Software as a Service (SaaS)

The on-demand CRM vendor, recently public, launches an application development platform — NetSuite Business Operating System — for custom and vertical software.

By Marshall Lager

Customizing a CRM system for business in a given vertical industry is time-consuming and difficult to do well, so software-as-a-service (SaaS) CRM vendor NetSuite is allowing the task to be handled by outside software developers. The NetSuite Business Operating System (NS-BOS), announced today, is a SaaS software development platform designed to help developers, independent software vendors (ISVs), and value added resellers (VARs) create industry specific applications targeting vertical markets.

NS-BOS includes:

• SaaS Infrastructure: Third-party applications will be hosted on NetSuite’s multi-tenant, on-demand architecture.
• Core Business Management Suite: By including the NetSuite application within the NS-BOS environment, ISVs can focus on adding features designed for specific industries instead of building core application capabilities like accounting, inventory, or order management.
• SuiteFlex: NetSuite’s technology platform for customer, partner, and development customization, verticalization, and business process automation includes tools and the SuiteScript programming language for creating new applications.
• SuiteScript D-Bug: NetSuite claims this is the first Platform-as-a-Service code debugger, and is a key component of NS-BOS. It enables real-time code validation and testing against the entire NetSuite application, which can result in faster development.
• SuiteBundler: This enables the delivery of ISV-built vertical solutions to SaaS customers in a packaged, repeatable manner, rather than recreating the code for each customer.

There is no additional cost for NS-BOS to developers, according to the company. Applications built with NS-BOS that include the NetSuite ERP / CRM / Ecommerce Suite will be priced by the ISV developing the vertical applications, with an agreed-to revenue share with NetSuite for the base suite.

Along with NS-BOS, the company announced the first three vertical customizations built with it:

• Supply chain management for manufacturers, by SPS Commerce;
• Integrated CRM and ERP for government contractors, by Daston Corporation; and
• Total commerce management, automating and integrating key business processes including supply chain management, procurement, competitor monitoring, and pricing, by IntroScape.

Finally, NetSuite has created a new position to oversee the NS-BOS development community. Michael Ni is now the vice president of industry solutions and ecosystem. In this new role, Ni will direct NetSuite’s industry vertical initiatives, software developer programs, and will oversee the continuation of the development of NetSuite as a vertical application platform, according to the company.

“Third-party vertical application developers are struggling to move their client/server applications to the SaaS model, and NS-BOS provides the technology they need to do that quickly,” said Zach Nelson, CEO of NetSuite, in a statement. “But developers need more than just great technology; they also need a new approach to business mandated by the on-demand software approach. Michael has the experience and the skill to take our platform initiatives to the next level and to help our partners transition their business to the Software as a Service model.”

CRM industry analysts expressed approval of NetSuite’s moves. “It’s great to see all of NetSuite’s strategic plans of the past year have been wrapped up within NS-BOS,” says Gretchen Duhaime, senior research analyst with Aberdeen Group. “Vertical solutions are critical to our industry; NetSuite is keeping its focus on the core CRM system while it lets other developers take over the creation of vertical applications where they have the expertise.”

The introduction of NS-BOS has inevitably led to comparisons with rival Salesforce.com’s Force development platform. “Both are addressing the same need,” Duhaime says. “But while Salesforce.com is using third-party developers both for horizontal and vertical functionality, NetSuite is keeping its focus on the core application, which is more complete, and leaving vertical customization to the VARs.”

“It’s a fairly savvy approach, participating in the platform hoo-ha without getting bogged down in vertical development,” agrees Denis Pombriant, founder and managing principal of Beagle Research Group. “NetSuite has a different view of the ISV channel relationship–it’s focused on giving people who want to use one or more core NetSuite applications the ability to get custom-crafted functionality. Salesforce.com is saying ‘Don’t use any of our applications if you don’t want to; here’s the Force platform, you can build your own if you want.”

