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Salesforce.com gains momentum after month of milestones

SAN FRANCISCO -- It's been a month of milestones for Salesforce.com. In August, the hosted CRM provider hit the 7,000-customer mark and inked its largest deal yet, a thousand-seat deployment.

CEO Marc Benioff has made it clear that overtaking Siebel is the ultimate goal. What is the estimated time frame for accomplishing that?

That's hard to say. There are two targets here, our upward mobility and Siebel's downward turn. Some metrics show we've overtaken them in terms of active users. But with revenue, that's guesswork. Do you still get much resistance to the hosted model? Or is less evangelizing required to close a deal?

We've been evangelizing for four years. We recently met with Gartner, and this was a big turning point for us. They're starting to get validation [for the model] from their customer base. Companies aren't looking at their comfort with hosting. They're looking at the best CRM out there. Some see Siebel as more risky because of their high failure rate. There is, however, still an issue of [loss of] control that comes from lower-level IT staffs. Do you have a strategy for dealing with Siebel if it enters into a hosted CRM agreement with IBM?

It'd be the base Siebel code running on IBM boxes. That's the same first-generation ASP concept that we've seen before that had little traction. Salesforce.com has long talked about expanding into the ERP space. One of your competitors calls the as-yet-undelivered functionality 'mythical.' When is it finally going to happen?

Software companies have typically shipped software before it's ready. That doesn't work well for us. We have 1,000 customers working with [new releases] in the first few days. We've been using our ERP functionality internally for about four months. We're putting the last touches on it. Expect contracts to be delivered later this year and later on order entry. Is the name of the game to move into the ERP space or to integrate with software from SAP and Oracle?

Right now, we're aiming for connectivity to SAP and Oracle financials, but we're not trying to replace them. There currently is a wide area between CRM and accounting. We're hoping to fill some of that gap. Do you still get much resistance to the hosted model? Or is less evangelizing required to close a deal?

People were initially dubious about banks. They saw them as risky, too. But people no longer stuff their mattresses with cash. Well, people no longer have to stuff their servers [with CRM]. Is the name of the game to move into the ERP space or to integrate with software from SAP and Oracle?
Long, long term, our goal is to replace [SAP and Oracle], but we don't see a customer [ERP] upgrade cycle for another five to six years. So for now, we'll take specific processes, such as making sure sales reps don't have to go to SAP for order entry. Is Salesforce.com designing software for specific vertical markets?

Absolutely. Our next release (due in the late fall) will feature technology for specific verticals. We'll feature pre-customized reports, fields, sample data and pre-loaded business processes. We're looking at markets like pharmaceuticals, financial services, manufacturing, and software and hardware. Our partners are also developing vertical-specific applications. Speaking of competitors, you recently filed a suit against UpShot over advertising claims. Doesn't that seem a bit silly?

They're saying a lot of incorrect things. The Better Business Bureau found they practiced false advertising, and we just want them to stop. Is it fair to say that many of this year's product moves, namely the Sforce development platform and the S3 software upgrade, are geared to attracting larger customers?

We want to make it clear that we're not abandoning smaller businesses. Despite the visible investment in [features for] larger companies, the latest release also features 32 ways to get started quicker with CRM that will appeal to smaller companies. You recently signed your first 1,000-user deal. Is Salesforce.com breaking through with larger businesses?

Our revenue is evenly split between small, medium and large businesses. I don't have an idea where it will ultimately end up. Five hundred of our 7,000 customers are in the Fortune 500. We see our product like Microsoft Office. It did a good job penetrating companies of all sizes. There are no fewer than four pure-play hosted CRM vendors. Can the market support that many, or will this space suffer the same consolidation currently facing the client-server market?

The market is huge. In the U.S., there are more than 1 million companies, and maybe 10% are using CRM. There's going to be a free-for-all. Who's going to get those 900,000? Only the strong will survive. Amazon.com picked off tons of dot-coms. Hopefully, in our case we can pick [competitors] off, too. In the short term, the market can support more than four providers, though. In the long term, maybe two or three. Is it fair to say that many of this year's product moves, namely the Sforce development platform and the S3 software upgrade, are geared to attracting larger customers?

We're very much focused on big companies. Big companies want five-nines availability and great uptime. We need to support these companies. Smaller companies, though, will benefit, too. We call it the trickle-up effect. There are no fewer than four pure-play hosted CRM vendors. Can the market support that many, or will this space suffer the same consolidation currently facing the client-server market?

We're actually scratching our heads saying, 'Why aren't there more vendors [right now]?' Do you have a strategy for dealing with Siebel if it enters into a hosted CRM agreement with IBM?
We're definitely going to keep our eye on it, but in the long term we don't believe Siebel knows how to do [hosting]. Speaking of competitors, you recently filed a suit against UpShot over advertising claims. Doesn't that seem a bit silly?

A bit of it is [Salesforce.com's] take-no-prisoners approach. Don't take potshots if they're not factually correct. 

FOR MORE INFORMATION:

Salesforce.com inks 1,000-user deal

Salesforce.com releases its 'most significant step'

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