Salesforce.com kicked off the new year with a flashy launch in San Francisco and London of its new software-as-a-service release and AppExchange platform, which can support application development in an on-demand model. The company is aggressively marketing the theme of "no software" — purchases, that is — to promote its position in the market. Salesforce.com's insistence that applications should be available on demand by combining Internet-based business services with applications is now a reality, but it's a reality that poses some challenges as well. Unfortunately, despite its $50 million investment in its data center, salesforce.com has been plagued with stability and availability issues. Nonetheless, Ventana Research does see salesforce.com's approach as a challenge for traditional software application providers that do not offer a similar mix of simplicity and sophistication. The company now must build trust with large companies and demonstrate sophistication in integrating its applications with the many enterprise-level applications already deployed while delivering the same level of stability as found with currently internally managed applications.
Salesforce.com intends to do for the business market what the likes of Google, iTunes and eBay do for consumers. No one thinks of them as software companies; they are service providers. Likewise, with salesforce.com, there is no software or hardware to buy, no support staff needed, no maintenance fees and no need to worry about upgrades; you pay your subscription, log onto the hosted Web site, and there you go.
But the business world is not the consumer market. It has a huge investment in legacy applications, not much budget for new projects and critical needs for availability, responsiveness, security, and above all functionality, customizability and integration.
Salesforce.com recognizes this and is making an effort to respond. At the winter '06 launch, it announced it has rebuilt its architecture and platform and established two new data centers to support the planned growth and use of the applications its partners develop. For the core constituency reflected in the company's name, the release includes new territory management capability, an agent console, a sales campaign builder, analytics, forecasting and capabilities for customizing applications. There also are new deployment capabilities for Microsoft Outlook and offline editions for mobile sales forces.
AppExchange represents a new paradigm for application development and customization. The application programming interface has a simplified set of capabilities the company calls "mash ups," which integrate Web services and content within applications. And it offers developers a "sandbox," a facility for testing changes before deployment. The company claims its new version of AppExchange has 160 applications live on the Internet now.
Salesforce.com presents the production and deployment of applications in a centralized, Web-hosted environment as its critical differentiator from SAP, Oracle and Microsoft. It introduced key new partners such as Skype (for free, integrated conference calling and messaging), Adobe (for creating direct PDFs integrated into applications) and Business Objects (providing an online version called crystalreports.com for dynamic generation of reports).
However, salesforce.com still lacks many of the basic analytics for optimizing customer relationship management (CRM), sales organizations and other areas critical to large organizations. It does partner with ForceLogix, which offers a sales force optimization application that provides the ability to understand, optimize and align sales reps and territories to goals and objectives. But it is clear that the company will depend on various such partners to supply enterprise-class functionality. Ventana Research recommends that companies using salesforce.com evaluate the complementary applications for their various CRM needs and realize that salesforce.com will not meet the full range of their management and business process needs as Oracle and SAP can do.
Salesforce.com has brought forward a next-generation CRM application development platform and a partner ecosystem that is beginning to challenge the likes of Oracle and SAP, even as these two vendors strive to capture yet more market share. While salesforce.com dismisses the traditional software-on-premises approaches of Oracle and SAP, it still must be cognizant of and address the complexities of large enterprises and their needs. And vendors such as Microsoft, Oracle and SAP, while they continue to be successful with their existing business models, likely will respond to the threat with on-demand versions of their own products.
There is an understandable demand in the business world today for simplifying access, deployment and use of customer-centric applications in sales and services, and salesforce.com is beginning to address it. While it has taken a significant step in simplifying its applications and data exchange with third-party applications, salesforce.com still faces a challenge in facilitating interoperation with large enterprises' existing investments. Ventana Research concludes that the market will retain a mixed supply model and that on-demand software will be just one of the choices companies have. We advise organizations that are looking to simplify purchase and adoption of CRM and related applications to evaluate salesforce.com, but also ensure they are not left without other critical capabilities in management and analysis.
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