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Salesforce.com continues enterprise build out

On-demand CRM company adds additional Web services tools and operational infrastructure in its effort to recruit larger customers.

Salesforce.com announced two new initiatives aimed at expanding its presence with larger customers, one of the company's most significant goals for future growth.

After reporting on-target financial results late Wednesday that featured substantial gains in revenue and profits compared with the same period last year, the on-demand customer relationship management, or CRM, specialist detailed the new projects, which focus on strengthening Salesforce's underlying technology infrastructure and expanding its Web services capabilities.

The first effort, dubbed Mirrorforce, revolves around a $50 million investment the CRM company is making to expand its data centers, the critical IT systems that run Salesforce's online applications and store all of its customers' information. Under the plan, Salesforce is building new data centers on the East Coast and West Coast of the United States, the exact locations of which it did not reveal, to augment its existing facility in Silicon Valley.

The company is also building a fourth data center, located on the West Coast, that will help support the Salesforce's new product development.

Marc Benioff, chief executive of Salesforce, said the software maker needed to expand its operations in order to provide real-time fail-over protection for its customers, a requirement he said enterprise clients have been asking the company to address. Salesforce has traditionally relied on technology and services provided by Sungard to back up its applications, but Benioff believes that adding the in-house protection will help provide faster response.

In the new data centers, Salesforce's customer information will be replicated live from its existing operations to provide an immediate backup system.

"Enterprise customers really want to be able to see this kind of instant fail-safe in the event of a catastrophic data center issue," said Benioff. "We're doing this as a result of signing more enterprise deals; large customers want us to go one level further" with data protection.

As part of its earnings report, Salesforce reported new deals with sizable companies including Aon, CIT Group and Citizens Financial Group. Benioff said Salesforce has already taken delivery on the hardware and software needed to build the new facilities, which are expected to go live when Salesforce introduces its Winter '06 version of its CRM tools, due out before the end of February.

Industry watchers praised the move as something the company needed to do, especially in light of the fact that its existing data center resides close to Northern California's earthquake belt. Some analysts said they had expected the company to make such infrastructure investments earlier.

"I'm actually surprised that they haven't done this before," said Laurie McCabe, analyst with AMI-Partners. "A lot of companies with fewer customers have built redundant facilities for the same reasons, such as (on-demand rival) RightNow Technologies. (Salesforce) faced even more pressure to do this because they're a leader in the market, and if anything ever happened to their systems, it could be harmful to the reputation of the whole (on-demand applications) industry."

Remixing Web services
Taking a cue from the popular culture trend toward so-called musical "mash-ups," or remixes of multiple songs pulled together to create something new, Salesforce also detailed its latest Web services initiative, which it's calling Smashforce.

The Smashforce effort will consist of a software-development tool kit, built on AJAX technology, which promises users of Salesforce's Multiforce platform the ability to create multiple Web services that share data and a single user interface. The AJAX standard, which stands for Asynchronous JavaScript and XML, claims the ability to allow programs to process Web-based requests more quickly.

According to Benioff, Smashforce will allow companies using Multiforce, its Web services development platform, to build their own tools, including programs that integrate its on-demand applications with legacy enterprise systems.

"This will allow companies to begin to integrate and populate their Multiforce Web services desktop," he said. "That's the power that our customers want; they want extensibility and customization and don't want to be locked into a premade solution...."

Benioff maintains that tools such as Smashforce, that promise customers the ability to create any type of Web service they need, will give Salesforce the ability to surpass Microsoft as the de facto provider of a business-software platform. Microsoft currently dominates the market for such technologies with its Windows operating system, Office business applications and proprietary development tools.

The executive claims further that Web services will eventually outmode desktop software altogether and refers to the combination of Multiforce with other Salesforce technologies as an "online operating system," a designation that most industry watchers haven't yet embraced.

"We want to put Microsoft on notice that client server computing is not going to be around in 10 years, and this whole idea that you should build everything on (their products) is ridiculous," he said. "Microsoft still thinks that the Internet is not the focus of the (information technology) universe, they believe that Windows should be the focus; we're all about promoting the idea of the Internet as the ultimate platform."

Microsoft representatives did not immediately return calls seeking a response to Benioff's comments.

Market experts said that though Benioff's master plan may be a bit overstated, particularly in light of Microsoft's own investments in building Web services capabilities, they do feel the CRM company is smart to create tools such as Smashforce, as customers are intent on tapping in to such efforts.

"If companies like Salesforce are going to compete using the software as a service model, they have to do this and will have to continue to provide services to extend customers' existing IT investments to grow, especially for larger customers," said Sheryl Kingstone, analyst with The Yankee Group.

Kingstone pointed out that Salesforce will hardly be alone in offering such Web services tools to customers, as software makers including Microsoft, SAP and IBM are already pushing similar plans. However, she said, it might be even more important for on-demand companies to aggressively address Web services if they want to win deals with larger companies.

"The ability to (build Web services integration) with existing legacy environments and embed those into the hosted application is key, especially in contact centers where everyone is trying to reinvent the agent desktop and drawing from a large number of systems," she said.

AMI's McCabe contends that though Smashforce may have plenty of competition in the Web services development segment, the company will likely succeed in drawing more attention to the movement to link enterprise software systems using Web services, much as the CRM company helped create much of today's buzz around on-demand applications.

"The end result of something like (Smashforce) could be to shake up the status quo," McCabe said. "If nothing else, it would be nice if one of the results was to push vendors to move away from their individual efforts around Web services, back to the original premise of (more standardized) offerings."