On a lighter note, both experts expressed amusement over the choice of name for the developer platform. “It sounds a little too much like MS-DOS,” Duhaime says. Pombriant notes that, “Given the orientation toward ‘Suite,’ I figured the name would have reflected that.” He adds that, to him, the name “sounds like a combination of an international airport and a starship.”

destinationCRM.com: NetSuite Calls In the BOS

Strong fourth-quarter and full-year earnings prompt Salesforce.com to predict that its revenue in fiscal 2009 will exceed $1 billion for the first time.

By Renee Boucher Ferguson

Salesforce.com just keeps topping its own as well as Wall Street’s expectations, reporting a 50 percent jump in fourth-quarter revenues compared with the same quarter a year ago.

The company’s strong fourth-quarter and fiscal 2008 results, released on Feb. 27, prompted it to increase its guidance for the coming year.

In 2009 Salesforce.com expects to finally reach the $1 billion revenue mark—a goal it has been shooting for since 2006—and exceed that by $30 million to $35 million.

For the fourth quarter, Salesforce.com reported record revenues of about $217 million and record operating cash flow of $81 million, up 112 percent from the same year-ago period.

Subscription and support revenues were $196.5 million, an increase of 49 percent year over year, and an 11 percent increase over the third quarter. Professional services and other revenue came in at $20.4 million, an increase of 68 percent from the previous year, and 24 percent from the previous quarter. Earnings per share for the quarter finally rose out of the break-even segment from the previous quarter to top 6 cents per share.

Net paying customers rose by about 2,900 during the quarter, and by about 11,200 during the year. To date, Salesforce.com has racked up about 41,000 customers and nearly 1.1 million paying subscribers.

“By any measure, the fourth quarter was amazing,” Salesforce.com CEO Marc Benioff said during a conference call with analysts. “The driver for our financial performance was the most incredible quarter for winning business in our history.”

According to Benioff, Salesforce.com increased the number of subscribers by more than 450,000 to roughly 1.1 million during the year, added roughly 1,800 users every day, processed 160,000 SQL Server transactions per second and served up 130 million transactions per day in well under 1 second each, which adds up to 29 billion transactions at more than 99.999 percent uptime for the year.

Click here to see a video interview with Salesforce.com CEO Marc Benioff.

As for its development tools, which include the Apex programming language and the Force.com platform, Benioff said 1.1 billion lines of Apex code were written and 5,800 unique interfaces were developed. “Developers from around the world with just a browser and an Internet connection can use the same powerful Internet infrastructure we worked hard to develop, to build and deploy their own applications,” Benioff said.

He did not, however, break out any revenue numbers for Force.com, or its corresponding marketplace, AppExchange—an issue in the past for analysts who have tried to assess the penetration (and revenue stream) of Salesforce.com’s newer product lines. Benioff did say that roughly one in four customers has deployed an application from AppExchange and that there are now more than 800 applications listed on the online marketplace.

For the full fiscal year, Salesforece.com reported revenue of $748.7 million, an increase of 51 percent over the previous year. Subscription and support revenues were $680.6 million, also an increase of 51 percent. Professional services rose nearly as high to 50 percent, or $68.1 million. Earnings per share for the full year were 15 cents.

As a result of its stellar performance, Salesfore.com said its revenue outlook for 2009 would increase to between $1.03 billion and $1.035 billion. The company said previously that it expected revenue next year to come in at around $1 billion, or exceed that long-sought goal by about $2 million.

However, earnings for the year are now expected to come in at between 32 and 33 cents a share, slightly below analyst expectations of 36 cents per share.

For the current quarter, Salesforce.com said it expects revenues to total between $233 million and $235 million with earnings between 6 and 7 cents per share—above analyst expectations of earnings around $230 million for the quarter and earnings of 6 cents per share.

During the question and answer period of the call, an analyst asked Benioff whether the company generated these strong results because it is landing bigger subscriber deals, through higher than expected productivity or because of some other metric. Benioff said it was really none of those things.

