Salesforce.com 2007 Annual Report Download - page 21

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Table of Contents
Efforts we are making to expand our service beyond the CRM market may not succeed and may reduce our revenue growth rate and cause us to
incur additional liabilities.
In fiscal 2006 we introduced the AppExchange directory, an on-line marketplace for on-demand applications that run on our Force.com on-demand
application service platform. The market for third-party on-demand applications and our platform is new and unproven, and it is uncertain whether the
initiative will ever result in significant revenue for us. Among other things, the success of the AppExchange will depend to a substantial extent on the
willingness of third-party technology providers to write on-demand applications that run on our platform and the willingness of enterprises, large and small, to
purchase and deploy these applications. If third-party technology providers or enterprises do not perceive the benefits of our on-line application marketplace,
then the market for this initiative may not develop at all, or it may develop more slowly than we expect, either of which would affect our ability to grow our
revenue. Given this new and unproven market, we have limited insight into trends that may develop and affect this initiative. In addition, our customers may
not authorize such third-party technology providers to access their customer data. If our customers do authorize such access, we do not warrant the
functionality, security and integrity of the data transmission or processing. Further, despite contract provisions designed to protect us, customers may look to
us to support and warrant the third-party applications, which may expose us to potential claims, liabilities and obligations for applications we did not develop
or sell. Moreover, the AppExchange directory, and other efforts to expand our service beyond the CRM market, may divert management resources from
existing operations and require us to commit significant financial resources to an unproven business, which may harm our business.
The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.
The market for CRM, enterprise business applications, and development platforms is highly competitive, rapidly evolving and fragmented, and subject
to changing technology, shifting customer needs and frequent introductions of new products and services. We compete primarily with vendors of packaged
CRM software, whose software is installed by the customer directly and companies offering on-demand CRM applications. We also compete with internally
developed applications and face, or expect to face, competition from enterprise software vendors and online service providers who may develop toolsets and
products that allow customers to build new applications that run on the customers' current infrastructure or as hosted services. Our current principal
competitors include:
• enterprise software application vendors including Amdocs Limited, Epicor Software Corporation, IBM Corporation, Infor Global Solutions,
Microsoft Corporation, Oracle Corporation, and SAP AG;
• packaged CRM software vendors, some of which offer hosted services, such as CDC Software Corporation, a subsidiary of chinadotcom
corporation, Consona Corporation (formerly Made2Manage Systems Inc.), FrontRange Solutions, Inc., Pivotal Corporation, which is owned by,
Sage Group plc, and SugarCRM;
• on-demand CRM application service providers such as Oracle Corporation, NetSuite, Inc., RightNow Technologies, Inc., and SAP AG;
• enterprise application service providers including IBM Corporation;
• Platform and development environment companies, including established vendors, such as IBM Corporation, Oracle Corporation (formerly
including BEA Software) and Microsoft Corporation; and an array of emerging vendors that have gained traction with the press and analyst
communities.
In addition, we face competition from businesses that develop their own CRM applications internally, as well as from enterprise software vendors and
online service providers who may develop and/or bundle CRM products with their products in the future. For small business customers, we also face
competition from companies whose offering is based on Microsoft Outlook and Excel for limited contact management functionality. We also face competition
from some of our larger and more established competitors who
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