Salesforce.com launches PIM for the Cloud… but Why?

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You gotta give it up for Benioff crew. They know how to execute, even in a bad economy, while looking for the Next Big Thing.

On August 20th Salesforce.com announced stunning Fiscal Q2 results: 20% YTY revenue growth, 32% growth in total customers and profit improvements too. Amazing.

How do they do it? Salesforce.com started as a simple, lower-cost alternative to Siebel and has grown into a serious competitor. As I recall, at its peak Siebel hit around $2B in annual revenue based on the license software model. But then declined and eventually was sold to Oracle. Salesforce.com shows no sign of letting up, and can build on its subscriber base, so long as they stay happy.

But Salesforce.com is now the “premium” vendor in the on-demand SFA space. Sure Benioff is moving into the cloud platform business and has also made a recent push into customer service. But the core revenue engine remains SFA. While there are loads of cheaper alternatives, Benioff has not shown any interest in fighting the price game. Instead, all indications have been to push into large enterprises.

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That’s why I’m puzzled about Salesforce.com’s latest announcement of a new Contact Manager Edition. Essentially this is a cloud-based PIM (personal information manager) that organizes contacts and has a some other nice features like email integration (to Outlook, Gmail and more), reports and Google Apps integration. And the price is very reasonable: just $9 per month per user. The catch: licenses are restricted to one or two users.

The functionality looks good to me (based on a quick demo), and Salesforce.com can leverage its brand and infrastructure to be a “trusted alternative” for those seeking a low-cost contact manager in the sky.

Bruce Francis, Salesforce.com’s VP of Corp. Strategy, says the CM is a “business opportunity in its own right” and believes this is a “massive market” that is “under-served.” Really? I wasn’t aware the market was clamoring for a new contact manager.

However, let’s look at the numbers to see if this is a good deal for Salesforce.com shareholders. Salesforce.com’s current run rate is $1.2 Billion per year. To make a noticeable contribution let’s say the goal is 10% of revenue for this new solution, or $120 Million. That translates to adding over 1 million new users to its current base of 63,200.

Seems far fetched, especially since the idea is for users to sign up on their own. No sales rep will call to close a two-seat deal worth $216 per year.

Maybe (probably) their business goals are more modest. But personally, I think the real agenda is to seed the pipeline. Individuals and very small businesses can start with Salesforce.com to organize contacts, then over time some will upgrade to more robust solutions. I like this idea provided that Salesforce.com can can attract new CM customers efficiently to start this scenario.

I would like to hear from others who have taken a look at this new Contact Manager edition and can comment on why they would or would not use it.

5 COMMENTS

  1. Hi Bob,

    Thank you for your fair assessment of our new Contact Manager. We feel there is an open market for small businesses that will need a quick and easy to implement application that is not only accessible & reliable, but also able to grow with their changing needs over time.

    Again, that you for the post.

    Marcus

  2. Hi Bob,

    I like your thinking and it mirrors mine. I also think that CME is in part a move to protect the flank. Have you seen ACT! lately? It’s looking more and more like a simple SFA than a simple contact manager. Whatever the merits of Salesforce’s actions, firing a shot across Sage’s bow may be something else to consider. As a 1-2 seat version, you are right that this is likely to be a feeder solution in an upsell scheme but I also suspect that there is a lot of untapped potential. I suspect that most people at this level are not using ACT! but Outlook instead. For them CME at $9/month may be a more palatable than ACT!

    Best wishes,

    Denis

  3. Thanks for the assessment. I agree – it does look like a stepping stone platform for Salesforce. Just one clarification on fact though. Your statement “That translates to adding over 1 million new users to its current base of 63,200” reads as if Salesforce currently has 63,200 users to me. Just to clarify – Salesforce is currently being used by 63,200+ companies, with a user base of over 1.5 Million.

    Thanks again

    Nik Panter
    @nikpanter

  4. Thanks for the clarification. You’re right, a Salesforce.com “subscriber” means a company. With 1.5 million users, that means the average customer has around 24 users.

    Still, adding a million new users on this base is a huge leap. ACT! (now owned by Sage) has been in the single user market for 10+ years and has accumulated 2.8 million total users.

    Bob Thompson, CustomerThink Corp.
    Blog: Unconventional Wisdom

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