5 May

Salesforce overview: A key enterprise cloud computing company

WRITTEN BY Samantha Nielson

Salesforce.com Inc.

The San Francisco–based Salesforce.com Inc. (CRM) provides enterprise cloud computing solutions with a strong focus on customer relationship management, or CRM. Although the company has seen increasing revenue in the last two years, it has yet to turn a GAAP profit, as growth in expenses has outpaced revenue growth. The stock is down 4% year-to-date.

Salesforce overview: A key enterprise cloud computing company

Salesforce.com was founded in March 1999 by former Oracle executive Marc Benioff along with Parker Harris, Dave Moellenhoff, and Frank Dominguez. Known for pioneering the software as a service (or SaaS) platform, Salesforce introduced its first CRM solution in February 2000 and has expanded its offerings with new editions, solutions, and enhanced features through internal development and acquisitions. The company’s flagship product is a customer relationship management solution for enterprises.

The company also provides platform-as-a-service (or PaaS) solutions via its cloud platforms Force.com and Heroku, which was acquired in late 2010. Salesforce manages the largest cloud computing applications and services platform, AppExchange, which was launched in 2005. Last year, Salesforce launched Salesforce1—a new social, mobile, and cloud customer platform built to transform how companies sell, service, and market for the “Internet of Customers.”

The global market for PaaS (platform as a service) is set to jump from $3.8 billion last year to more than $14 billion in 2017 as companies look to cut infrastructure costs and speed up application development, according to research from analyst firm IDC. The increase in spending is due to “indications of faster acceptance of the competitive PaaS buying proposition and new information concerning past years, particularly related to the acceptance of and market penetration of Microsoft Azure,” the report states. Synergy Research Group said in its 4Q 2013 data that Salesforce, Microsoft, IBM, and Google (GOOG) continue to lag far behind Amazon Web Services (AMZN) in the infrastructure as a service (IaaS) and PaaS markets despite strong revenue growth.

Salesforce recently said it was named the number-one CRM software provider in Gartner Inc.’s latest worldwide CRM market share report, entitled Market Share Analysis: Customer Relationship Management Software, Worldwide, 2013. Based on CRM revenue in 2013, salesforce.com achieved greater total revenue, revenue growth, and market share growth than any other top-ten CRM vendor, the report said. Other vendors the report named were SAP (SAP), Oracle (ORCL), Microsoft (MSFT), IBM (IBM), and Adobe (ADBE).

The company derives its revenues from two sources:

  1. Subscription revenues, which comprise subscription fees from customers accessing its enterprise cloud computing services and from customers purchasing additional support beyond the standard support that is included in the basic subscription fees (the majority of Salesforce’s subscription and support revenues derive from subscriptions to Sales Cloud)
  2. Professional services, such as process mapping, project management, implementation services, and other revenue, which consists primarily of training fees

Salesforce recognizes subscription and support revenue ratably over the contract term, beginning on the commencement date of each contract. The majority of professional services contracts are on a time and materials basis, for which the company generally recognizes revenue as the services are rendered.

Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue, which primarily consists of billings or payments received in advance of revenue recognition from the above-mentioned subscription services and is recognized as the revenue recognition criteria are met. Unbilled deferred revenue represents future billings under the subscription agreements that have not been invoiced and, accordingly, are not recorded in deferred revenue.

Salesforce provides solutions in each of its four core markets: sales, customer service, marketing, and cloud platforms. It provides social and mobile cloud apps and platform services, as well as professional services such as consulting, deployment, training, implementation, integration, and campaigns for adoption of its solutions. The company also offers a number of traditional classroom and online educational classes that address topics such as deploying, using, administering and developing on its service.

The company’s primary service offerings

The Sales Cloud, also called the Salesforce1 Sales Cloud, is a popular solution for sales force automation and it enables companies to grow their sales pipelines, close more deals, improve sales productivity, and gain valuable business insights. Customers use the Sales Cloud to access accurate customer and prospect information, track leads and progress, forecast opportunities, and collaborate around closing a sale on any device. The Sales Cloud also encompasses partner relationship management functionality (including channel management and partner communities) and real-time customer and contact information.

The Service Cloud, also known as the Salesforce1 Service Cloud, is a platform for customer service and it enables companies to connect with their customers and effectively address their service and support needs. Customers use the Service Cloud to connect their customer service agents with customers on a multitude of devices and across every channel—phone, email, chat, self-service web portals, social networks, online communities, and directly within their own products and apps.

The Marketing Cloud, also known as the the Salesforce1 ExactTarget Marketing Cloud, is a customer platform for one-to-one marketing and it enables companies to bring in data from any source and deliver personalized interactions (digital marketing) to any customer across any channel—email, mobile, social, web, or within their product. By combining the July 2013 acquisition of ExactTarget with the existing marketing automation solutions, Salesforce created a marketing platform that allows marketers to manage their digital marketing, including email, mobile, social, web, marketing automation and data analytics, from a single platform. With the Salesforce1 ExactTarget Marketing Cloud, customer data can be routed into the Sales Cloud and Service Cloud in the form of leads, contacts and customer service cases to give companies a complete view of their customers.

The Salesforce1 Platform is a cloud platform for developing customer apps. Salesforce1 Platform is delivered as a service, enabling anyone to build business apps without the burden of managing hardware and software. The Salesforce1 Platform enables existing customers, ISVs, and third-party developers to create and deliver cloud apps they’ve built on Salesforce’s multi-tenant platform. It’s a platform where users can create, test, publish, and run apps. Plus, developers can market these apps and sell them on the AppExchange, Salesforce’s online marketplace for business apps, or sell them through software vendors.

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