Analysis: Salesforce.com's dreams of conquest

Is the SaaS giant planning to stab some of its partners in the back office? Sooraj Shah weighs up the evidence from the company's recent Dreamforce conference

At Salesforce.com's recent Dreamforce 2012 conference, CEO Marc Benioff said that his company would "put off for as long as possible" the introduction of back-office applications to go with its core CRM business, but the launch of Work.com seemed to suggest otherwise.

Work.com is the rebranded and updated version of Rypple, an HR performance management tool acquired by Salesforce in December 2011 designed to increase enterprise efficiency by enabling a social and collaborative approach to managing staff.

The application does not provide core HR functions, and Salesforce was at pains to stress during the Work.com session at Dreamforce that its technology partners, such as Workday, will continue to provide these while it works on the social add-ons.

But the company has not completely distanced itself from the idea of providing native HR solutions.

"Anywhere that there is friction between company and customer that can be improved or resolved, we've been doing it," said Salesforce's chief scientist JP Rangaswami (pictured), when asked by Computing on a potential move into the back-office market.

Rangaswami was coy on the firm's strategy, stating that with updates to Salesforce.com's offerings such as Data.com, Chatter and Touch, the firm remains focused on the front end.

"In all of those things it shows our focus is in [the front office]. It is not that we discard back office - we have companies such as [social ERP firm] Kenandy and [online billing firm] Zuora. It is just that our intention is that it is OK for us to have an ecosystem and have partners," Rangaswami said.

But many of the firm's customers are unconvinced; they want end-to-end integration between core back-office functions and Salesforce.com's CRM suite.

"It would make a good fit," Threadneedle Investment's head of distribution and corporate systems Barry Clarke told Computing.

"If they can deliver those core functions the way that they deliver the sales cloud, it would make a more than compelling reason to look at Work.com. I am positive that Marc Benioff and Salesforce is thinking 18 months to two years down the line [at something like this]," he added.

Analysis: Salesforce.com's dreams of conquest

Is the SaaS giant planning to stab some of its partners in the back office? Sooraj Shah weighs up the evidence from the company's recent Dreamforce conference

This type of integration may well be on the cards, but in the meantime, according to Ovum analyst Carter Lusher, Salesforce has other priorities.

"They have their plate full trying to fill the gaps in the customer-facing activities. They have been dramatically increasing R&D spending over the past five years, and $191m (￡117m) is a lot of money, but is still small compared to the $6bn (￡3.7bn) that an IBM or Oracle spends. There is so much to be done that they cannot attack all of the back office right now without doubling their R&D spend," he said.

Much of the work is to integrate its acquisitions with its products, according to Salesforce partner and consulting firm Bluewolf's vice-president of marketing, Corinne Sklar.

"It is acquiring almost every month and the problem is that it has to integrate those with the existing platform and then roll them out to the customers.

"Customers are asking for the ability to get the data to go all the way through from the customer to the invoice. Salesforce will probably do the core HR functions and do it better than Workday, but at the moment Workday are a step ahead [in that market]," she added.

Lusher argued that unlike Oracle, Salesforce would continue to focus on bringing something unique to the market.

"Over the last decade Oracle has aimed to consolidate legacy applications such as Siebel and JD Edwards into its Fusion package, but none of these contributed anything unique; it was a product to sell, which gained maintenance revenues and Oracle saw it as good business. But Salesforce.com does not have this strategy, it is looking at what the unique capability of a product is first," he explained.

Lusher said this approach meant it was unlikely that Salesforce would be interested in acquiring its partner Workday. He said such a move would not bring anything "sexy", such as the gamification value that Rypple added to Salesforce's platform.

"It has to be something that can be added to the core platform that can be exploited by multiple components," he added.

CEO of HR application provider Fairsail, Nic Scott, said that smaller acquisitions would be more likely to form the basis of a core HR function application as opposed to a big acquisition such as Workday.

"It is likely to be smaller acquisitions as integrating several code sources is challenging and there are also potentially competitive regulations that would prevent a large acquisition," he said.