“We’ve made investments in technology, in our data center infrastructure, in our ability to distribute our product on a global basis,” Benioff said.

“When you look at the fourth quarter, we’re reaping the harvest a lot of the investments we’ve made on in the past. This is what we’ve been focused on—whether it’s our application strategy or our platform strategy, both are at the right place at the right time. And we’re the worldwide leader at the most important time in the software industry, and we think that’s what we’re seeing,” he said.

Salesforce.com Reports Record 50% Jump in Q4 Revenues

As budgets tighten, all technology spending comes under scrutiny. A new survey, however, indicates that strategic CRM projects are more likely to be spared.

By Phillip Britt

Whether or not the worldwide economy is in a recession — defined by two straight negative quarters — is a subject of debate that typically won’t be settled until Gross Domestic Product figures are available in future months, but most analysts agree that the economy is certainly weaker than it was last year or the year before. With that in mind, most businesses may be tempted to put off any long-term technology projects, but will still continue to increase spending on projects expected to produce positive return on investment within a year, according to Gartner principal analyst Chris Pang.

A new Gartner survey has found that 44 percent of respondents expect their budget for CRM initiatives to increase this year, with another 30 percent expecting their budgets to remain the same. License and maintenance revenue in the European CRM software market was an estimated $2.5 billion in 2007, according to Gartner. That figure is expected to grow to $2.8 billion in 2008.

The survey — involving more than 250 business and technology leaders who influence CRM strategy in their enterprises across Europe, the Middle East, and Africa — reveals that though some technology spending may be postponed during a slowdown, the industry won’t see a sharp technology-spending downturn like the one that followed the burst of the dotcom/tech bubble at the beginning of the decade.

CRM initiatives tend to have a high priority among technology projects, survey respondents said. The key business issue driving CRM is the need to move toward or improve a customer-centric strategy. The main challenge for most companies is how to integrate CRM systems with other business applications and with customer-interaction channels.

An economic slowdown will mean that companies will be more likely to put any large, far-reaching initiatives — CRM and otherwise — on the back burner, according to Pang. “CRM is a large market,” he says. “In terms of a downturn, anything considered a discretionary project will likely be delayed. But some projects are strategic, like customer service or projects that enable better self-service. Those projects will be fine in an economic downturn because they play to a company’s strategic needs of reducing costs.”

Quick-to-implement analytic and business intelligence projects as well as technologies that will aid customer retention will be among those that companies will continue to pursue, he adds.

Therefore, line-of-business users trying to build a business case for CRM initiatives — and CRM vendors looking to cater to those needs — should focus on projects that are strategic rather than transformational in nature, the kind that will provide quick, measurable returns, Pang recommends. Vendors, he adds, “should target customers that are likely to spend [on CRM projects] within a year’s time. They should mine their customer base to look for [CRM spending] patterns or trends rather than [pursuing] a massive, broad marketing campaign.”

destinationCRM.com: Is CRM Recession-Proof?

With the help of Web-application powerhouse Adobe, Marc Benioff — Salesforce.com’s founder, chairman, and chief executive officer — brings his company’s Force.com platform to the corporate desktop.

Everyday Internet users who surf Google’s YouTube or download PDF files are familiar with Adobe’s Flash Player and its Acrobat Reader. Now Salesforce.com has teamed with Adobe to give its Force.com platform developers the tools to create desktop applications that would include these same Adobe functions.

Salesforce.com today released its Force.com Toolkit for Adobe AIR and Flex, designed to introduce functions known as rich Internet applications (RIAs) into online and offline applications. The toolkit allows developers on Force.com — Salesforce.com’s on-demand platform for application development — to create desktop business applications that include these RIAs for their Force.com projects, says Adam Gross, Salesforce.com’s vice president of developer marketing.

