Can Salesforce.com extend to the back office?

With the availability today of Winter '08 and its on-demand platform, Salesforce.com is extending beyond CRM; but it faces significant hurdles developing ERP software.

Salesforce.com today made available its Winter '08 release and Force.com, its on-demand platform.

More than 2,800 developers have begun adapting Coda, a U.K.-based financial management software company that is bringing its on-premise accounting software to Salesforce.com's on-demand platform.

"What we're doing is making a version of our financials -- our headline product -- to run on Force.com," said Christopher Webb, group public relations manager with the company. "There's no point in reinventing the wheel. If someone's done a good job of developing a platform, it makes sense to use it ourselves."

Coda has about 2,600 medium to large customers running its financials in 100 countries, according to Webb.

For Salesforce.com, which began as a CRM provider and has consistently evangelized Software as a Service (SaaS), partners like Coda extend its front-office footprint to the back office. It's a combination San Mateo, Calif.-based NetSuite Inc., a Salesforce.com competitor, is banking on. preparing for an IPO, offers CRM, e-commerce and ERP software on demand.

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With Visualforce and Force.com, Salesforce.com is reaching beyond the traditional CRM functions of sales, service and marketing and offering other capabilities from partners on the AppExchange, its online repository of SaaS applications, according to Kendall Collins, vice president of product marketing at Salesforce.com.

"It's really the long tail of applications," Collins said. "Clearly there are applications that are CRM add-ons that you would expect, but also ERP and HR that are broadly applicable."

Other new applications built on top of the platform include paid time off and vacation planning, and a conference management application that runs on a different UI using a kiosk with a scanner.

Yet the market's appetite for back-office SaaS still faces adoption questions, according to Liz Herbert, analyst with Cambridge, Mass.-based Forrester Research.

"There's adoption of SaaS in some areas beyond CRM, but certain areas are slow to adopt," Herbert said. "With big ERP packages, we haven't seen a lot of SaaS adoption. Same with supply chain management and things that tend to be heavily customized, heavily integrated."

Back-office SaaS has seen some traction with human resources applications, according to Herbert. NetSuite's growth has primarily come in the small business market and with its CRM and e-commerce packages, she said.

SaaS vendors have begun

In addition, because Salesforce.com has only one platform to support (which every customer gets upgraded to on schedule) rather than multiple versions, all research and development goes into the newest version, and they have economies of scale that a traditional software vendor wouldn't get, Herbert said.

Coda has already built an integration between its financial software and Salesforce.com, and its financials software should be released on Force.com early next year. Coda sees an advantage to being one of the first to develop accounting software for the AppExchange.

"We compete at a high level with SAP and Oracle and in the midmarket with Microsoft, who we also partner with for our on-premise products," Webb said. "One of the questions has to be: Who is in the position where they want to put a similar application on Force.com?"

According to Herbert, however, SaaS adoption in the U.K. has lagged behind the United States. Coda itself is apparently approaching the market carefully as well.

"We are approaching on-demand software with caution," Dave Turner, marketing director at Coda told Accountancy Age at the Softworld Accounting and Financing exhibition last month. "It has worked for customer resource management, but it is still to be proven that it will work for finance."

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