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Chapter 5 IT Infrastructure and Emerging Technologies 203

Salesforce.Com: Cloud Ser vices Go Mainstream


CASE STUDY

S alesforce.com, one of the most disruptive


technology companies of the past few years,
has single-handedly shaken up the software
industry with its innovative business model
and resounding success. Salesforce provides
unique business processes. Subscribers can leave if
business turns sour or a better system comes along.
If they lay people off, they can cut down on the
number of Salesforce subscriptions they buy.
Salesforce faces significant challenges as it
customer relationship management (CRM) and other continues to grow and refine its business. The first
application software solutions in the form of challenge comes from increased competition, both
software as a service leased over the Internet, as from traditional industry leaders and new chal-
opposed to software bought and installed on lengers hoping to replicate Salesforces success.
machines locally. Microsoft, SAP, and Oracle have rolled out
The company was founded in 1999 by former subscription-based versions of their CRM products in
Oracle executive Marc Benioff, and has since grown response to Salesforce. Smaller competitors like
to over 3,900 employees, 82,400 corporate customers, NetSuite, Salesboom.com, and RightNow also have
and 2.1 million subscribers. It earned $1.3 billion in made some inroads against Salesforces market share.
revenue in 2009, making it one of the top 50 software Salesforce still has plenty of catching up to do to
companies in the world. Salesforce attributes its suc- reach the size and market share of its larger
cess to the many benefits of its on-demand model of competitors. As recently as 2007, SAPs market share
software distribution. was nearly four times as large as Salesforces, and
The on-demand model eliminates the need for IBMs customer base includes 9,000 software compa-
large up-front hardware and software investments in nies that run their applications on their software and
systems and lengthy implementations on corporate that are likelier to choose a solution offered by IBM
computers. Subscriptions start as low as $9 per user over Salesforce.
per month for the pared-down Group version for Salesforce needs to continually prove to customers
small sales and marketing teams, with monthly that it is reliable and secure enough to remotely
subscriptions for more advanced versions for large handle their corporate data and applications. The
enterprises starting around $65 per user. company has experienced a number of service
For example, the Minneapolis-based Haagen-Dazs outages. For example, on January 6, 2009, a core net-
Shoppe owned by Nestle USA calculated it would work device failed and prevented data in Europe,
have had to spend $65,000 for a custom-designed Japan, and North America from being processed for
database to help management stay in contact with 38 minutes. Over 177 million transactions were
the companys retail franchises. The company only affected. While most of Salesforces customers accept
had to pay $20,000 to establish service with that IT services provided through the cloud are going
Salesforce, plus a monthly charge of $125 per month to be available slightly less than full time, some cus-
for 20 users to use wireless handhelds or the Web to tomers and critics used the outage as an opportunity
remotely monitor all the Haagen-Dazs franchises to question the soundness of the entire concept of
across the United States. cloud computing. In February 2009, a similar outage
Salesforce.com implementations take three occurred, affecting Europe and as well as North
months at the longest, and usually less than a America a few hours later.
month. There is no hardware for subscribers to Thus far, Salesforce has experienced only one
purchase, scale, and maintain. There are no operat- security breach. In November 2007, a Salesforce
ing systems, database servers, or application servers employee was tricked into divulging his corporate
to install, no consultants and staff, and no expensive password to scammers, exposing Salesforces
licensing and maintenance fees. The system is acces- customer list. Salesforce clients were subjected to a
sible via a standard Web browser, with some func- barrage of highly targeted scams and hacking
tions accessible by mobile handheld devices. attempts that appeared authentic. Although this
Salesforce.com continually updates its software incident raised a red flag, many customers reported
behind the scenes. There are tools for customizing that Salesforces handling of the situation was
some features of the software to support a companys satisfactory. All of Salesforces major customers
204 Part Two Information Technology Infrastructure