They key word here is desktop, Gross stresses. The pairing will allow Force.com developers to move their applications off the Internet and onto the desktop — a capability, he adds, that many had sought. The Adobe features will give those desktop applications the look and feel users have come to expect from standard Web offerings, such as YouTube.

“The significance for Salesforce.com is that this allows us to provide an offline component to the Force.com platform,” Gross says. “For Force.com, you have to be connected to the Internet to use our capabilities and services. Now, companies can build, say, a database application and run it as a service and then — using AIR and the Force.com toolkit — they can develop an offline extension to this Force.com application.”

The capability comes thanks to Adobe’s Integrated Runtime, or AIR, the third iteration of the Flex development framework, which Adobe released Monday. With the new Force.com toolkit for AIR, developers can build or include an offline tool for use in the field, one which automatically synchs up with an online application when the Internet is launched, Gross adds.

The Force.com and Adobe pairing will further Salesforce.com’s position as not just a software-as-a-service (SaaS) vendor, but a platform-as-a-service one as well, says Denis Pombriant, founder and managing principal of Beagle Research Group, a CRM consultancy. Salesforce.com, he adds, is now able to stress to developers that they can call upon the platform for applications that range well beyond traditional CRM use.

These varied desktop applications — Gross speaks of a database application, for example — will advance that message, Pombriant says. “Salesforce.com is getting into the business of [providing] any application you can think of, so they need multiple strategies,” Pombriant says. “Previously, Salesforce.com liked what Adobe did, so bringing them into the fold makes the relationship bilateral now. Adobe might actually help push Force.com products [further] into the marketplace.”

destinationCRM.com: Salesforce.com Rises on Adobe’s Hot AIR

Microsoft launched a takeover bid on Feb. 1 of $31 per share in cash and stock, a 62 percent premium over Yahoo’s previous day’s closing price. A New York Times article cited Michael Cusumano, professor at the Sloan School of Management at the Massachusetts Institute of Technology, suggesting that Microsoft should instead use the M&A strategies of SAP rival Oracle as an example.

By Tyler Sitte

Shares in SAP (NYSE: SAP)  were lower in morning trade as dealers said talk about possible future acquisitions for the software manufacturer was offsetting merger and acquisition speculation concerning the unlikely takeover from software giant Microsoft (Nasdaq: MSFT)  .

“Jitters about a possible expensive takeover by the software company are helping to put pressure on its shares,” said a Frankfurt-based trader.

He said the jitters were offsetting a report in this Sunday’s New York Times that Microsoft is going after the wrong target, with its takeover attempt of Yahoo (Nasdaq: YHOO) , and it should instead try to buy SAP.

Integration, Then Negotiation

In an interview with the Handelsblatt newspaper, SAP chief executive Henning Kagermann said the company is open for any further acquisitions but it would first have to integrate Business Objects before looking around for any further deals.

In late-morning trading, shares in SAP were 0.06 Euros, or 0.18 percent, lower at 32.45 euros (US$48.12), making it the third worst performer on the DAX, which was down 112.91 points or 1.66 percent at 6,919.20.

Microsoft launched a takeover bid on Feb. 1 of $31 per share in cash and stock, a 62 percent premium over Yahoo’s previous day’s closing price.

Follow Oracle’s Lead?

The New York Times article cited Michael Cusumano, professor at the Sloan School of Management at the Massachusetts Institute of Technology , suggesting that Microsoft should instead use the M&A strategies of SAP rival Oracle (Nasdaq: ORCL)  as an example and “should acquire another major player in business software, merging Microsoft’s strength with that of another.”

“It’s not an outlandish idea,” the report said.

“The two companies held merger talks in late 2003, and perhaps since then, too. Microsoft is in an enviable position: It is a nearly universal presence in corporate data centers, and large enterprise customers are arguably the best customers a software company can have.”

“This all sounds very interesting,” said a local trader in response to the article, “but the stock is really not reacting on the news.”

CRM News: Deals: SAP Called Better Target Than Yahoo for Microsoft