Salesforce.com Sees Rise In 2Q Revenue

How competitive is the market for on-demand CRM? Salesforce.com CEO Marc Benioff puts it this way: "We are seeing our competitors do just about anything to try to win a deal from us."

While many software companies are struggling to achieve any growth at all, Salesforce.com announced Thursday a year-over-year revenue increase of 20% for its second fiscal quarter ended July 31, to $316.1 million, while its net income was up 112% to $21.2 million.

Still, Benioff made it clear in a conference call Thursday that Oracle and Microsoft are working hard to win business over Salesforce.com with their own subscription-based software services in the customer-relationship management area. Although SAP also offers CRM on demand, Benioff said Salesforce.com hasn't seen it in many competitive bids.

CRM is low-hanging fruit for traditional software vendors trying to beef up a presence in cloud computing. That's because if a customer decides to try out a hosted software service, CRM is typically considered the safest bet and requires the least integration with on-premise software systems.

Benioff pointed to several instances where it has won deals in competitive bids with Microsoft and Oracle. Insurance company Marsh chose Salesforce.com over those two for sales and marketing automation in the past quarter, and is integrating Salesforce CRM with news feeds and account contact information. The deal calls for 2,500 subscribers initially, but Marsh plans to grow its subscriber base to more than 10,000 people.

Other wins against Oracle in the second quarter include Comcast, Thompson Reuters, NCR, AT&T, Abbot, Waste Management, Capital One Services, BBVA, Bancomar, the Frank Russell Company, and Developers Diversified Real Estate, Benioff said, adding that another SaaS company, SuccessFactors, signed on for Salesforce.com after an Oracle On Demand deployment failed.

Analysts have said the biggest threat to Salesforce.com is pricing of its CRM services, which typically run higher than Microsoft or Oracle. Benioff indicated those two consistently try to out-price Salesforce on deals, "but customers come back to us."

Still, Benioff realizes that for Salesforce.com to continue on its rapid growth rate, it needs to keep moving beyond the CRM area.

Salesforce.com is making some progress. The company's "Service Cloud," which includes services for call centers and self-service Web portals, and its "Custom Cloud," for developing and running custom applications, represented more than 25% of new business wins, Benioff said. He did not provide details on how much they are contributing to revenues.

Not all of those Custom Cloud applications fall into the general CRM area. For example, Benioff said, Crescent Health Care has developed seven custom applications that run on Salesforce systems (called the Force.com cloud computing platform) to monitor patient care, including intake and pharmacy needs. Rasmussen College in Chicago built a student enrollment app that runs on Force.com

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