Enterprise applications Toolkit

Searching for the next Salesforce

Tags:
Recruitment,
Taleo,
Salesforce.com

Alorie Gilbert CNET News.com

Published: 27 Jun 2005 13:00 BST

Is there room for more than one Salesforce.com? Michael Gregoire certainly hopes so, and he's not alone. Gregoire, a former PeopleSoft executive, recently took the helm at San Francisco start-up Taleo. It's one of a few dozen software start-ups emulating Salesforce, which is shaking up the $10bn (£5.5bn) market for customer relationship management, or CRM, software and threatening industry leader Siebel Systems with a groundbreaking business model.

Salesforce's software programs require no installation because the company delivers them as Web pages over the Internet. Salesforce also charges monthly subscription fees for its service instead of requiring traditional licensing agreements that include big starting fees -- agreements businesses find increasingly cumbersome.

But analysts say up-and-comers such as Taleo, which is taking the same no-fuss 'on-demand' model to the much smaller market for corporate hiring and recruiting software, may have a tough time reaching Salesforce's heights.

"We'll see if one of these guys can break out as the quote-unquote next Salesforce.com," said Peter Coleman, securities analyst at Think Equity Partners. "A lot of it's a matter of timing."

Salesforce had impeccable timing, Coleman said. It was not the first company to introduce business software by subscription or 'as a service'. Many dot-com-era start-ups tried it first and then flamed out as the high-tech scene unravelled. Salesforce was a relative latecomer, but by the time it introduced its on-demand customer information system, in 1999, many businesses had become disenchanted with other applications software that didn't live up to expectations. Customers of Siebel Systems were a particularly unhappy bunch, and Salesforce went right after them.

Salesforce had a few other things going for it too. Siebel had already convinced thousands of businesses that they needed customer relationship management software, creating a huge market with lots and lots of potential users. It also helps that Salesforce is led by master salesman Marc Benioff.

The conditions created the perfect storm that launched Salesforce as the big success story of the subscription-software market, analysts said. A much anticipated initial public stock offering last year and a ninefold increase in first-quarter profits this year -- all amid a lacklustere market for business software -- are proof of that.

Such conditions are hard to replicate, yet the list of start-ups aspiring to be the next Salesforce seems to grow by the week. In addition to Taleo, it includes Rearden Commerce, which specialises in on-demand software for ordering business supplies and services, and BlueRoads, which makes applications for facilitating communication between businesses and their distribution partners. Enviance develops programs for ensuring compliance with environmental, health and safety (EH&S) regulations, while Employease provides human resources applications. NetSuite, an Oracle-backed venture, and Intacct both specialise in accounting systems.

Taleo, formerly known as Recruitsoft, is hoping to break out of the pack with an initial public offering this year. The San Francisco company recently amended its IPO registration forms and expects to pull the trigger later this year.

Gregoire claims Taleo is among the top subscription-software 'pure plays' behind Salesforce, though it's just a third of Salesforce's size. Salesforce reported $176m (£96.6m) in revenue last year while Taleo revenue was about $60m (£33m), according to AMR Research estimates. That makes Taleo just about the size of RightNow Technologies, an on-demand player that went public last year.

Gregoire, one of several ex-PeopleSoft executives to join the company recently, was probably a wise hire. He was the head of PeopleSoft's $1bn (£0.55bn) services business until Oracle took over the company earlier this year. So his Rolodex is surely filled with names of hundreds of PeopleSoft customers -- companies who are natural candidates for Taleo's service.