Salesforce.com 2007 Annual Report Download - page 39

Table of Contents
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion contains forward-looking statements, including, without limitation, our expectations regarding our outlook and future
revenues, expenses, results of operations and liquidity. Our actual results may differ significantly from those projected in the forward-looking statements.
Factors that might cause future actual results to differ materially from our recent results or those projected in the forward-looking statements include, but are
not limited to, those discussed in the section titled "Risk Factors." Except as required by law, we assume no obligation to update the forward-looking
statements or our risk factors for any reason.
Overview
We are the leading provider, based on revenues and market share, of software on demand, according to a July 2007 report by IDC. We provide a
comprehensive CRM service to businesses of all sizes and industries worldwide.
We were founded in February 1999 and began offering our on-demand CRM application service in February 2000.
In order to increase our revenues and take advantage of our market opportunity, we will need to, among other things, continue to add substantial
numbers of paying subscriptions and upgrade our customers to more fully featured versions such as our Unlimited Edition. We plan to invest for future
growth by expanding our data center capacity both domestically and internationally; hiring additional personnel, particularly in customer-related areas;
expanding our domestic and international selling and marketing activities; increasing our research and development activities to upgrade and extend our
service offerings and to develop new services and technologies; expanding the number of locations around the world where we conduct business; adding to
our infrastructure to support our growth; and expanding our operational systems to manage a growing business. Additionally, in our effort to further
strengthen and extend our service offering, we may in the future acquire or make investments in complementary companies, services and technologies.
We expect marketing and sales costs, which were 50 percent of our total revenues for fiscal 2008 and 51 percent for the same period a year ago, to
continue to represent a substantial portion of total revenues in the future as we seek to add and manage more paying subscribers, build brand awareness and
increase the number of marketing events that we sponsor.
Fiscal Year
Our fiscal year ends on January 31. References to fiscal 2008, for example, refer to the fiscal year ended January 31, 2008.
Sources of Revenues
We derive our revenues from two sources: (1) subscription revenues, which are comprised of subscription fees from customers accessing our on-
demand application service, and from customers purchasing additional support beyond the standard support that is included in the basic subscription fee; and
(2) related professional services and other revenues. Other revenues consist primarily of training fees. Subscription and support revenues accounted for
approximately 91 percent of our total revenues during fiscal 2008. Subscription revenues are driven primarily by the number of paying subscribers of our
service and the subscription price of our service. None of our customers accounted for more than 5 percent of our revenues during fiscal 2008, 2007 and 2006.
Subscription and support revenues are recognized ratably over the contract terms beginning on the commencement dates of each contract. The typical
subscription and support term is 12 to 24 months, although terms range from one to 60 months. Our subscription and support contracts are noncancelable,
though customers
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