Software high-flyer takes act of God in its stride - The Age

Eight years after its inception, Salesforce.com is on track for the big boys' league, writes Brad Howarth.

May 8 2007

NOT even an earthquake that severed undersea internet cables off the coast of Taiwan was sufficient to slow the momentum of internet-based software supplier Salesforce.com.

The company, which makes software for managing customer relationships that clients access over the internet, reports it did not lose a single client as a result of the earthquake on December 26, 2006, that brought some internet services in China to a standstill.

According to the company's president, Jim Steele, while these acts of God do cause disruption for users of so-called on-demand software suppliers such as Salesforce.com, the heavy reliance that many companies have on the internet means even those that run their software within their own premises are not exempt from problems.

"(Internet availability) is an issue, but on average the internet has been pretty accessible and pretty reliable overall," Mr Steele says. "We are the virtual IT (department) for all of our customers, and we have to meet the most demanding customer's requirements."

He says customers rarely publicise when they have suffered problems themselves due to natural disasters, external failures or internal errors.
While all customer data is currently hosted at Salesforce.com's US data centre, Mr Steele says the company is considering creating two new data centres in Asia and Europe.

"It's not necessarily about performance...but there could be companies that say, 'We don't want our data in the US', for whatever reason," he says.
New data centres would mark another step in the evolution of the company, which was founded in an apartment in San Francisco eight years ago as a developer of customer relationship management (CRM) software. It subsequently pioneered the on-demand software delivery model, and now has 30,000 customers and 646,000 users. In Australia it employs 65 people and has more than 1000 clients.

About two years ago, in response to pressure from customers such as Cisco and Merrill Lynch, Salesforce.com began allowing other developers to build complementary software products that could also be delivered on demand, creating what it calls the AppExchange.

"There is no one that is offering a platform like this," Mr Steele says. "We've created a new market with AppExchange, and whenever we get into a battle with a large company over CRM, our differentiator becomes our platform."

While Salesforce.com originally required all clients to purchase a licence for its CRM software, six months ago it created a second class of licence for those users that wanted to only access software from other developers through the AppExchange. The financial services company Morgan Stanley, for instance, has bought 700 AppExchange platform licences for using another company's recruitment application. Mr Steele says Salesforce.com makes money by charging a percentage of what its AppExchange partners sell.

According to the analyst company Gartner, the market for on-demand software reached $US6.3 billion ($A7.7 billion) in 2006, and is forecast to grow to $US19.3 billion by 2011.

While Salesforce.com's success has drawn CRM competitors such as Oracle, SAP and Microsoft to begin offering on-demand CRM software, it has also helped pave the way for other on-demand applications from companies such as Num Sum and Google, which now has several internet-based applications available.
However, Mr Steele does not believe that Google is likely to become a competitor in the business market.

"We've spent a lot of time with Google - their model comes from the consumer side of things, and they are driving the advertising dollars," Mr Steele says. "But in the enterprise it is a different story. They are going to learn a lot as they get into Google Apps and realise that enterprise requires a lot more support."
A month ago the company announced it had developed a version of its software specifically for the financial services industry: a customised wealth management workstation.

"(Company chief executive) Marc Benioff's vision is nothing short of being the trusted platform for managing and sharing information in an enterprise, on demand," Mr Steele says. "Our opportunity is to be the Microsoft of the on-demand era. We want to be one of the big boys."