Risk
2/25/2010
07:18 PM
Chris Murphy
Chris Murphy
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Global CIO Quick Take: Don't Crown Salesforce Cloud King Just Yet

CEO Marc Benioff has something most companies don’t--blockbuster sales results. But in his latest market expansion, he's in for a fight.

Salesforce CEO Marc Benioff did everything short of whistling "zip-a-dee-doo-dah" while discussing the past year's financial results during a conference call this week. What, you didn't have boffo sales growth last year? Your sales aren't up 21% for the year, cash flow up 18%, earnings per share up 82%? Guess you're not Salesforce, then.

"We just went through one of the most horrific times of all time for technology spending," Benioff said. "One of the most difficult times for a lot of companies, and certainly a difficult time for our peers. Yet Salesforce.com kind of sailed through it really well. ... If anything was going to injure us, it's kind of what we have just gone through."

Impressively, 30% of Salesforce's new business growth comes from products other than its flagship salesforce automation service, primarily from its customer service online software and its online custom app platform.

Four years ago, InformationWeek asked in a cover story "Does Salesforce.com Have The Chops To Become A Billion-Dollar Company?" Now that it's on a $1.4 billion-a-year run rate, Benioff has his sites on $2 billion a year, planning to spend on salespeople even if it means slightly slower growth of its profit margin. With only 31% of sales outside the U.S., there's a lot of greenfield out there.

"We're just not in enough deals. ... We need to continue to visualize ourselves beyond that $2 billion revenue number with a fully diversified product line," he said. "That's where we're moving." The next big product in Salesforce's pipeline is Chatter, a Facebook-like collaboration platform it plans to start selling sometime later this year.

It's a growth story that rings true.

What doesn't ring true, though, is Benioff's summary dismissal of legacy vendors as competitors in the cloud. It worked for CRM, where Salesforce.com's tool was one-of-a-kind. But the crowded world of collaboration, where it's headed with Chatter, is a whole other fight.

Chatter is intriguing. But for solving a lot of everyday practical collaboration headaches, so is Microsoft's coming online version of Office. And as far as adopting a SaaS collaboration platform, a lot of CIOs will give a long look this year to Outlook--meaning they'll seriously consider pushing that to the cloud. Or perhaps even replace it with Google Apps, opening new options for collaboration. Can IBM revitalize Lotus with aggressive pricing of a cloud option? Can Cisco turn WebEx into more than an online conference room? Are companies too entrenched with SharePoint to even consider another collaboration platform? I raise all these because there a lot of reasons for CIOs to build additional functions--Facebook-like functions--into collaboration platforms employees already use, rather than bring in another.

Chatter is intriguing because it promises something different--that it'll make collaboration an embedded part of things you already do, and apps you already use. To claim that coveted role, though, Salesforce will have to take on some very real rivals with their own cloud-based stories.

Global CIO small globe Chris Murphy is editor of InformationWeek.

To find out more about Chris Murphy, please visit his page.

For more Global CIO perspectives, check out Global CIO.

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