M-P

Salesforce.com: The Double-Edged Sword of Iterative Marketing

Benioff is basically a marketing genius ... he really has been out-spoken and on-message long before it was a "cool" thing to do ... his guerrilla marketing has been impressive ... however, they have confused a few people and sometimes seem to be trying too hard to look innovative and cutting edge ... there are basic functions that are left wanting, with more time spent for Twitter, which is 90% Chatter - no pun intended.

Thinking About the Cloud, Oracle and Salesforce.com

The Oracle move would be interesting ... or there is consolidation in the SaaS industry w/ SFDC leading the charge ... it could hurt parts of their ecosystem, but think of Siebel grabbing a number of complementary horizontals in Scopus, etc. They must spread the considerable SG&A over more of a footprint ... SFDC is already going for lock-in via intra/ternet, KM, social, etc. They will become harder to extract out. The platform is also a considerable force - no pun intended - and the idea of co-existing w/ on-prem makes sense on the enterprise side - for now. The SMB world could go mostly cloud - look at Appirio w/ the serverless enterprise - but that is their world. Practice what you preach.

Sector Overview: SaaS

This is a good overview. The SaaS space has a lot of positive aspects and I believe - as I've written elsewhere on SA - that there will be some consolidation in '09. The potential for a SaaS player on an Oracle-like scale is coming ... a massive cloud in the sky that can exploit their distributed computing power and secure data centers will gain some economies and efficiencies. Many of the security concerns and uptime issues have been remedied - as bandwidth expands globally, the issue around speed and concurrent users should improve. The challenge with SaaS is also one of its advantages - it's easy to propagate new versions and functionality, but it can hard to get the uptake and adoption on all the new functionality - coming at a quarterly clip. As a lesson from Siebel Systems, the SaaS players need to be careful at not getting into a functionality race with themselves and hurting some of their key benefits -turn-key implementations, easy to use and understand, solid adoption. As each of the major players gain more enterprise customers, they will have better lock-in (more integration) and more stable annuity streams. Watch the customer lists/names.

Salesforce.com Unlikely to Sustain Its Current High Multiple

I agree that SFDC is priced a little rich. The SG&A drag is considerable on earnings and the cloud model is a little different than the normal license model in terms of revenue recognition and upside surprises. SFDC is trying to gain more lock-in via AppExchange partner integration, Internet/Intranet resources, and back-end linkages. For a large, complex org that links SFDC to it's back-end systems (e.g., SAP, BI Apps, etc.), it is not easy to "rip" it out - they have some pretty good lock-in with their larger customers. Per my previous posts, I would expect SFDC to acquire some other SaaS players to broaden their footprint and better spread out their cloud costs. I think it's a good stock at the right price - per the article, I would look more closely under 15 or so.

Salesforce.com: Recession-Resistant, or Just Late to the Pain?

SFDC is paying a lot of SG&A and costs for a $1 of revenue. I think they will need to acquire and grow their footprint (see their new web tools, cloud linkages) to really achieve some economies for their cloud. Similar to Amazon, their whole cloud infrastructure costs need to spread over more and more people. Like Siebel, a former employer, they will need to - and they are starting - to cover the full footprint of the business - a front-to-back office in the cloud ... I would expect to see SaaS consolidation in the near to medium term - Workday, SuccessFactors, etc. etc. Benioff is a great salesman, but he will need to carefully manage market expectations or we will see some choppy movements going forward.

SaaS Stocks Down 50% in 2008: Why I Remain Upbeat

The SaaS model is different from the normal on-premise SW company and yet their valuations have often been on par. The SaaS model should provide a less lumpy revenue stream, but the SG&A and blazing the path is taking a chunk out of gross margins, which are similar to on-premise providers. Similar to Amazon, I think the economies and efficiencies should come out of the Cloud at a few billion dollar top line. The operating cost of the revenue should continue to be watched ...