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Chapter 5 IT Infrastructure and Emerging Technologies 203 Salesforce.Com: Cloud Services Go Mainstream CASE STUDY alesforce.com, one of the most disruptive technology companies of the past few years, has single-handedly shaken up the software industry with its innovative business model and resounding success. Salesforce provides customer relationship management [CRM) and other application software solutions in the form of software as a service leased over the Internet, as opposed to software bought and installed on machines locally. The company was founded in 1999 by former Oracle executive Marc Benioff, and has since grown to over 3,900 employees, 82,400 corporate customers, and 2.1 million subscribers. It earned $1.3 billion in revenue in 2009, making it one of the top 50 software companies in the world. Salesforce attributes its suc- cess to the many benets of its ondemand model of software distribution. The on-demand model eliminates the need for large up-front hardware and software investments in systems and lengthy implementations on corporate computers. Subscriptions start as low as $9 per user per month for the pared-down Group version for small sales and marketing teams, with monthly subscriptions for more advanced versions for large enterprises starting around $65 per user. For example, the Minneapolis-based HaagenDazs Shoppe owned by Nestle USA calculated it would have had to spend $65,000 for a custom-designed database to help management stay in contact with the company's retail franchises. The company only had to pay $20,000 to establish service with Salesforce, plus a monthly charge of $125 per month for 20 users to use wireless handhelds or the Web to remotely monitor all the HaagenDazs franchises across the United States. Salesforcecom implementations take three months at the longest, and usually less than a month. There is no hardware for subscribers to purchase, scale, and maintain. There are no operat- ing systems, database servers, or application servers to install, no consultants and staff, and no expensive licensing and maintenance fees. The system is acces- sible via a standard Web br0wser, with some func- tions accessole by mobile handheld devices. Salesforce.com continually updates its software behind the scenes. There are tools for customizing some features of the software to support a company's unique business processes. Subscribers can leave if business turns sour or a better system comes along. If they lay people off, they can cut down on the number of Salesforce subscriptions they buy. Salesforce faces signicant challenges as it continues to grow and rene its business. The first challenge comes from increased competition, both from traditional industry leaders and new chal- lengers hoping to replicate Salesforce's success. Microsoft, SAP, and Oracle have rolled out subscription-based versions of their CRM products in response to Salesforce. Smaller competitors like NetSuite, Salesboomcom, and RightN ow also have made some inroads against Salesforce's market share. Salesforce still has plenty of catching up to do to reach the size and market share of its larger competitors. As recently as 2007, SAP's market share was nearly four times as large as Salesforce's, and IBM's customer base includes 9,000 software compa- nies that run their applications on their software and that are likelier to choose a solution offered by IBM over Salesforce. Salesforce needs to continually prove to customers that it is reliable and secure enough to remotely handle their corporate data and applications. The company has experienced a number of service outages. For example, on January 6, 2009, a core net- work device failed and prevented data in Europe, Japan, and North America from being processed for 38 minutes. Over 1 77 million transactions were affected. While most of Salesforce's customers accept that IT services provided through the cloud are going to be available slightly less than full time, some cus- tomers and critics used the outage as an opportunity to question the soundness of the entire concept of cloud computing. In February 2009, a similar outage occurred, affecting Europe and as well as North America a few hours later. Thus far, Salesforce has experienced only one security breach. In November 2007, a Salesforce employee was tricked into divulging his corporate password to scammers, exposing Salesforce's customer list. Salesforce clients were subjected to a barrage of highly targeted scams and hacking attempts that appeared authentic. Although this incident raised a red flag, many customers reported that Salesforce's handling of the situation was satisfactory. All of Salesforce's major customers 204 Part Two Information Technology Infrastructure regularly send auditors to Salesforce to check security. Another challenge for Salesforce is to expand its business model into other areas. Salesforce is currently used mostly by sales staff needing to keep track of leads and customer lists. One way the company is trying to provide additional functionality is through a partnership with Google and more specically Google Apps. Salesforce is combining its services with Gmail, Google Docs, Google Talk, and Google Calendar to allow its customers to accomplish more tasks via the Web. Salesforce and Google both hope that their Salesforcecom for Google Apps initia- tive will galvanize further growth in ondemand soft- ware. Salesforce has also partnered with Apple to distribute its applications for use on the iPhone. The company hopes that it can tap into the large market of iPhone users, pitching the ability to use Salesforce applications any time, anywhere. And Salesforce introduced a development tool for integrating with Facebook's social network to enable customers to build applications that call functions at the Facebook site. (In early 2010, Salesforce intro- duced its own social networking application called Chatter, which enables employees to create proles and make status updates that appear in colleagues' news feeds, similar to Facebook and TWitter.) In order to grow its revenues to the levels that industry observers and Wall Street eventually expects Salesforce is changing its focus from selling a suite