[May 3, 2005]

Gartner: Beware of Salesforce.com

BY ROBERT LIU

Salesforce.com’s aggressive campaign to deepen its reach in the enterprise software space could spell disaster if deployed by organizations with complex sales teams of 500 people or more, according to a reputable research firm. But officials at the on-demand software company say customer feedback doesn't support those findings.

In its latest research report, Gartner said that within three years of an initial Salesforce.com deployment, more than 60 percent of larger organizations will find the cost double due to integration and customization compared with the total cost of ownership (TCO) for a prepackaged software solution.

The report comes amid a major push by the on-demand software company that has become known by its crusade of “No Software.” After very successfully carving out its own lucrative niche in the CRM space by putting sales automation onto the thin-client (or ASP) environment, Salesforce.com CEO Marc Benioff last month pre-announced its latest offerings and positioned them as an opportunity to take on large-scale, enterprise-level CRM systems integrators (Siebel, SAP, Oracle) head on.

“When I see vendors pre-announce software releases, typically they are done to address market segments where their weaknesses are,” Gartner analyst Robert Desisto told TMCnet on a phone interview. He declined to comment on the identity of his customer citing Gartner policy.

Gartner estimates that more than 80 percent of Salesforce.com’s deployments have fewer than 20 users. While these customers have been well served, Desisto warns new customers should be aware of the limitations of Salesforce.com’s offerings as it attempts to move “upmarket” into larger, more complex selling organizations.

At its “IntegrationForce Day” event in mid-April, Salesforce.com outlined its strategy of capturing more of the enterprise resource planning (ERP) market away from traditional client-server applications companies with its flagship Sforce 6.0 portal software, Customerforce integration tool and Multiforce operating system, which are all due out this summer.

At that time, Benioff explained how customers can take advantage of a burgeoning Web Services developer community to help integrate his tools to take on more functions than just sales automation. But Gartner contends that customization on Salesforce.com’s platform would be no less costly due to the additional IT resources required by large-scale enterprise deployments.

“The more [customers] have the burden to building software that is commercially available, the less time you have to add value-added technology that is going to be your differentiator,” Desisto explained.

Companies need to understand their strategic 24-month to 36-month requirements as part of the Salesforce.com TCO. And while the integration of multiple data sources to bring critical enterprise information to the point of sale is not impossible, it has not yet been proven, the analyst said.

However, Salesforce.com officials dispute the findings in the report, saying they have already satisfied large enterprises like ADP, Staples, Nextel, Kaiser Permanente.

"For us, nothing speaks louder than the success of 227,000 paying subscribers and 13,900 customers. Fully 76 percent have already recommended salesforce.com to a friend or colleague. We pride ourselves with our close work with our customers to achieve their goals. The report does not match our experience with or feedback from our customers," said Adam Gross, director of product marketing, salesforce.com.

Robert Liu is executive editor at TMCnet.  Previously, he was executive editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg.  He can be reached at [email protected].