Stephen Gall

Bachelor of Science in Business Administration Program

MGMT 3005: Management Information Systems

Walden University

Professor Angela Perry, Instructor

Walden University

February 18, 2006

E-business Systems Analysis of Salesforce.com

Salesforce and Web 2.0

Salesforce.com (Salesforce) is a Web 2.0 company and its business model is very disruptive. What is a Web 2.0 company and is Salesforce really a different type of e-commerce company? This paper briefly describes how Salesforce works and why it represents a complete shift in thinking about how organizations use software, and how organizational data is maintained.

Until recently, organizations have always bought and maintained their own computing and data infrastructure components. This entire infrastructure required an information technology (IT) staff to maintain the whole system, despite huge costs.

In retrospect the era up to the 1990’s was dominated by a data-centric viewpoint, and the corporate driver was IBM. Starting in the late 80’s, a workgroup-centric viewpoint became dominant. This era, which is coming to a close today, was started by the personal computer revolution and the corporate driver was Microsoft.

Today, we are moving toward a network-centric viewpoint; the corporate driver being Google. The difference between the two models is seen in the strategy; in the workgroup-centric model the strategy is to capture the desktop, in the network-centric model the strategy is to occupy the internet.

Salesforce delivers a Web service via the network-centric model, allowing companies to access both the software and infrastructure behind it. This service model makes the large support infrastructure of an IT department redundant. In contract to this Web service model, it is estimated that in the workgroup client/server model 50% of current IT corporate costs go to supporting the infrastructure itself, and in the software management side, 50% of application costs go to integration issues. [Strassman, 2005] If Salesforce can show clients how to dramatically reduce these costs, the company will continue to gain market share.

Market Position

Salesforce has more than 276,000 subscribers at well over 9,800 companies worldwide. Functional areas include: sales, customer service, product and project management, executive management, and human resources. "Salesforce reported first quarter 2006 net income of $4.4 million, compared with income of $437,000, for the same period in its fiscal 2005. The company increased its overall revenue to $64.2 million, compared with $34.8 million for the same period last year. Salesforce said it has added 40,000 new customers in 2005." [Hines, 2005]

Hardware, Software, and Networks, and Related Components

Salesforce is quick to give advice on how the network configuration of its clients should be configured to support quality of service (QoS), security, access, and up-time, which are critical to the success of any web-based service delivery system. Only insiders actually know what the configuration of Salesforce’s back-end network looks like today. We can say that the configuration has been effective so far. But will it scale? In network-centric systems, the use of workgroup-centric technologies based on the standard client-server model may not be the best long-term solution. As discussed in the Proposals and Recommendations section, Salesforce must ensure that it has chosen the right network infrastructure architecture. We do know that Salesforce is very focused on managing its data centers. “(In 2005) Salesforce has introduced two new datacenters worth $50m to support the service.” [Clarke, 2006]

Operating Systems, Applications Software and User Data

Salesforce is built on the software-as-a-service (SaaS) model. The Salesforce motto is "no software." What’s so different about Salesforce? Salesforce provides an operating system environment called AppExchange OS. Clients can use AppExchange to configure their own working environment that includes components for collaboration, reporting and data sharing. Clients are encouraged to configure their own system’s user interface and data relationship model (database). AppExchange includes administration tools so IT departments can more easily deploy access to end-users, and for auditing and monitoring the system’s use.

AppExchange is also the basis of a completely different model for building and delivering software services. Instead of a grand design, Salesforce monitors the use patterns of its customers in real-time, looking for ways to change the model every day based on user feedback. Adam Bosworth, VP of Engineering for Google, calls this model ‘intelligent reaction.’ [Bosworth, 2005] This model is in contrast to the grand plan model commonly used to deploy client/server software, where a group of engineers determines what customers might want and then builds a set of API’s upon which developers can develop applications. In the ‘reaction’ model, a basic application is quickly built and deployed, and then the API is developed only when there is customer demand to extend the application.

