What Salesforce.com Results Say About Oracle Battle
Salesforce.com keeps furthering its reach into more corners of its customers' operations. The competition has noticed.
What's striking about Salesforce.com's results for its fiscal 2012, reported Thursday, wasn't just the rapid revenue growth and profitability. It's the degree to which its add-ons to its highly successful customer relationship management (CRM) software-as-a-service business keep promising to spill over into other parts of its customers' operations.
CRM is the established domain of a company's sales operation. But Salesforce CRM, with its Chatter social networking, Radian6 social network monitoring, and Force.com custom development platform, is in danger of having to rename itself Enterpriseforce or some other general purpose moniker.
Salesforce's broader ambitions are reflected in revenues that grew at an annual rate of 37% to $2.27 billion. It concluded the year on an annual run rate of $2.5 billion, having first crossed the $1 billion mark three years ago, as a 10-year-old company. In a statement that, for him, reflected self-imposed understatement, chairman Marc Benioff said of the results: "Our fourth quarter was a really gorgeous finish to an amazing year of growth."
With the deals already closed in its first quarter, Benioff said, it has raised its guidance for fiscal 2013 by $30 million over guidance last November to $2.92-$2.95 billion. Another "gorgeous finish" might conceivably push it over the $3 billion mark.
Don't think the competition hasn't noticed the good news.
Oracle, which thinks of itself as the essential business applications company, has been making moves to strengthen its own ability to offer SaaS in areas that reflect Salesforce's strengths, particularly the Salesforce Service Cloud. In October, it announced it was purchasing CRM vendor RightNow for $1.5 billion, which supplies midmarket CRM and salesforce automation. "RightNow's leading customer service cloud is a very important addition to Oracle's Public Cloud," said Oracle's executive VP of Oracle development Thomas Kurian in an Oct. 24 statement on the purchase. RightNow had a reported 2,000 customers at the time.
Salesforce's heavy emphasis on Chatter and social network monitoring has begun to infringe on the category of human capital management. In the future, managing talent will have a more dynamic element to it, with what people can do reflected in part by their participation in social networks and willingness to engage in a project. Salesforce has shown a knack for understanding the potential, and in December announced it was acquiring Rypple, a company that produces social networking mechanisms for tracking and recognizing employee performance.
Oracle, in turn, is in the process of acquiring SaaS talent management vendor Taleo for $1.9 billion, even though it already has several human resources management products, in part to give it stronger chops in online HR management, and to make sure its 5,000 customers and $291 million in sales don't fall into the Salesforce camp. In a similar vein, SAP is acquiring SuccessFactors, an online employee evaluation and talent management firm, and in a reseller agreement with NetBase, a supplier of social media analytics.
But what used to be a tension between the chieftains of Salesforce and Oracle--Benioff used to be a loyal lieutenant of Ellison's--has passed into something more akin to an era of hard feelings. Oracle chairman Larry Ellison, in defining Oracle's favored form of cloud computing, told customers that it wasn't like the allegedly hazardous Salesforce example. In his year-end remarks, Benioff emphasized the size of the deals in the fourth quarter; all three major gaming companies, Zynga, Electronic Arts, and Activision "have all unplugged and turned off Oracle RightNow in favor of Salesforce.com," Benioff said.
Salesforce also concluded large deals with Symantec, Philips, Chron, BMW, AT&T, Sprint, Motorola, McKesson, and LinkedIn in the quarter, he said.
It will be one thing if these deals are merely repeat versions of what Salesforce has done on in the past--automating the activities of roving sales staff with an online service. It will be another if these customers wish to convert their enterprises into social-networked businesses, with analytics working constantly on the data generated by employees and partners using the network. In that case, they may see Salesforce as the technology provider to get them there.
That would mean Salesforce has its foot in the door on where these companies are prepared to invest--and a full head of steam going to keep augmenting its existing product lines. If talking constantly about the social network tends to focus customer interest on Salesforce, then expect more of the same from Benioff & company--and a longer catchup gap for those trying to chase it down the path to the socially networked enterprise.
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