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Report: Salesforce stumbles in Cisco deal

A research report issued by investment bankers JMP Securities on Thursday sheds unflattering light on Cisco Systems' efforts to utilize hosted applications provided by

According to the JMP publication, Cisco has changed the terms of its licensing deal with Salesforce because the networking giant has not been able to move as many employees as it had planned onto Salesforce's online customer relationship management tools. JMP said that Cisco purchased a license during the second half of 2004 to establish 10,000 Salesforce subscriptions by June 2005. However, the report contends that Cisco asked Salesforce to re-work its license earlier this year after the company realized that it would not be able to get as many people live on the hosted software as quickly as it had originally hoped.

Representatives from both Cisco and Salesforce declined to comment on the report or any license-related details.

JMP said that its sources indicate that Cisco has only been able to turn on between 1,000 and 2,000 Salesforce accounts, and that the company now plans to license only 2,500 Salesoforce seats by the end of this month. Under the new deal, Cisco will attempt to launch 5,000 paid seats by September 2005, 7,500 paid seats by December 2005, and 10,000 paid seats by March 2006. However, JMP said that it is unclear whether Cisco will reach those targets, and reported that the networking company may review its Salesforce license again at the end of June.

According to the report, users at Cisco "are not adopting as quickly as originally expected because the service does not support many of the tools the sales people feel they need in order to do their jobs." JMP said the applications in question include the hosted vendor's sales compensation system for commissions, advanced account hierarchies, territory management, forecasting and quoting, and configuration tools.

Further, JMP contends that Cisco's IT department has "struggled to integrate these tools with a hosted application and is questioning the logic of a having such a heavily customized hosted application." The report said that Cisco is also encountering significant management and training issues related to the online CRM tools, which have led to "ballooning" costs related to moving to Salesforce's software.

The investment analysts also report that Cisco employees are actually ditching Salesforce's applications in favor of their older, non-hosted software alternatives, and that some Cisco executives have soured on the process of moving to the online applications altogether.