Salesforce.com Makes Platform Play

With Salesforce.com finally ready to serve as the platform player it has long wanted to be, its next hurdle will be convincing the market that it's more than CRM. As someone inevitably points out at every Salesforce.com analyst meeting, the company's name is Salesforce, not AppExchange or Multiforce or some other, broader branding.

"There's still a lot of evangelizing that needs to happen," Bluewofl's Berridge said. "Salesforce.com has a reputation in the marketplace as being a world-class CRM vendor; that's how they're characterized. Their biggest challenge is educating the marketplace that this is a platform play and not a CRM play."

Salesforce.com will have a big megaphone next week for its evangelizing. Its annual Dreamforce customer conference opens Sunday in San Francisco, and Benioff likes to kick off the show with headline-grabbing, splashy announcements. The Wall Street rumor mill is already churning heavily with expectations of big news: Salesforce.com's stock has risen around 15 percent over the past week in the run-up to the conference. Benioff began priming the pump on last month's earnings call. "Those of you with an appetite for news are used to us serving up industry-changing surprises like AppExchange and Apex at Dreamforce. We promise that you won't be disappointed," he told gathered analysts.

Inflection points are risky, and Salesforce.com has skeptics questioning its ability to grow beyond its CRM roots. Cowen & Co. analyst Peter Goldmacher, who has a Neutral rating on Salesforce.com's stock, doesn't see platform sales expansion stemming Salesforce.com's tide of slowing revenue and growth. With platform subscriptions priced lower than CRM subscriptions (which start at $65 per user annually, versus a $25 starting list price for the Platform Edition), Salesforce.com's profitability is likely to suffer, he warned in a recent research note.

Other analysts are more bullish on the company's prospects. "It seems increasingly clear that even as Salesforce still drives most of its revenues from its CRM products, the real focus is on the company's position as a platform vendor," Bernstein Research analyst Charles Di Bona opined in his own research report after Salesforce.com's August earnings call. "If Salesforce navigates this transition successfully, we think that the potential long-term payoff is substantial, and as one of the first movers in this market, the company has the early advantage. However, given the newness and rapid evolution of the market, success remains far from certain."

Rivals like Microsoft, SAP and Oracle are lining up to try to knock Salesforce.com off its pace, but the true threat the company faces is best symbolized by a ghost. Like Salesforce.com, Siebel Systems trailblazed its way through the software market and proudly took up the vanguard position in the CRM market it pioneered. But larger, more established vendors eventually cracked the CRM code, while nimbler upstarts like Benioff's ate away at Siebel's market opportunity. In the end, Siebel was trapped in the niche it helped invent, and became easy prey for Oracle to pick off -- which it did, ironically, the day Salesforce.com kicked off its Dreamforce 05 conference, upstaging Benioff's opening keynote.

Count analyst Josh Greenbaum of Enterprise Applications Consulting among the naysayers. In an oft-cited blog post dubbing Salesforce.com "Siebel 2.0," he forecast: "Salesforce.com is the next Siebel, the next CRM has-been, the next low-priced software buyout opportunity, unless somehow the company gets sold before its stock begins to tank or it engineers a remarkable turnaround from its current moribund strategy. It may take a couple of years, and there may be some big blockbuster announcements and a couple of good quarters in the interim, but it's gonna happen, and it's gonna be ugly."

Next week's Dreamforce, with its promised blockbusters, will be a high-profile showcase for Salesforce.com's plans for transitioning into a platform player and achieving the escape velocity needed to propel itself beyond CRM space. In the long run, the company's survival is at stake.