regularly send auditors to Salesforce to check them in the cloud on Salesforces data center infra-
security. structure. Salesforce opened up Force.com to other
Another challenge for Salesforce is to expand its independent software developers and listed their
business model into other areas. Salesforce is programs on its AppExchange.
currently used mostly by sales staff needing to keep Using AppExchange, small businesses can go
track of leads and customer lists. One way the online and easily download over 950 software
company is trying to provide additional functionality applications, some add-ons to Salesforce.com and
is through a partnership with Google and more others that are unrelated, even in non-customer-
specifically Google Apps. Salesforce is combining its facing functions such as human resources. Force.com
services with Gmail, Google Docs, Google Talk, and Sites, based on the Force.com development environ-
Google Calendar to allow its customers to accomplish ment, enables users to develop Web pages and regis-
more tasks via the Web. Salesforce and Google both ter domain names. Pricing is based on site traffic.
hope that their Salesforce.com for Google Apps initia- Salesforces cloud infrastructure includes two data
tive will galvanize further growth in on-demand soft- centers in the United States and a third in Singapore,
ware. with others in Europe and Japan planned for the
Salesforce has also partnered with Apple to future. Salesforce has additionally partnered with
distribute its applications for use on the iPhone. Amazon to enable Force.com customers to tap into
The company hopes that it can tap into the large Amazons cloud computing services (Elastic
market of iPhone users, pitching the ability to use Compute Cloud and Simple Storage Service.)
Salesforce applications any time, anywhere. And Amazons services would handle the cloudburst
Salesforce introduced a development tool for computing tasks of Force.com applications that
integrating with Facebooks social network to enable require extra processing power or storage capacity.
customers to build applications that call functions at An International Data Center (IDC) report esti-
the Facebook site. (In early 2010, Salesforce intro- mated that the Force.com platform enables users to
duced its own social networking application called build and run business applications and Web sites
Chatter, which enables employees to create profiles five times faster and at half the cost of non-cloud
and make status updates that appear in colleagues alternatives. For instance, RehabCare, a national
news feeds, similar to Facebook and Twitter.) provider of medical rehabilitation services, used
In order to grow its revenues to the levels that Force.com to build a mobile iPhone patient
industry observers and Wall Street eventually expects admission application for clinicians. RehabCares
Salesforce is changing its focus from selling a suite of information systems team built a prototype applica-
software applications to providing a broader cloud tion within four days that runs on the Force.com
computing platform on which many software com- platform. It would have taken six months to build a
panies deliver applications. As CEO Marc Benioff put similar mobile application using Microsoft develop-
it, over the past decade, we focused on software as a ment tools. About 400 clinicians now use the app.
serviceIn the next decade, Salesforce.com will Author Solutions, a self-publishing company based
really be focused on the platform as a service. in Bloomington, Minnesota, uses the Force.com
The company has intensified its efforts to provide platform to host the applications driving its
cloud computing offerings to its customers. The new operations. It reports saving up to 75 percent from
Salesforce.com Web site places much more emphasis not having to maintain and manage its own data
on cloud computing, grouping products into three center, e-commerce, and workflow applications, and
types of clouds: the Sales Cloud, the Service Cloud, the ability to scale as it business mushroomed.
and the Custom Cloud. The Sales and Service clouds Workflow modifications that once took 30 to 120
consist of applications meant to improve sales and hours are accomplished in one-fourth the time. The
customer service, respectively, but the Custom Cloud time and cost for adding a new product, which used
is another name for the Force.com application to take 120 to 240 hours (and cost $6,000 to $12,000)
development platform, where customers can develop has been reduced by 75 percent. The new platform is
their own applications for use within the broader able to handle 30 percent more work volume than
Salesforce network. the old systems with the same number of employees.
Force.com provides a set of development tools and The question is whether the audience for
IT services that enable users to customize their Salesforces AppExchange and Force.com platforms
Salesforce customer relationship management appli- will prove large enough to deliver the level of growth
cations or to build entirely new applications and run Salesforce wants. It still isnt clear whether the
Chapter 5 IT Infrastructure and Emerging Technologies 205

company will generate the revenue it needs to Sources: How Salesforce.com Brings Success to the Cloud, IT
provide cloud computing services on the same scale BusinessEdge.com, accessed June 10, 2010; Lauren McKay,
Salesforce.com Extends Chatter Across the Cloud, CRM Magazine,
as Google or Amazon and also make its cloud com- April 14, 2010; Jeff Cogswell, Salesforce.com Assembles an Array
puting investments pay off. of Development Tools for Force.com, eWeek, February 15, 2010;
Some analysts believe the platform may not be Mary Hayes Weier, Why Force.com Is Important to Cloud
attractive to larger companies for their application Computing, Information Week, November 23, 2009; Jessi Hempel,
Salesforce Hits Stride, CNN Money.com, March 2, 2009; Clint
needs. Yet another challenge is providing constant Boulton, Salesforce.com Network Device Failure Shuts Thousands
availability. Salesforce.com subscribers depend on the Out of SaaS Apps, eWeek, January 7, 2009; J. Nicholas Hoover,
service being available 24/7. But thanks to the Service Outages Force Cloud Adopters to Rethink Tactics,
previously described outages, many companies have Information Week, August 18/25, 2008; and Charles Babcock,
Salesforce Ascends Beyond Software As Service, Information Week,
rethought their dependency on software as a service.
November 10, 2008.
Salesforce.com provides tools to assure customers
about its system reliability and also offers PC
applications that tie into their services so users can CASE STUDY QUESTIONS
work offline.
1. How does Salesforce.com use cloud computing?
Still, a number of companies are reluctant to jump
on the SaaS and cloud computing bandwagon. 2. What are some of the challenges facing Salesforce
Moreover, it is still not clear whether software as it continues its growth? How well will it be able
delivered over the Web will cost less in the long run. to meet those challenges?
According to Gartner consultants analyst Rob DiSisto,
it may be cheaper to subscribe to Salesforce.coms 3. What kinds of businesses could benefit from
software services for the first few years, but what switching to Salesforce and why?
happens after that? Will the expense of upgrading 4. What factors would you take into account in decid-
and managing on-demand software become higher ing whether to use Saleforce.com for your business?
than the fees companies are paying to own and host
their own software? 5. Could a company run its entire business using
Salesforce.com, Force.com, and App Exchange?
Explain your answer.