Hosted Application Demand Fuels SalesForce.com

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Hosted Application Demand Fuels SalesForce.com

Hosted applications continue to get more press as time goes on. Similar to the e-commerce space, this market saw a slew of new entrants during the bubble times and many of these companies subsequently crashed and burned. Obviously having ASPs (remember that term?) drop like flies was not conducive to customer uptake of these solutions. In addition as an industry, we went from a time when the term ASP was ubiquitous to one where VCs actually told companies to not use these banished initials.

As you might imagine if you were an ASP in 2001-2003 and your financial backers told you to stop identifying the industry in which you played, you had trouble acquiring new customers.

This is likely why the term ASP is now gone and we use terms like hosted, on demand and software as a service (SaaS) instead.

While on the subject, note to self… Short stocks of companies where the investors micromanage.

Over time, companies have gotten more comfortable with e-commerce and the hosted model and one of the poster children for the latter has certainly become SalesForce.com.

Just making it through an ASP, tech and telecom depression speaks volumes about the company.

If this wasn't bad enough, Tom Siebel the much-respected company behind Siebel Systems publicly stated SalesForce.com wouldn't be around for long.

SalesForce.com seems to thrive as the underdog but are they still? SalesForce.com founder Marc Benioff has told me in the past he wants to see his company grow to a billion dollars in annual revenue. Certainly the hosted CRM leader is no longer small but this just means they have decided to focus on going after bigger competitors.

Of course the alliance SalesForce.com has made with Google has brought a huge spotlight on the company. To get a handle on the future of the hosted CRM company and what the Google alliance means to customers I traveled to downtown Manhattan where I spoke with Bruce Francis, the company's Vice President of Corporate strategy. You may recall, I last interviewed Francis in the summer of 2006.

Francis was candid about the Google news. He told me that his customers want to be free of the software burden. Many of them started with hosted CRM and are now yearning for SaaS solutions to replace the rest of their in-house software as well.

Francis continued, "It doesn't hurt that the incumbent software maker has rolled out the most disastrous upgrade to Windows ever," [referring to Microsoft Vista]. He continued, "Who wants to deal with this anymore?"

From there, Francis explained how there has been a shift in the market where enterprise users used to be so far ahead of consumers in terms of their technology adoption. He sees a world now where consumers are way ahead of the business market… Now he says consumers have web 2.0 and 3.0 and seem much further along than most businesses.

According to Francis, "Businesses are saying what gives? Why am I using the greatest [software] hits of the mid-decade of the 20th century when my consumer life is so much better?"

He went on to explain with much enthusiasm that this is the opportunity his company in conjunction with Google are taking advantage of. From there he discussed a bit of how much easier it is to collaborate on shared documents using hosted services.

Referring to collaborative software, he said, "Traditional vendors like Microsoft do not understand and show no potential to do so."

I did mention Microsoft's SharePoint server product as one of the ways Microsoft is addressing this matter. He responded, "It is one of those products that millions have but thousands use and no one loves."

In the past I have heard some negative comments on SharePoint and I didn't really have a list of happy (or unhappy for that matter) customers to bring up during the interview. I have been meaning to test the SharePoint out at TMC and hope to do so in the future. It is worth mentioning that after the interview I did do some digging and was able to pull up a number of positive comments regarding the latest version of SharePoint.

Coincidently I have also been informally testing some of the hosted services Microsoft offers via it's Live initiative.

I believe the problem for Microsoft is a lack of a clear SaaS strategy and moreover a concise market explanation. They have a number of hosted and collaborative initiatives and if it is tough for me to rattle them off, one wonders what customers need to do to keep up.

But getting back to SalesForce, I asked what will come of the Google collaboration and Francis responded, "I don't know." Those who know me well know it is challenging to make me speechless. But sure enough - I wasn't sure how to respond. I told Francis this was not the answer I expected.

He said it isn't him or anyone in the company who necessarily direct them in how they collaborate with Google. He told me the answers I seek are at ideas.salesforce.com the user portal for the SalesForce.com community. This is where you go when sharing suggestions and improvements to the company's services. This technology is not only powering the growth of SalesForce.com but Dell and Starbucks too are now taking advantage of SalesForce.com's services to ensure they too can get their customers to collaborate in making them better.

I checked this portal out in fact and found a great recommendation to get SalesForce.com working with Google Gears. There were lots of other interesting ideas there as well.

He also pointed me to companies like Astadia who built an application which integrates a quote generating service between Salesforce.com and Google applications allowing you to use Gmail to e-mail a custom quote to a customer.

From there, we discussed how the company's goal is to get as many companies as possible to use their hosted platform to develop applications. He mentioned Coda, an accounting software vendor out of Germany who decided to use the AppExchange as the basis for their hosted offering. He explained the company is able to utilize 1/3 the resources in pulling off their SaaS product as they leverage the database, logic, workflow and other features that SalesForce.com has perfected over the past nine years.

He emphasized that he hopes thousands of companies take advantage of their platform as a service model and moreover they are thrilled to allow developers in emerging markets to develop applications without the need for tremendous infrastructure they would likely never have access to.

I left enthused about what SaleForce.com is doing. They seem to have great market position as the hosted market is exploding with growth and they are so closely tied to it. Of course their recently enhanced relationship with Google doesn't hurt.

As always, you can never count Microsoft out as they thrive on competition. Their hosted solutions have been under the radar but it is not like the Redmond-based software giant doesn't have the resources to compete effectively using increased marketing and branding.

In the short term however, Microsoft may be very distracted with the Yahoo acquisition (assuming they try to purchase the company again or instead try to duplicate Yahoo's products and services) and it is during this time I expect SalesForce.com to be working as hard as ever to ensure they gain as much traction as possible across the spectrum of hosted services they play in.


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