Salesforce.com bids for new market with sforce

Offering positioned as platform for building hosted apps

With this week's launch of its new sforce platform for developing hosted applications, Salesforce.com aims to expand beyond the enterprise applications category into the broader business of functioning as an "on-demand utility computing company," according to Chief Executive Officer Marc Benioff.

Since San Francisco-based Salesforce.com's debut four years ago as a vendor of hosted CRM (customer relationship management) software available for a per-user monthly fee, the company has been developing for internal use the technology that underpins sforce, Benioff said at a Tuesday evening launch event in New York. Benioff said he's always intended to offer that technology to external customers, but had to wait until Salesforce.com had developed market credibility.

And profitability. With 7,000 client companies and 90,000 end users, Salesforce.com is operating in the black, and will generate $100 million in revenue this year, according to Benioff.

Analysts say those figures put Salesforce.com at the head of a pack of vendors reviving an ASP (application service provider) model that buzzed brightly but never appeared to gain market traction during the dot-com boom. The competitors include UpShot, NetLedger and Salesnet.

While Salesforce.com is selling sforce as a platform for other developers to use to create their own hosted applications, the technology is also intended to let customers and ISVs (independent software vendors) build extensions to salesforce.com's core functionality. It's that aspect of the platform that's likely to be the most used for the foreseeable future: So far, Salesforce.com doesn't have any built-from-scratch, non-Salesforce.com-related applications running on sforce, according to a spokeswoman.

Analyst Sheryl Kingstone, with Yankee Group in Boston, said she's pleased to see Salesforce.com launch sforce, and expects it to solve a problem that's deterred some potential customers: The challenge of integrating Salesforce.com with other enterprise applications, such as accounting and ERP (enterprise resource planning) systems. With sforce, customers who need integrations can build them, or hire consultants to do so.

Such customization flies in the face of the promise of simplicity that initially draws many customers toward hosted, managed offerings, but "it seems that's life," Kingstone said. "They're offering the ability to customize that the clients say they need."

Salesforce.com's rivals are quick to cast the announcement as a sign Salesforce.com is shirking its integration duties.

"Every software developer, when the problems get too hard, tells the customer to go do the development themselves," said NetLedger Chief Executive Officer Zach Nelson.

UpShot Chairman Keith Raffel said his company also focuses on building needed integration features into its application, and consistently wins against its competitors for deals with larger enterprises because of its emphasis on compatibility.

"We're connected to everything you can shake a stick at that a big company might use," he said.

Both NetLedger and UpShot say they have no interest in the infrastructure market Salesforce.com hopes to crack. But Yankee Group's Kingstone says it's a market without any dominant players, and one Salesforce.com can afford to enter speculatively.

"I think they have enough time to start testing the waters," she said. "The only (vendor) that's started working it a bit is Onyx (Software)."

Benioff says he's not worried about having Salesforce.com's focus diverted by entering a market tangential to the one in which it's known.

"We've been doing this since day one," he said. "We couldn't build Salesforce.com without it. It's a part of everything we do."

Copyright © 2003 IDG Communications, Inc.

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