You won't find an enterprise software company with more evangelists right now than salesforce.com. Bloggers, 3rd party research organizations and especially my fellow investors have collectively drunk the SfDC Kool-Aid and seem universally ready to anoint CRM the "next great software vendor."
While Marc Benioff and his company deserve a tremendous amount of praise for the hyper growth trajectory they've put themselves on; while at the same time bringing the concept of SaaS [or OnDemand] to the forefront...I implore the evangelists to take foot of the proverbial gas pedal for a few seconds while you consider the following quick math lesson:
$47.6 million
What's that amount signify?
1) The total R&D spend by salesforce.com SINCE INCEPTION
2) The amount SAP spent on R&D over an 11-day span last quarter
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Again, I don't mean to suggest that salesforce.com has no moat with which to defend itself. It's the natural order of things in the software universe for smaller vendors to outmaneuver their more mature brethren as they ride the crest of a paradigm shift. First mover advantage and a laser-focused sales and marketing message are major assets not to be dismissed.
HOWEVER, I've heard so many people speak of salesforce as though it was game over for all the traditional apps vendors. Please folks, settle down. AppExchange is a compelling idea, but it's by no means fully baked [or close to it]. 300,000+ subscribers is impressive; but compare that to the number of active users at SAP [or simply look at the number of active users added in North America over the last three years; blows SfDC out of the water].
Yes, SAP's initial foray into OnDemand CRM leaves much to be desired [not that we should really be surprised...those that are need to think long and hard about who SAP's core customers are and whether OnDemand CRM makes a lot of sense for them], but the company is hiring 4,500 people this year and to think they can't devote SIGNIFICANT resources in a hurry to OnDemand CRM if they want/need to would be misinterpreting the scale of that organization.
And don't think for a second that salesforce's first mover advantage puts it that far ahead of other SaaS vendors either. With VCs absolutely gung ho about the SaaS model, software icons like Dave Duffield putting their best efforts into the space, and the big vendors having a level of market share and scale unlike anything we've seen in the industry in prior cycles; the evolution of the SaaS apps market is sure to be a long and winding road.
Note: At the time of this writing I, and/or funds I maintain discretionary control over, maintained a long equity position in SAP but did not maintain a position [long/short] in CRM.
saas crm salesforce ondemand software sap woodrow
On the conf call that very same number is the expected amount of stock based comp for 2006 (give or take a million here and there).
also on the call I heard that CRM says it wants to make a stronger investment in R&D for future architectures, CRM says it now has a higher goal of reliability than it did previously.
.... all interesting stuff
Posted by: Brian Bolan | February 22, 2006 at 07:18 PM