

The growth of Salesforce.com has prompted nearly every CRM vendor to reevaluate the importance of the small and midsize business market, Kingstone said. As the company continues to advance, it is likely that its moves will have implications across the industry.

Denis Pombriant, founder and managing principal of Beagle Research, said, “There’s no greater testament or compliment to Salesforce.com’s success than the fact that a number of very large enterprise software companies are imitating their model.”

He noted that major competitors like Siebel and PeopleSoft have announced products and services that are more in line with the Salesforce.com model. He said he believes that there will be more similarity as Salesforce.com’s sforce platform is tweaked and refined.

“We’ll continue to see Salesforce upgrade and enhance its products with things like additional tabs to track things like invoices and contracts,” he said. “Also, there’ll be embedded analytics.”

The result is that as innovation advances at the company, the rest of the CRM field will take notice.

“They redefined the model and found success with it,” Pombriant said. “Because of that, they’re being imitated, and they’ll continue to be.”