Cloud Computing: Salesforce.com’s Next Billion-Dollar Business – Marketing

Grazed from InformationWorld. Author: Doug Henschen.

Salesforce.com now has six cloud-computing lines of business: sales force automation, customer service, marketing, collaboration, human capital management, and Salesforce.com development platforms (Force.com, Heroku, and Site.com). Sales force automation is already a $1 billion-plus business, and if predictions by CEO Marc Benioff hold true, the customer service, development platform, and marketing businesses will catch up soon.

Benioff made his predictions during a conference call with equity analysts on Thursday in which Salesforce.com detailed financial results for its second fiscal quarter ending July 31. Highlights included a 34% year-over-year increase in quarterly revenue to $732 million. Salesforce.com also raised its full-year financial guidance, forecasting revenue of about $3.03 billion to $3.04 billion, up from $2.99 billion to $3.03 billion. Earnings are expected to come in at $1.48 to $1.51 per share, up from $1.45 to $1.49 per share…

The only weakness in Salesforce.com’s performance was a shortfall in quarterly earnings, which came in at 31 cents to 32 cents per share, below the 34 cents per share analysts polled by Thomson Reuters expected. Salesforce reported a loss of $9.8 million according to generally accepted accounting principles (GAAP), up from a loss of $4.3 million during the same period last year. Increases in operating expenses, stock-based compensation plans, and interest expenses all cut into profits. Wall Street has its eyes on profitability, so it sent Salesforce.com’s shares down 5.6% to $138.60 in after-hours trading.

Benioff is clearly focused on Salesforce.com’s industry-leading growth, as he boasted that the company is on track to hit a $3 billion run rate in the third quarter. He also disclosed that the company’s customer-service product line has surpassed a $500 million run rate and is "well on its way" to $1 billion.

Salesforce.com faces new cloud-based customer-service competition from Oracle, which acquired RightNow in January, but Benioff said Salesforce has seen no change in competitive dynamics. Salesforce is getting a big share of its customer-service business from customers moving away from aging, on-premises Siebel CRM implementations. Oracle is clearly hoping RightNow will help stem defections from its camp.

Marketing will be Salesforce.com’s next $1 billion business, Benioff vowed. That product line is built on the combination of Radian6, acquired early last year for $326 million, and Buddy Media, a $689 million acquisition finalized earlier this month. Radian6 is a social media monitoring and engagement platform while Buddy Media offers a cloud-based social media marketing and campaign-management platform. The combination will enable customers to "listen, engage, advertise and measure their social marketing programs," Benioff said. He noted that Buddy Media already manages more than 10% of Facebook ad spend.

As for plans in the human capital management (HCM) arena, Benioff said Salesforce.com will be demonstrating Work.com at next month’s Dreamforce event in San Francisco. Work.com is a rebranding and redevelopment of the cloud-based Ryyple application, which was acquired for an undisclosed sum late last year. Ryyple was a tiny startup with a simple social goal-setting and performance-review system. Gamification features let users win badges for completing goals, landing a big client, or otherwise doing a good job.

By contrast, SuccessFactors, acquired by SAP in February for $3.4 billion, and Taleo, bought by Oracle in April for $1.9 billion, offer far more extensive HCM suites including performance review, recruiting, workforce planning and analytics, compensation planning, and succession planning applications. In a clear response to the gap in HCM functionality, Benioff said Salesforce.com will also demonstrate at Dreamforce extensive new ties with the cloud-based Workday HCM suite.

"We’re working hard to integrate to deliver a full HR suite to our customers between Salesforce.com, Work.com, and Workday," Benioff said. He added that an integration between Workday and Salesforce.com’s Chatter collaboration application will also be demonstrated at Dreamforce.

Competition from the likes of Oracle and SAP and the ongoing search for growth may ultimately pull the company into the back-office ERP domain, but the current strategy is to work with partners like Infor, Kenandy, and Workday. For now, Benioff said Salesforce.com’s strategy is to help companies "redefine their front office," and he’s content to let customers "reposition their old enterprise software as their back office."