Salesforce.com Inc, the company that has rattled established CRM giants with its application service provider business model, plans to raise $115m in what will be one of the most eagerly anticipated IPOs of 2004.
The San Francisco-based company says in its SEC filing that it might seek to expand into other markets, insisting that it has not designated any specific uses for the money it will raise. But it says it might use a portion of the proceeds to fund investments or acquisitions of complementary businesses, services or technologies.
While it says it is not involved in any negotiations for acquisitions, the possibility of it moving into new markets will disconcert many software companies, which have seen it prosper during a downturn in IT spending.
Salesforce.com only began to offer its on-demand CRM application service in February 2000, yet revenue of $5.4m in 2001 climbed to $22.4m the following year, and more than doubled to $50.9m in the year to January 31, 2003.
After burning money in the early years, it is now in the black. In the first nine months of the current year to October 31, it reported net income of $4.7m, up from a loss of $7.2m on revenue 86.2% higher at $65.9m.
Salesforce.com says its customer base has grown to about 8,000 subscribers, with an aggregate of over 110,000 paying subscribers in 70 countries. It has scarcely scratched the surface of markets outside the US, and overseas expansion is high on its agenda. Sales in Europe and Asia Pacific represented 17% of the total in the first nine months of this year.
The company’s record is impressive because it has taken market share from major established vendors. It says its principal competitors include Amdocs, E.piphany, IBM, Microsoft, Oracle, PeopleSoft, SAP, and Siebel Systems. It is also up against packaged CRM software vendors, some of which offer hosted services, such as BMC Software, FrontRange Solutions, Onyx Software, Pivotal, and Sage.
It also competes with companies offering the same ASP business model such as Computer Associates’s subsidiary ACCPAC International, NetSuite, RightNow Technologies, and Salesnet, and enterprise ASP providers including British Telecom, Corio, and IBM.
Salesforce.com has been a particularly painful thorn in the side of market leader Siebel, whose own revenue has been on the slide. It acknowledges the Siebel fight-back through Siebel CRM OnDemand and its recent acquisition of UpShot Corp.
The company is confident that it is the right place in the market, quoting market researchers IDC as forecasting the market for on-demand application services is projected to grow from $425m in 2002 to $2.6bn in 2007, a compound annual growth rate of 44%.
It says the CRM applications market, which according to IDC was worth about $7.1bn in 2002, was one of the first to benefit from on-demand application services. It claims that many enterprises have failed to successfully deploy CRM applications they have bought for a variety of reasons including the difficulty and relatively high cost of implementation and maintenance.
Salesforce.com has yet to decide whether to list on Nasdaq or the New York Stock Exchange.
This article is based on material originally produced by ComputerWire.