T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .


Salesforce.com reignites as a pla...
development and deployment capabilities. Another value-add from Salesforce1 is that customers’ acquisitions will
delivery option may help sway the Fortune 50 and highly regulated verticals to work with Salesforce.com. We do
not bel...
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Salesforce.com reignites as a platform game changer with mobile and API-first Salesforce 3


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Salesforce.com reignites as a platform game changer with mobile and API-first Salesforce 3

  1. 1. TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C . TBR EVENT PERSPECTIVE Salesforce.com reignites as a platform game changer with mobile and APIfirst Salesforce1 Salesforce.com: Dreamforce 2013 San Francisco; Nov. 18–22, 2013 Author: Jillian Mirandi (jillian.mirandi@tbri.com), Software and Cloud Practice Analyst TBR Perspective Dreamforce 2013 marks Salesforce.com’s 11th annual customer, partner, developer and analyst conference. The conference continues to grow into one of the largest global tech conferences, with 110,000 registrants in 2013, nearly 100 times more than the number at its inaugural event in 2003. Salesforce.com uses Dreamforce to showcase product launches and to highlight Salesforce.com’s marketing messaging and strategy as well as how marquis customers are innovating with and on Salesforce.com technology. Salesforce.com’s new mobile-first platform, Salesforce1, has the opportunity to trump the growing number of competitors — if it delivers on its promises Dreamforce 2013 focused more on outlining Salesforce.com’s corporate strategy than making major product announcements. The most notable shift in strategy was the increased focus on platform and mobile. After years of minor investments in the Force.com and Heroku platforms, an increased focus on platform in 2H13 marks a turning point for Salesforce.com that places PaaS at the center of its strategy. The major product announcement that occurred was the launch of Salesforce1, the company’s new platform layer that sits between the traditional development platforms and applications. Salesforce1 will include customers’ applications and additional mobile capabilities and APIs. Salesforce1 is a mobile and API-first platform that runs all of Salesforce.com’s major applications, including Sales Cloud, Marketing Cloud and Services Cloud. The focus on the platform is expected to elevate Salesforce.com’s value proposition based on improved mobile app
  2. 2. TBR development and deployment capabilities. Another value-add from Salesforce1 is that customers’ acquisitions will systematically update across all devices to create a seamless and integrated customer experience. Salesforce.com undertook these actions because it faces threats from increasing competition. On the applications side, competitors SAP and Oracle bought into the cloud market through cloud-delivered acquisitions, reorganizations and an influx of resources to promote and sell their evolving portfolios. On the platform front, Microsoft, open-source players such as OpenStack and ServiceNow, and most recently VMware and EMC spinoff Pivotal expressed intent to evolve into an enterprise platform vendor and have the portfolios to back it up. Additionally, Saleforce.com is no longer the agile game changer it was even just a few years ago. However, if Salesforce1 delivers on its promises to fully integrate products and populate across all devices, it has the potential to become the application platform of choice for enterprise; it will also scale quickly and ahead of competitors due to the breadth of the Salesforce.com customer base. Salesforce.com’s continued expansion into the mobile world, where it was trailing, will leap frog it ahead of competitors. However, TBR has some doubts as to how seamless the transition and the platform really are; similar platform Salesforce Touch was announced at Dreamforce 2012 and was later scrapped due to its lack of technical capabilities. TBR believes Salesforce is lacking in analytics capabilities. Although CEO Marc Benioff claims the company has robust analytics capabilities (i.e., Dashboards), customers see this as an area in need of improvement. TBR expected an analytics acquisition or partner announcement during Dreamforce 2013 and would not be surprised if there is one in the near future. However, continued operational losses are stalling the company’s decision of another multibillion-dollar acquisition. Benioff asserts that business models matter and pledges to improve on operating losses by evolving bundling and GTM strategies During Salesforce.com’s CY3Q13 earnings call that helped kick off Dreamforce 2013, Benioff emphasized that Salesforce.com’s continued operational losses were a problem. TBR believes that while cloud vendors need to build technology, personnel and scalability ahead of customer growth, this type of business model is unsustainable for a company of Salesforce.com’s size. TBR believes that while Salesforce.com’s portfolio is expanding and maturing, the company has not adequately evolved its business model to reflect this maturity. To right this issue, Salesforce.com is lessening its focus on direct sales and marketing and the high costs associated with it, bundling and integrating products at a premium, and expanding partnerships with large ISVs such as HP to improve its appeal among the largest enterprises and most-regulated industries. The high cost of S&M expenses, at nearly 50% of revenue, is Salesforce.com’s business model’s biggest flaw. Salesforce.com made quite a name for itself in the SaaS market through aggressive S&M tactics, and we believe that a de-emphasis on direct focus will help the company improve margins, as this approach is no longer necessary. Utilizing ISVs, SIs, MSPs and developers to create value and sell will drive revenue gains at lower costs. A newly formed relationship with HP, announced at Dreamforce 2013, will help Salesforce.com improve operating margins. Salesforce.com and HP plan to combine Salesforce.com’s software with HP’s Converged Infrastructure and run it in Salesforce.com’s data center to create Superpods. A Superpod will give customers who require private cloud an option to use Salesforce.com. Although the Salesforce.com technology will run exactly as it does on Salesforce.com Pods, Superpods will be dedicated to specific customers; the first customer is HP. We believe this www.tbri.com
  3. 3. TBR delivery option may help sway the Fortune 50 and highly regulated verticals to work with Salesforce.com. We do not believe this is a major strategy shift for the company. Finally, product bundling such as the Salesforce Performance Edition, which integrates Sales Cloud, Service Cloud, Platform, Data.com, Work.com and Pardot, will drive improved operational costs as it takes selling expenses and time out of cross-selling and is sold at a premium. We believe Salesforce.com will roll out more bundles like Salesforce Performance Edition to the market and will sell Salesforce1 not as a CRM, but as a front-end suite. Benioff stated that the company wants to sell every product to every customer, leading TBR to believe that the sales team will see increased incentives for (more profitable) cross-selling. Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com. ©2013 Technology Business Research Inc. This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce. www.tbri.com