Concurrently, Salesforce helps customers and third-party developers build applications for other customers. Salesforce allows third-party developers to offer their applications through AppExchange. In this way, Salesforce is becoming the arbiter in a new type of service market, offering a common look-and-feel to online software applications, as well as providing the basis for a common data model. Salesforce also helps developers gain a reputation of trust in this new market.

Salesforce, which does a major release of AppExchange every 3 months, is also launching new environments to support their model. Sandbox is an application that will allow companies to download these new applications and test them with their own data before going live. "Sandbox is a full parallel copy of a company's production environment to be used for testing, development and end-user training. Sandbox becomes a contained and safe environment where IT departments can test integration with back-office applications and customizations as well as train employees on a new piece of functionality without having an effect on live data." [Schwartz, 2005] Multiforce, another new environment built on top of AppExchange, allows third-parties to deploy applications so that clients can use and share functions to demonstrate how the web service works.

Salesforce uses a bi-directional approach to sharing data and functionality. For example, other companies are allowed to leverage Salesforce functionality and data into their own applications to cross-extend functions in an entirely different type of application. For example, recently Salesforce blended Google's street mapping software allowing clients to generate a map of a customer’s office using data from their CRM data. [Hines, 2005] Using a service from a provider called StrikeIron, clients can now "add live business demographics, data verification and cleansing capabilities, as well as receive real-time connections to instant telephone number lookups, address verification and enhancement via USPS, live sales and use tax rates for calculating sales tax on-demand, live business demographics from a myriad of data sources, the ability to send an SMS message worldwide, and online verification of email addresses." [Colin, 2006]

Developer Experience

Analysts who understand the SaaS model are impressed with Salesforce. "Like Microsoft, Salesforce hopes that by allowing independent software developers to build on top of its basic software, it can keep customers happy." [Kuchinskas, 2006] Certainly developers who have moved to the Saas model are happy that Salesforce provides an open platform for sharing applications and services, and a method for finding new clients.
User Experience

Salesforce provides lower risk to customers because the customer doesn’t need to purchase and support a large software package and the infrastructure behind it. Salesforce is also highly configurable in terms of the database and the user interface. As long as Salesforce can ensure quality of service and address client security issues, it will continue to win new customers.

On December 20, 2005, Salesforce experienced a major system outage. This event shook the entire user community and caused a lot of notice in the press. Salesforce has been keenly aware of the issue of downtime risk; “. . .the more partnerships and engagements, the higher the degree of downtime risk: 97 percent uptime with Salesforce.com and 97 percent uptime with just one partner mean a potential 6 percent downtime window.” [Caton, 2006]

Salesforce is also very security conscious. Salesforce is accessed through a secure log-in using a SSL connection; URLs use the HTPPS access method. Also, Salesforce has a strict privacy policy and does not view or share its client’s data unless there is a support request.
Proposals and Recommendations
Deploy the right Infrastructure

Salesforce should adapt Google’s network-centric systems design model in order to ensure that its network scales. Google’s great strength is that it has mastered the infrastructure behind the network-centric model. Their infrastructure model is briefly described below: [Strassman, 2005]

• Google’s network acts as one parallel supercomputer
• The basic unit is called a cluster; there are well in excess of 2,000 clusters, perhaps more than 300,000 separate servers in the Google system
• A cluster is comprised of custom-built commodity servers using the following configuration (per cluster):
• 359 racks
• 31,658 machines
• 63,184 CPUs
• 126,368 GHz of processing power
• 63,184 Gb of RAM
• 2,527 Tb of hard drive space

Salesforce should also implement the operating system and components of Google. In Google’s system:

• Software operating system is a highly modified version of Linux
• All computers share the same configuration
• Files are broken into 64 MB chunks for 2000+ MB/second read/write load; all file chunks at least triplicate for safety; response time monitored to assure <0.25 second latency
• Processing a single query may involve 1000+ servers
• Dynamic indexing, (Google indexes over 8 billion pages and over 1 billion images)

