Salesforce.com 2007 Annual Report Download - page 6

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Table of Contents
and operating environments. As a result, they dedicate fewer resources to innovation and incur higher research and development expenses as a percentage of
revenue than on-demand application service providers.
Software-as-a-service applications are typically multi-tenant in nature, leveraging a common infrastructure and software code among all customers.
With multi-tenancy, customers benefit from access to the latest release of the application, automated upgrades, more rapid innovation and the economies of a
shared infrastructure.
We believe the shift to software-as-a-service applications provides significant benefits even beyond those associated with multi-tenant infrastructure.
Businesses are able to realize many of the benefits offered by traditional enterprise software vendors, such as a comprehensive set of features and
functionality and the ability to customize and integrate with other applications, while at the same time reducing the risks and lowering the total costs of
owning enterprise software. As a result, we believe the continued emergence of software-as-a-service applications is bringing about a fundamental
transformation in the enterprise software industry as businesses will be able to replace their purchased software with subscriptions to a wide range of
application services.
Platform-as-a-Service
We believe the success of software-as-a-service applications for business users is expanding beyond packaged business applications to include the
development of custom software-as-a-service applications on a technology development platform that we and others call platform-as-a-service. Platform-as-a
service is a new paradigm. We are currently evangelizing the benefits of platform-as-a service to customers, developers and industry analysts.
Custom applications are typically developed by application developers. Application developers include corporate IT and independent software vendors
(ISVs) that develop applications for their internal organizations or to sell to customers. Traditionally, these developers needed to purchase, install, test and
maintain complex software and hardware infrastructures to develop their applications. This expensive process meant more time and resources spent
maintaining their infrastructure and less time available to develop applications, which eventually hinders their innovation and productivity.
Platform-as-a-service enables corporate IT developers and ISVs to leverage the benefits of a multi-tenancy platform for developing new applications.
Our Solution
We are the leader in software on demand. The Company's flagship Salesforce CRM applications, which were initially introduced in February 2000,
help companies better record, track, manage, analyze and share information regarding their sales, customer service and support, and marketing operations.
Our on-demand technology platform, Force.com, which was introduced in 2007, allows customers and partners to customize and integrate Salesforce CRM
applications or build entirely new on-demand applications beyond CRM without having to invest in new software, hardware and related infrastructure. We
also offer the AppExchange, an online directory for on-demand applications, where customers can browse, test-drive and install applications. Since we
introduced the AppExchange directory in 2006, more than 700 applications developed mostly by our partners, have been posted to the directory.
The Force.com platform allows all of our application services to be customized to meet the specific business needs of each of our highly diverse
customers. Substantially all of our subscription and support revenue comes from subscriptions to our core CRM application services, all of which include the
customization benefits of the Force.com platform. Customers can also build their own application sevices on the Force.com platform, or install those built on
force.com by partners from the AppExchange. In order for customers to install and run custom applications, whether built by themselves or by our partners,
they must be a subscriber to our service.
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