Salesforce, Gartner reports show cautious optimism for CRM

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This week, Inc. reported net income for the fiscal fourth quarter nearly double that of last year's, showing that, in a receding economy, CRM and software-as-a-service (SaaS) providers may prove to be a bright spot.

Although it has lately been bogged down by falling stock prices and the February departure of president and chief strategy officer Steve Cakebread, Salesforce actually surpassed sales and earnings estimates for the quarter, which ended January 31. For the quarter, net income was $13.8 million, a $6.4 million increase from the same period the year before. Revenue grew 34% to $289.6 million. Revenue for the year increased 44% from fiscal year 2008 to reach $1.08 billion.

The company's success follows trends revealed in a recent Gartner Inc. report. The report, released Thursday, showed that CRM was the No. 2 technology priority for CIOs worldwide in 2009. The report also predicts that nearly 50% of all field sales applications be delivered through SaaS by 2012, compared with less than 1% in 2000. The percentage of all CRM applications delivered through SaaS will be closer to 25% in 2012 but up to 40% in 2020 — all good news for, which has been a major promoter of SaaS in the CRM marketplace.

Salesforce attributed some of its 2008 success to deals won at the expense of Oracle and SAP, heavy-hitters in the CRM space that have more limited SaaS options. However, Oracle, which also provides SaaS with its Oracle CRM On Demand, has reported 6% growth in GAAP total revenue, to $5.6 billion, in its most recent quarter, which ended November 30. SAP, another competitor that does not focus on SaaS, saw its revenue grow 8% in its fourth quarter, which ended December 31, and 13% in 2008.

In spite of the strong numbers, CRM big shots are, like most companies, treading cautiously now. Salesforce, which predicted revenues of $1.35 billion to 1.36 billion in November for fiscal 2010, has since lowered those projections to around $1.3 billion. SAP declined to provide an outlook for the coming year, “due to the continued uncertainty surrounding the economic and business environment.”

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