Salesforce: From Oracle to Amazon to Facebook

To understand SaaS and Enterprise Social Networking landscape, we have to look at Salesforce (NYSE:CRM). As you can see Salesforce has performed nicely on NYSE past 52 weeks. What went right? What propelled them to become the dominant SaaS player in the market? What does success of Salesforce tell us about SaaS and future of social network?

Back in June 22nd, 2010, Marc Benioff, CEO of Salesforce kicked off Cloudforce 2010 in San Jose, and outlined his vision. His elevator pitch for Salesforce when he left Oracle to start Salesforce: Why can't enterprise software be as simple as using Amazon? Can enterprise software users just sign up for accounts, and start using the service? Brilliant idea. Sales guys started signing up for Salesforce accounts and became immediately hooked on to the model. Highly mobile nature of enterprise sales team was just the right target to go after.

Marc says the work of making Salesforce more like Amazon is of yesteryears, however. He's now on to Facebook: Why can't enterprise software be as collaborative as Facebook? Can Salesforce be extended to all employees in organization as collaboration platform? After all, Salesforce is already the biggest SaaS player with enterprise customers, and knows how to deliver easy-to-use software as service.

Marc mentions a few datapoints to back up his become-like-Facebook strategy. First is accelerated adoption of social networking by internet users. Recently Nielsen announced that time spent on Facebook eclipsed the time spent on Google and Yahoo combined. Second is sustained growth of mobile devices, and touch-driven UI paradigm. New emergence of mobile device usage will accelerate the need for workforce to access data using new mobile device UI paradigm. Third is push and newsfeed-based data consumption pattern.

Marc's read of enterprise social networking market coincides with mine. As Facebook dominance continues, enterprises will see more reasons to adopt highly collaborative means of communication. We are already seeing this trend with announcement of Cisco Quad, Sametime Connect, and Microsoft Sharepoint as on-prem solutions. Even early stage startup Yammer, Box.net, Socialtext, and Socialcast are entering the SaaS enterprise space to cut a niche market of their own.

But there are a few hurdles for Salesforce to overcome before enterprise starts rolling out Salesforce Chatter company-wide. First is corporate compliance. In order to expand the solution to all users in the enterprise, Salesforce must address many esoteric regulations and requirements. They'll have to work closely with existing compliance vendors to jump start the efforts. Second is data confidentiality and control. Salesforce and other SaaS offering must convince customers that their data is securely managed and maintained. This will be harder sell for new startup SaaS players than for Salesforce.

Marc's correct trend-spotting will help Salesforce widen its lead in enterprise social networking market. It won't mean Salesforce will get there without challengers, however. Before consolidation, I expect to see more players bid to become Facebook for enterprise. But clearly Salesforce will be the one to beat.