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Salesforce at 15: Industry disruptor wards off midlife crisis

Chris Kanaracus | April 23, 2014
Salesforce.com recently celebrated its 15th year in existence, and as the SaaS (software-as-a-service) vendor races toward US$5 billion in revenue its influence on the industry is being felt more than ever. At the same time, some signs indicate that Salesforce.com is having a few growing pains, as well as showing some trappings of the mega-vendors it once mocked with its "End of Software" marketing campaign.

Salesforce.com has spent billions on acquisitions to do just that and set itself up against Oracle, SAP, IBM and Adobe in the red-hot marketing software market. Benioff has declared that marketing software will be Salesforce.com's next $1 billion business.

What Benioff is not doing is predicting exactly when that will occur, and perhaps with good reason. "Substantially all" of Salesforce.com's revenue is derived from CRM (customer-relationship-management) software subscriptions, according to its annual report.

"We very much see our growth as a mix of supporting our customer base, growing [their investments] and bringing in new customers," co-founder Harris said.

The cloud is a commodity: Benioff often used to crow about the scalability, flexibility and other benefits provided by Salesforce.com's cloud infrastructure. But today, that talking point isn't of much strategic value given the plethora of SaaS options in the market.

In one sense, Benioff has even had to backtrack. At Dreamforce, along with Hewlett-Packard CEO Meg Whitman, he announced Superpods, special dedicated instances for Salesforce.com's largest customers that use HP's Converged Infrastructure hardware and are hosted by Salesforce.com.

While not amounting to a traditional on-premises deployment, to many ears the Superpod announcement sounded like a tacit recognition that the public cloud simply isn't desirable for some companies.

On the bubble?: It's hardly news that some financial analysts and stock bloggers believe Salesforce.com's emphasis on growing top-line revenue while spending heavily on marketing, acquisitions and hiring, versus showing a profit, is a problem that flies in the face of its strong stock price.

Salesforce.com is staying the strategic course for now.

"We're a growth company and we put all of our money back into driving innovation," Harris said. "We're acquiring great companies. If we were slowing down and not as aggressive in our growth we wouldn't be able to deliver on our vision."

The Future

Out of ideas?: Salesforce.com recently announced a push into industry-specific versions of its software, prompting InfoWorld blogger and cloud computing expert David Linthicum to declare the company was "officially out of ideas."

"When you run out of new ways to provide innovative technology, you go vertical," he wrote in a recent blog post. "That was the running joke among CTOs back in the day. It usually meant the market had reached the saturation point and you could not find new growth, so you hoped that a health care strategy would save you. Sorry, no."

"Salesforce will soon discover that when you get into vertical industries, the existing foundation of industry-specific applications is difficult to displace," he added.

Competitive creep: Salesforce.com might boast an impressively low churn rate, but it's also facing increased pressure in the CRM market from the likes of Microsoft, particularly on cost.

 

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