NEW YORK (TheStreet) -- Salesforce.com (CRM) CFO Graham Smith couldn't have picked a better time to leave the cloud computing giant, retiring at a time when a change of face at the CFO level probably wouldn't make a major difference to investors.
In its latest reported quarter, Salesforce produced a large display of above-target financial numbers, demonstrated "stickiness" with all-time low attrition rates and soaring large enterprise deals, and continued to stoke interest in its new sales leadership and strategies with the recently-introduced Salesforce1 platform. Shares quickly rebounded from news of Smith's retirement coupled with a wider GAAP loss.
The details of the earnings call last week once again underscored that it's essentially been smooth sailing for Salesforce's customer relationship management solutions business or sales cloud, by far the largest piece of its cloud solution. This business has basically been left unchallenged by competitors such as Oracle (ORCL), SAP (SAP) and Microsoft (MSFT), with the first two still unable to catch up to Salesforce after their delayed entry into the sales cloud.
Meanwhile Microsoft Dynamics, which includes marketing solutions as well, made bets on a less profitable market, focusing on smaller companies when they should have been putting more effort into selling to large enterprises, which later turned out to be the heaviest adopters of the cloud.
Salesforce's recent Salesforce1 development has pushed it even further ahead of the curve. While the components of the platform in and of themselves are nothing new, the aggregation of these parts into one, one-stop, centralized solution that pulls together key elements of the company's CRM offerings plus aspects of the recently-bought ExactTarget digital marketing cloud platform has been widely praised for providing a rare alternative to the more tiring display of disjointed offerings currently crowding the market.
Many investors may be hard-pressed to find a real area of weakness in the company's performance and outlook after analyzing its fourth-quarter earnings conference call, but Ali Zaidi, senior research analyst at IDC's IT consulting and systems integration service says like any other company venturing into new territory, potential vulnerability could arise for Salesforce as it forays into the relatively new and also fast-changing marketing cloud growth market. This sector has been generating keen interest driven by the trend where chief marketing officers increasingly outspend chief information officers on technology.
While Zaidi sees no issues with the company's overall financial stability right now, factoring in the $2.5 billion ExactTarget acquisition makes it a bit more difficult to predict some of the long-term risks and uncertainties that Salesforce might face; despite ExactTarget's prominence and strong brand name in the marketing cloud, it's not entirely clear or even a given yet that the financial impact of the acquisition will swing fully in Salesforce's favor, especially because the marketing cloud is still evolving and may not even be fully understood by salesforce.com itself, just yet.
"I think they're running on a very strong base, and at least in the near future I don't see that there's going to be any negative impact on Salesforce's performance," Zaidi told TheStreet. "From the CRM side, Salesforce is pretty much shielded -- they are way ahead."
"But if you look at what they are launching right, the marketing cloud, that's also new for Salesforce itself," he continued. "I think this is where the competition can create some hindrance for Salesforce because everybody's sort of new in that space and large vendors have also been arguably pushing more and more into the cloud. That's where I can see Salesforce having some issues. If you look at the new areas, that's where I see the biggest threat that Salesforce can experience."
While Salesforce has already bought ExactTarget, the remaining players in the marketing cloud are still plentiful, consisting of ExactTarget-like competitors such as Yesmail and eBay's (EBAY) eBay Enterprise Email, formerly "e-Dialog;" and more significantly, Adobe (ADBE) Omniture. Zaidi says that of those three examples, Adobe Omniture can cast the longest shadow on Salesforce due to the breadth of its features.
IDC IT customer survey results collectively show that there are three criteria that large enterprise IT customers typically follow when they're trying to select a vendor: domain or product knowledge; industry-relevant solutions; and proof points or evidence of past successes in a particular field of technology that gives the vendor the credibility it needs to persuade customers to adopt new, related offerings.
Proof points is where Salesforce most definitely has an edge over all the other marketing cloud vendors because it was an early pioneer in CRM on the sales cloud and therefore already has a big much bigger client base than any of the other three active player examples. So Salesforce selling its marketing cloud to an existing, large portfolio of customers would be much easier than Adobe Omniture coming in and taking these accounts away from Salesforce when clients are already more accustomed to working with salesforce.com and may view it as the go-to place for cloud computing solutions. The widely-praised, all-encompassing Salesforce1, one-stop shop and ExactTarget brand name could reinforce this message.
But in this newer, fast-paced segment of the cloud computing market, new opportunities could always crop up, and if identified by competitors, could help them find a way to carve out an edge over Salesforce ExactTarget; when it comes to the first and second points of the vendor selection criteria commonly used by enterprises, the competitors are certainly almost there.
Zaidi said that on the first and second points, Adobe Omniture can certainly "fight head to head" with Salesforce.
"In some industries, Omniture is a better fit compared to Salesforce so they could win there," he explained. "Also, if you're a large enterprise that's trying to launch a marketing cloud, the Omniture portfolio offers the completeness of portfolio that is somehow very similar to ExactTarget's."
"So Omniture covers everything right. You will find social media solutions built into it, you will see content managers, customer target managers, website analytics, social media optimization, intake, and customer targeting. Adobe Omniture covers everything that make up all the pillars of an effective marketing campaign."
"In my opinion, Salesforce and Adobe's breadth of offerings in the marketing cloud are the most comprehensive," said Zaidi.
-- Written by Andrea Tse in New York
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