of software applications to providing a broader cloud computing \"platform" on which many software com- panies deliver applications. As CEO Marc Benioff put it, over the past decade, \"we focused on software as a service. ..In the next decade, Salesforcecom will really be focused on the platform as a service." The company has intensified its efforts to provide cloud computing offerings to its customers. The new Salesforcecom Web site places much more emphasis on cloud computing, grouping products into three types of clouds: the Sales Cloud, the Service Cloud, and the Custom Cloud. The Sales and Service clouds consist of applications meant to improve sales and customer service, respectively, but the Custom Cloud is another name for the Force.com application development platform, where customers can develop their own applications for use within the broader Salesforce network. Force.com provides a set of development tools and IT services that enable users to customize their Salesforce customer relationship management appli- cations or to build entirely new applications and run them \"in the cloud\" on Salesforce's data center infra- structure. Salesforce opened up Force.com to other independent software developers and listed their programs on its AppExchange. Using AppExchange, small businesses can go online and easily download over 950 software applications, some add-ens to Salesforcecom and others that are unrelated, even in non-customer- facing functions such as human resources. Force.com Sites, based on the Force.com development environ- ment, enables users to develop Web pages and regis ter domain names. Pricing is based on site traffic. Salesforce's cloud infrastructure includes two data centers in the United States and a third in Singapore, with others in Europe and Japan planned for the future. Salesforce has additionally partnered with Amazon to enable Force.com customers to tap into Amazon's cloud computing services (Elastic Compute Cloud and Simple Storage Service.) Amazon's services would handle the \"cloudburst computing" tasks of Force.com applications that require extra processing power or storage capacity. An International Data Center (IDC) report esti- mated that the Force.com platform enables users to build and run business applications and Web sites five times faster and at half the cost of non-cloud alternatives. For instance, RehabCare, a national provider of medical rehabilitation services, used Force.com to build a mobile iPhone patient admission application for clinicians. RehabCare's information systems team built a prototype applica- tion within four days that runs on the Force.com platform. It would have taken six months to build a similar mobile application using Microsoft develop- ment tools. About 400 clinicians now use the app. Author Solutions, a self-publishing company based in Bloomington, Minnesota, uses the Force.com platform to host the applications driving its Operations. It reports saving up to 75 percent from not having to maintain and manage its own data center, e-commerce, and workflow applications, and the ability to scale as it business mushroomed. Workflow modications that once took 30 to 120 hours are accomplished in onefourth the time. The time and cost for adding a new product, which used to take 120 to 240 hours [and cost $5,000 to $12,000] has been reduced by 75 percent. The new platform is able to handle 30 percent more work volume than the old systems with the same number of employees. The question is whether the audience for Salesforce's AppExchange and Force.com platforms will prove large enough to deliver the level of growth Salesforce wants. It still isn't clear whether the Chapter 5 IT Infrastructure and Emerging Technologies 205 company will generate the revenue it needs to Sources: "How Salesforce.com Brings Success to the Cloud," IT provide cloud computing services on the same scale BusinessEdge.com, accessed June 10, 2010; Lauren Mckay, as Google or Amazon and also make its cloud com- "Salesforce.com Extends Chatter Across the Cloud," CRM Magazine, April 14, 2010; Jeff Cogswell, "Salesforce.com Assembles an Array puting investments pay off. of Development Tools for Force.com," eWeek, February 15, 2010; Some analysts believe the platform may not be Mary Hayes Weier, "Why Force.com Is Important to Cloud attractive to larger companies for their application Computing," Information Week, November 23, 2009; Jessi Hempel, needs. Yet another challenge is providing constant 'Salesforce Hits Stride," CNN Money.com, March 2, 2009; Clint Boulton, "Salesforce.com Network Device Failure Shuts Thousands availability. Salesforce.com subscribers depend on the Out of Saas Apps," eWeek, January 7, 2009; J. Nicholas Hoover, service being available 24/7. But thanks to the 'Service Outages Force Cloud Adopters to Rethink Tactics," previously described outages, many companies have Information Week, August 18/25, 2008; and Charles Babcock, rethought their dependency on software as a service. "Salesforce Ascends Beyond Software As Service," Information Week, November 10, 2008. Salesforce.com provides tools to assure customers about its system reliability and also offers PC applications that tie into their services so users can CASE STUDY QUESTIONS work offline. Still, a number of companies are reluctant to jump 1. How does Salesforce.com use cloud computing? on the Saas and cloud computing bandwagon. 2. What are some of the challenges facing Salesforce Moreover, it is still not clear whether software as it continues its growth? How well will it be able delivered over the Web will cost less in the long run. to meet those challenges? According to Gartner consultants analyst Rob DiSisto, it may be cheaper to subscribe to Salesforce.com's 3. What kinds of businesses could benefit from software services for the first few years, but what switching to Salesforce and why? happens after that? Will the expense of upgrading 4. What factors would you take into account in decid- and managing on-demand software become higher ing whether to use Saleforce.com for your business? than the fees companies are paying to own and host their own software? 5. Could a company run its entire business using Salesforce.com, Force.com, and App Exchange? Explain your