It's perhaps a sign of how far Salesforce.com has come that the firm can announce a doubling on profits on the eve of its biggest ever user conference, but see its share price slip because Wall St expected even more from the Cloud apps firm.
With the Dreamforce keynote sessions less than 24 hours away, Salesforce.com needed to deliver good news on Tuesday to get things off on an upbeat note and on the face of it the results provided them with just that. For the third quarter of fiscal 2009, the company saw profit more than double to $20.7 million compared to $10.1 million one year ago. Revenue rose to $330.5, up 20% from a year ago.
“At this level our annual revenue run rate is now more than $1.3 billion and we continue to be the fastest growing software company of our size in the world today,” said CEO Marc Benioff who added that the bigger underlying story was an uptick in the wider economic environment. “While our financial results were outstanding, perhaps the most exciting part of our quarter was the improvement we saw in some of the key growth drivers of our business. We now believe we are seeing some very early signs of improvement in some very key areas. That is really causing us to enter a growth stance in our company.
“After seeing increases in attrition over the past several quarters, we saw a lower dollar attrition in the third quarter and finally customer demand for our services has never been greater. During the third quarter we added a record 4,700 net new customers. That is some 500 more than we have ever added in a single quarter and all our global customer community is now more than 68,000 customers despite this challenging economic environment. We are up 30 % from a year ago.”
Eastern promise met
Japan continues to be a significant growth opportunity for the firm. “Our two marquis transactions this quarter were both in Japan where we continue to see just remarkable momentum,” noted Benioff. “AIG Edison signed an ELA with Salesforce.com during the third quarter. In addition to the roughly 5,000 sales people that will use SalesCloud, AIG is also using the ServiceCloud to build a customer portal that is expected to serve more than one million users. AIG Edison also plans to use the Force.com development platform to build applications demanding new contracts and insurance payments. In all of these applications, as well as their data, will be available in real time to employ via their smart phones in Japan.
“AIG Edison is an excellent example of how our multi-Cloud strategy of the SalesCloud, the ServiceCloud and the CustomCloud is allowing us to grow beyond sales. It is just now about sales anymore because a Force.com platform is allowing us to create success in other great new areas like contract management or in the case of AIG Edison we are able to expand our footprint inside of our customer’s themselves. As a result, every employee at every business of every size is seriously a prospect for Salesforce.com.”
The other poster child in Japan is of course JapanPost, a long standing Salesforce.com subscriber. “The flagship implementation with Japan Post continues to grow very nicely,” said Benioff. “In order to expand their use of the Force.com platform, Japan Post decided to upgrade to Unlimited Edition. In addition to the applications they have already built for areas like product sales reporting on the platform, and ad space management on the platform, audit management and claims and access management in the platform, they are now expanding to build new things like sales information and commission management, IT asset management and a post office master application. Japan Post is one of the most impressive customers we deal with, managing over 100 million savings accounts in Japan, working with over 400,000 employees in over 25,000 locations and managing 6.8 billion transactions in a year. They have a lot of data to manage. More of that data than ever before is moving to Force.com."
A return to hostilities
After the outbreak of peace a month ago when Benioff headlined at a fringe event at the Oracle OpenWorld conference, it was back to business as usual between the Salesforce.com CEO and the on premise software providers. “According to AMR Research the growth of Cloud Computing is expected to outpace the growth of on-premise by double digit percentages over the next five years. Nothing speaks more to this shift than our list of wins against the big, on-premise companies,” he declared.
Going out of his way to thank Oracle execs for allowing Salesforce.com to set up stall within the Oracle event, Benioff nonetheless was quick to highlight occasions when his firm was trumping his old alma mater. “Against Oracle we won deals at ING, American Express, Centex, PR Newswire and Phonographic Performance,” he said. “Even more exciting another one of Oracle CRM on-demand’s very top and premier customers in the technology industry has made the decision to convert to Salesforce.com. Through that customer’s request we are not giving their name but they are one of a growing list of former Oracle CRM on-demand customers who have made a decision to convert to Salesforce.com including SuccessFactors, Motorola and Axion.”
It wasn't just Oracle of course that came into his competitive sights – SAP was also in the firing line. “While license deals report a long list of wins against SAP, I don’t know whether it is through their own operational performance or their position to not participate in the Salesforce automation or customer service markets, [but] they remain largely invisible on our market space,” he said. “However, we are pleased to see our largest SAP installed base accounts add to their sales force deployments including companies like Thomas Cook, Lenovo, Kellogg’s and Schwan’s. Add on an upgrade activity at industry leading companies like these and others it is another key of our growth formula.”
The 4th Cloud
Benioff said Salesforce.com was also seeing the benefits of its diversification strategy away from the bedrock sales force automation base. “Together our non-SalesCloud businesses were responsible for roughly 25-30% of new orders in the third quarters,” he said. “Our Service Cloud II is really connecting with our customers. Customers love our vision for customer service call centers and self-service portals.
“We also teamed up with Cisco to offer a complete cloud contact center solution. This is just really cool. Basically not only can you get all of the CRM services from Service Cloud II from us directly as a service right over the net, but all of that kind of IP and telephony and CPI infrastructure is also delivered directly as a service from Cisco. [I'm] really, really impressed with Cisco’s commitment to the services world, to Cloud Computing. Making their CPI as a service is evidence of that.”
Benioff also cited Salesforce.com's commitment to the five minute upgrade as another significant new development. “Very simply, we already run kind of replicated data centres,” he explained. “Now the ability is while we are doing upgrades we keep our backup centre live with our customer’s data giving them the ability to read that information. Then when we finish the upgrade all of the read/write capabilities are restored but in no case is the customer’s data unavailable, or at a maximum of five minutes. This is a breakthrough in Cloud Computing. It is evidence of the power of having a multi data centre architecture. We have three major data centres now that are in production on Singapore, on the West Coast and the East Coast of the United States. The network and meshing of these data centres has become a huge competitive weapon, when we look at many of our competitors who only have one data centres, which is extremely unusual.”
As for the future, Benioff made bold claims for the opening keynote announcements at the Dreamforce event. “We are going to have plenty to talk about,” he pledged. “How we have fundamentally changed what is CRM. What is custom application development and deployment. What are enterprise apps. What do customers want to be doing. We have three Clouds: our SalesCloud, ServiceCloud and our CustomCloud. We will have a fourth Cloud tomorrow. I am willing to kind of put my reputation on the line here to say that by the end of the keynote if customers aren’t shooting out of their seats then something is really wrong over the past year creating this product.”
No pressure then...
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