Salesforce.com's Next Steps To Become The Next Oracle
Salesforce.com is still tiny compared to giants like IBM, Oracle, and SAP, but there's plenty of room for fast growth in new markets. Here's what it needs to do next.
The Chatter collaboration platform and Force.com and Heroku development platforms keep sprouting new features and add-ons, such as the Chatter Communities, Salesforce Identity, and Desk.com service-desk systems announced last week, the last based on the 2011 acquisition of Assistly. The Community and Identity offerings won't hit until 2013, so they won't be big near-term revenue drivers. Pricing won't be set until they're available, so the revenue potential is unknown. They feel like add-on services for enterprise licensing deals. Desk.com is aimed at small businesses. Scaling up to larger companies (to gain more revenue) would put Salesforce in competition with partners such as BMC with its Remedy and RemedyForce offerings.
Dreamforce also trained spotlights on Saleforce.com's two newest product lines, the Salesforce Marketing Cloud and Work.com employee performance management platform. There's greater revenue promise here. The push into marketing was repeatedly described as "the beginning of journey." For now, Salesforce says the Marketing Cloud combination of the Radian6 social listening platform and Buddy Media's social marketing platform will give marketers all the tools they need to listen to social networks, create presences on Facebook and Twitter, engage with social customers, create social ads, and measure the impact of all these efforts.
Keep in mind that this Marketing Cloud is currently only about social marketing. Salesforce has nothing yet to create, manage, or measure email or web banner advertising campaigns. That's the province of partners such as Marketo and Eloqua. There's been plenty of talk about Salesforce acquiring one of these companies, and it's an obvious area Salesforce could move into to get to its goal of $1 billion in Marketing Cloud revenue more quickly. Buddy Media had a run rate of about $100 million in annual revenue before it was acquired while Radian6 revenue was about $35 million (though that was 18 months ago). Eloqua went public last month and is on an annual run rate of just over $90 million.
It's easy to see why Benioff sees a big opportunity in marketing. Marketers don't really have an IT system of record currently. Instead, they've been making do with many point systems or, worse, spreadsheets. A next step for Salesforce would be to do more to support e-commerce, an area that direct competitor NetSuite has entered. Commerce is also a big deal for both IBM and Oracle with their personalization, commerce-engine, and retail technologies. So the race is on to build a more comprehensive (and lucrative) marketing and e-commerce cloud.
In the area of talent management, Work.com expands on the December 2011 Ryyple acquisition with new employee promotion, rating, ranking, and analytics capabilities. But Work.com does not yet handle recruiting, succession planning, onboarding, or e-learning. Benioff and Work.com executives were evasive about future plans, saying only that they're "not done yet." Partners like Jobscience and Cyber U build apps for recruiting and e-learning, respectively, on Force.com, so it's easy to see Salesforce acquiring or building its own apps to pick up more revenue. But at $5 per user, per month, the current list price for Work.com, talent management is clearly not the next billion dollar cloud after marketing, even if Salesforce adds more components.
Investors want Saleforce.com to grow as quickly as possible, so some financial analysts openly wonder why an acquisition of Marketo or Eloqua hasn't already happened. Salesforce is clearly pacing itself. In fact, you could say it's already getting ahead of itself given that so many Dreamforce announcements (like Chatter Communities, Salesforce Identity, and the Data.com Social Key) won't be available until next year.
Salesforce.com now has the product breadth to become a $10 billion revenue company, according to Wells Fargo equities analyst Jason Maynard. And with the long-term promise of the Marketing Cloud, Work.com, and collaboration and development-platform offerings, the company has expanded its "total available market" to greater than $40 billion, Maynard wrote in a research note last week.
Though Salesforce isn't a tech giant yet, it has grabbed a huge chunk of mind share. It will be interesting to see how much sizzle Oracle can whip up at next week's Oracle Open World around its engineered systems, its on-premises applications, its database, and its middleware.
No doubt we'll hear from (or at least about) Fusion cloud applications as well as from cloud customers gained with Oracle's 2012 acquisitions of RightNow (CRM), Taleo (talent management), Vitrue (social marketing), and Collective Intellect (social monitoring). But it will be very tough to outshine Salesforce on cloud and social.
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