Salesforce.comCoverage Salesforce.com and BakBone Software, WizKids 2006 Salesforce.com Takes New York, Again June 2005 The Hosted Contact Center, October 2004 CRM’s Coming Second Act, July 2004 Road Trip: Salesforce.com at NYSE, July 2004 The Advantage of Being Second, June 2004 Synopsis Salesforce.com (www.salesforce.com, NYSE: CRM) is the leading software company in the on demand market for several reasons, not the least of which is that few others wanted to enter it. That’s a good thing for Salesforce.com because it enabled the company to execute a brilliant, text book, disruptive innovation strategy. On demand today is the fastest growing segment of CRM and probably of enterprise software due in part to the favorable economics of paying by the user seat vs. buying a computer room full of gear, software, and people. At this point many other vendors are entering or have entered the market for diverse reasons. For example, Siebel entered in an attempt to fend off competition that was draining customers from the low end of its range. Siebel was the first company to offer what was termed a “hybrid” strategy to give customers what they wanted, where they wanted it. Most people saw the Hybrid strategy as a thinly disguised ruse to capture customers and slowly upgrade them to the on premises product. It didn’t work. Siebel was acquired by Oracle. SAP has recently tried the same thing with an even thinner disguise. The SAP product can be charitably described as embryonic, a check to Oracle’s growing prominence in CRM and on demand due to the Siebel acquisition — despite Siebel’s misguided strategy Siebel OnDemand is a decent product, the same cannot be said of SAP’s. Importantly, Salesforce.com is not wasting time resting on its laurels. The company that reinvented software delivery has followed up with a potentially greater innovation in its on demand development platform, AppExchange. AppExchange is doing to development what on demand did to software provisioning and this time, systems integrators and purveyors of traditional development tools — Microsoft and Oracle to name two — are in the cross hairs. Anyone expecting to invent the moral equivalent of a “hybrid strategy” for developers should seriously reevaluate career options. The power of the AppExchange strategy is that it is actually growing the market for commercial software. Many application areas that may be worthy of automation have historically been underserved — think about healthcare, education, law. If those areas have all of the automation they need, why is there so much paper still embedded in their business processes? The simple answer is that some of the most demanding (and for software companies, lucrative) areas of these businesses have received automation support, but many other areas are ignored by commercial developers because the potential returns are too meager, given the costs of developing, marketing, selling, and supporting software products. This is the so called “Long Tail” phenomenon. AppExchange addresses these markets creating demand where it was suppressed and solutions that have only so far been dreamed about. All in all, we like Salesforce.com’s chances to become a very large company. It’s impact is only beginning to be felt. |
