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Salesforce.com's (NYSE:CRM) CEO Marc Benioff is back on the blogosphere with a reprise of his claim that companies should "do more Facebook." Unlike two weeks ago, this post is more an outright ad for salesforce.com so it is getting much less interest. Or perhaps the lack of interest the second time around is just indicative of the short attention span of the blogosphere and mainstream media.

Or maybe there is a lot more thinking about the issue going on. I don't think it's coincidental that salesforce.com European president Dr Steve Garnett is quoted in IT Pro on March 3 either reinforcing or refuting his boss. According to the article (I was not present at the speech):

Garnett said people questioned why it's so easy to shop online, but so “hard and expensive” to run business processes. “It just does not equate.”

It is true that e-commerce (online shopping) and business process software do not equate. It is accurate to say that it is easy to shop online because of - not despite - the "staggeringly complex" enterprise software running behind it.

But I don't think Garnett meant it that way or was refuting Benioff. I think he was just taking another chance to pitch the salesforce.com company propaganda about IBM and Microsoft (NASDAQ:MSFT). He is also quoted as saying:

The days are gone when we used to learn how to use computing from IBM or Microsoft... most people spend an awful lot of their time personally on the web. Most of the next-generation of execs have (sic) grown up with the web.”

Garnett of course realizes that you couldn't effectively shop online without IBM CICS and/or SAP R/3 and/or an Oracle (NYSE:ORCL) database and/or similar robust transaction processing software sitting behind the cute little shopping cart. And I am sure he also realizes that when "most people spend an awful lot of their time personally on the web" it is because that awful Microsoft software has made it incredibly inexpensive to do so. And so easy that you don't have to "learn how to use" it... from Microsoft or anyone else. It's intuitive.

Putting self-serving salesforce.com speechifying aside, the questions in this recent salesforce.com PR blitz for investors are:

  • To what extent will on-premise software be further replaced by application service provision (which is actually a return to past practice for manufacturers and has long been the only way to transact business for most in the service industry)?
  • What is the next killer app for enterprise software (hint: it's not customer relationship management, which is why Benioff and Garnett are scrambling with their PR blitz)
  • Which enterprise software companies should you invest in to take advantage?

The answer to those questions rest on three things: enterprise-software-market history, current market dynamics, and individual enterprise-software supplier financial fundamentals.

First, history tells us that tomorrow's software market leaders will be today's leaders minus one that falls by the wayside each decade or so plus one that moves up to take its place. There is usually, but not always, even an investment opportunity in the one that falls by the wayside because of an acquisition situation. My guess is that the "one that moves up" in this decade will be the software supplier that figures out the "staggeringly complex" area of business process management (BPM) correctly.

Second, current market dynamics bolster this thought process. IBM, Microsoft, Oracle and SAP have been the software market leaders for a decade (or more). Each has a viable BPM play in process. Still they only own about 40% of the enterprise software market in the aggregate (Microsoft is of course a competitor in consumer software as well) so there is room for another player to get the BPM value proposition correct. Google (NASDAQ:GOOG) is the software market participant that moved up in the last decade but has yet to really become a force in the broad enterprise software space. It's trying with its recently announced Apps Marketplace.

Third, from a fundamentals point of view, the new guy on the block has to be able to crack into the top five quickly the way Google did (0 to billions in revenue in a few years), either via a unique business model (such as Google's ability to get advertisers to pay for the technology) or via breakthrough functionality, or more likely both. The newcomer will need a very visionary, deep pocketed venture capitalist or pool of capital to compete with the current top five. It will have an IPO or secondary offering that will make Google's seem like something out of the 1950s. And if I knew who it was, I wouldn't be blogging. But there is a list of possibilities in this article on ebizQ.

Disclosure: No position in companies mentioned.

Source: Who Will Be Tomorrow's Enterprise Software Market Leaders?