This description of the Google environment is similar to the one SalesForce should be building because it will allow them to scale their service and ensure uptime. As you can see, it creates an environment unlike any client/server model previously built. The efficiency and effectiveness of this system far surpasses any other architecture. It is estimated that when comparing cost per CPU cycle (needed to) process a single transaction that this system is 4 to 6 times the price advantage of the second best architecture, that used by Sun Microsystems. [Strassman, 2005] Competitors such as Yahoo and Microsoft, which still deploy using a client/server model, do not have the architecture to truly compete based on system costs. Will Salesforce? This network-centric environment will ensure that Salesforce is well positioned to leverage an architecture and model that meets the demands of an infinitely scalable solution.

Deploy the right Infrastructure

All business models, even one so advanced as Salesforce are subject to the encroachment of cold technologies. The future might include the these disintermediating events for Salesforce:

• Small vendors may begin to make their applications available independently. As long as there is the ability to provide a common data model (and XML provides this ability) portals like Salesforce might find themselves redundant
• Search sites like Google or technologies like RSS may allow customers to easily find these small vendors and the appropriate application for their needs without the need to integrate applications through vendors like Salesforce
• Independent networks using the Google (network-centric) model may allow web services to be delivered securely and to run seamlessly, bypassing the need to portal-based
• Customers may find it easier to build their own custom suite of small independent applications, and skip the need to use the larger integration vendors

Reflections

We have learned that Salesforce is leveraging a new type of software solution based on the Web 2.0, or Saas model, where software is delivered as a service via the internet. This model is highly disruptive to the current practice based on the client/server workgroup model, which require organizations to purchase software and then build, maintain, and support their infrastructure.
Applications

Currently, most organizations are steeped in the client/server or workgroup model. However, solutions like the one Salesforce offers seem to be the future of software delivery. Therefore, organizations should rethink how they deploy and use software to support business functions. As business managers, we must engage our IT departments in a discussion of how and when to move to this new service delivery model. Not only can the service be significantly less expensive, it drastically reduces the need for the organization to support and maintain a large IT department. [O’Brien, 2005. page 113]

Bibliography

Strassman, Paul; “Google: A Model for the Systems Architecture of the Future” Lecture, George Mason University, December 2005 (video presentation 1 hour) <<http://www.strassmann.com/>>

Bosworth, Adam; “Intelligent Reaction: The Salesforce Model” (a 20 minute video presentation) at: <<http://salesforce.breezecentral.com/intelligentreaction/>>

Hines, Matt; "Salesforce.com's new gamble"; CNET News.com; July 2005; <<http://news.com.com/Salesforce.coms+new+gamble/2100-1012_3-5804017.html>>

Adam, Colin; "StrikeIron Introduces Web Services via Salesforce.com’s AppExchange," webservices.org; January 2006 <<http://www.webservices.org/categories/development/interoperability/strikeiron_introduces_web_services_via_salesforce_com_s_appexchange>>

Schwartz, Ephraim; "Salesforce to launch full production testbed," ComputerWorld, Dec. 2005; <<http://www.computerworld.com/softwaretopics/crm/story/0,10801,107010,00.html>>

Kuchinskas, Susan; "Salesforce: The New Microsoft?" Enterprise - Internetnews.com; January 2006; <<http://www.internetnews.com/ent-news/article.php/3578791>> SAP vs Salesforce: http://www.businessweek.com/the_thread/techbeat/archives/2006/02/sap_vs_salesfor.html

Clarke, Gavin; "Salesforce pitches to become the 'iTunes' of enterprise apps;" Channel Register; Jan. 2006; <<http://www.channelregister.co.uk/2006/01/17/salesforce_appexchange_launch/>>

Caton, Michael; "The Salesforce.com Domino Effect;" eWeek.com; Jan. 2006; <<http://www.eweek.com/article2/0,1895,1911628,00.asp>>

O’Brien, James; Introduction to Information Systems, McGraw-Hill, 2005, ISBN 0-0711121-X

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