New Rivals May Torment Salesforce.com and Concur - Barron's

Two of the "most outrageously priced software stocks around," Barron's Plugged-In says, are Salesforce.com (CRM), up 56% over the past year, and Concur Technologies (CNQR), up 100%. Both stocks fetch a rich price/free-cash-flow multiple of about 35x-40x.One reason for their richness is their projected revenue growth: 49% for CRM and 25% for CNQR.

But investors seem to be ignoring the fact that the two firms are no longer the only publicly-traded "pure plays" on red hot SaaS [software as a service, or web-based applications]. Newly public Netsuite (N) and SuccessFactors (SFSF) develop and market software similar to that of the incumbents. The latter was initiated this week by Pacific Crest Securities with a rating of Outperform, which called the two-million-user firm "the world's largest on-demand application provider."

And according to SEC IPO filings, there are more in the pipeline, including Varolii, whose software automates collection agencies' calling process; and Convio, whose customer-relations software targets nonprofit organizations. Keep in mind as well that most commercial software packages will at some point probably attempt web-based apps. All this bodes for "fierce jockeying" among SaaS developers to gain favor in investors eyes, and may mean Salesforce's and Concur's days of exclusivity and rich premiums are numbered.

Comments

[The Dawg]

I don't get your point at all - these apps all do different things. Neither N nor SFSF do expense reporting - so how do they compete with Concur? And while N has salesforce automation, SFSF does not.

It's not like a company needs only 1 SAAS vendor. They need multiple, picking the best-of-breed apps for specific tasks.

[SpareTimeFun]

Totally agree with The Dawg. If we were back a dozen years ago or so, it would be like this guy saying that there could only be two successful software companies in the world.

On demand applications compete on function -- expense reporting, travel booking, salesforce automation, etc. -- not on the software delivery model. The delivery model drives up value because of the lower costs and therefore higher leveraged profitability.

[TomGreenberg]

Actually all these companies compete against each other! Maybe Concur does not have SFA, but Salesforce.com does have expense reporting to some degree, and Netsuite does have SFA and CRM and Accounting, etc.

I believe dozens of new rivals will go public including companies such as Salesboom.com and Entellium

[nitadmin]

Microsoft is also competing against Salesforce with its CRM product. The newly released Microsoft Dynamics CRM 4.0 is upgrade of popular Microsoft Dynamics CRM 3.0. Microsoft is also offering Microsoft Dynamics CRM Live. However, the bigest challenge to Salesforce could come from Microsoft hosting partners, who will be able to offer Micorosft Dynamics CRM 4.0, along with Hosted Microsoft Exchange 2007, Micorosft Office Sharepoint Server (MOSS)2007. Microsoft Dynamics CRM 4.0 Enterpise edition gives Micorosft hosting partners multi-tenet capabilities. Which basically allows Microsoft Dynamics CRM 4.0 server to host crm for many clients.