According to Forrester Research, Inc., salesforce.com has the largest
market share of customer relationship management on-demand application
services. The company began offering its service in February 2000.
Through April 30, 2004, the customer base has grown to approximately
9800 customers. The customers have purchased over 147,000 paying
subscriptions for users in approximately 65 countries, up from
approximately 30,000 paying subscriptions as of February 1, 2001.
Individual customers have between one and more than 2000 paying
subscribers. Customers pay between $65 and $125 a month per user
based on the package they subscribe to. The company also offers a
package aimed at individual sales representatives at no charge.
The company has grown its revenues rapidly, increasing them from $5.4
million in fiscal 2001 to $96.0 million in fiscal 2004. The company
has enjoyed its greatest success in the United States amongst small
businesses. Small business customers, which the company classifies as
being companies with fewer than 200 employees, comprised 40% of total
revenues during fiscal 2004.
International revenues have grown from 9% of total revenues in fiscal
2002 to 18% of total revenues during fiscal 2004. Asia Pacific has
grown most rapidly, increasing from 2% of revenues ($424,000) to 6% of
revenues ($5,311,000) between 2002 and 2004. However, its Japanese
joint venture has contributed insignificantly to the company's
operating performance, and the company does not expect this to change
anytime soon. Europe generates more overall revenue, although it is
growing more slowly. European revenues increased from 7% of total
revenue ($1,680,000) to 12% of total revenue ($11,754,000) between
2002 and 2004. The company states that it has and will continue to
expand its international operations and international sales and
marketing activities in order to attract additional international
customers. Its product offerings are currently available in 11
languages.
Medium and large-size businesses have been more reluctant to purchase
services from salesforce.com, although they generate the majority of
the company's revenue. 30% of salesforce.com's revenues come from
medium-size businesses with 200 or more employees and up to $500
million in annual revenues. Another 30% of revenues come from large
businesses with over $500 million in annual revenues.
"'I have no doubt in my mind that Salesforce.com will hit a wall, and
sooner rather than later,' said Liz Roche, an analyst at META Group
who has been covering the customer-relations management field since
its inception in the early 1990's. 'For small- and medium-sized
companies with limited I.T. departments, Salesforce is an amazing fit.
But for larger companies, I just don't see it.'" (The New York Times
reference)
Medium and large-size businesses tend to be more reluctant to purchase
critical software applications from small companies with unproven
operating histories. Larger companies have in many cases already made
large investments in traditional CRM enterprise software applications
that make them reluctant to switch to a new on-demand application
service. Such an approach require sharing critical company data with
a third-party, which may create security risks. More competition
exists for larger companies' business from well-known companies like
SAP and Siebel systems as well. In addition, large customers tend to
require more elaborate features and greater amounts of customization
that a small, relatively inexperienced company may be unable to
provide.
Small companies with limited information technology resources are more
likely to see the benefits of switching to an on-demand application.
A relatively low cost of ownership, rapid deployment, and a lack of
substantial integration requirements make salesforce.com's offering
attractive and feasible for small companies.
In order to attract larger companies, salesforce.com has launched
additional versions of its product with more functionality. These are
the Enterprise Edition, targeted at large companies, the Professional
Edition, targeted at medium-sized businesses and large companies with
fewer functionality requirements, and the Team Edition, targeted at
small businesses with even fewer functionality requirements. The
company also recently released a Personal Edition for individual sales
representatives for use by a single user.
The company has experienced success in a number of different
industries. The company has acquired significant customers in the
Business Services, Consumer Services, Financial,
Healthcare/Pharmaceuticals, Manufacturing, Media/Internet, Technology,
Telecom, and Transportation/Logistics industries. A list of the top
five customers by revenue for fiscal 2004 by industry is provided in
the Prospectus on Page 52. No single customer has accounted for more
than 5% of revenues in any fiscal year.
Sources:
"Prospectus," Filing 424B1, salesforce.com (June 23, 2004)
http://ccbn.10kwizard.com/xml/download.php?repo=tenk&ipage=2857234&format=RTF
available at http://www.salesforce.com/us/company/sec-filings.jsp
"It's Not Google. It's That Other Big I.P.O." By GARY RIVLIN, The New
York Times, (May 9, 2004)
http://www.nytimes.com/2004/05/09/business/yourmoney/09ipo.html?ex=1088827200&en=70cfeef6dc04156f&ei=5070&th
Sincerely,
Wonko |
