Salesforce.com 2011 Annual Report Download - page 44

Accordingly, the sequential quarterly changes in accounts receivable and the related deferred revenue during
the first three quarters of our fiscal year are not necessarily indicative of the billing activity that occurs in the
fourth quarter.
(in thousands)
April 30,
2010
July 31,
2010
October 31,
2010
January 31,
2011
Fiscal 2011
Accounts receivable, net ................................ $183,612 $228,550 $258,764 $426,943
Deferred revenue, current and noncurrent .................. 664,529 683,019 694,557 934,941
April 30,
2009
July 31,
2009
October 31,
2009
January 31,
2010
Fiscal 2010
Accounts receivable, net ................................ $145,869 $168,842 $191,297 $320,956
Deferred revenue, current and noncurrent .................. 549,373 549,010 545,435 704,348
April 30,
2008
July 31,
2008
October 31,
2008
January 31,
2009
Fiscal 2009
Accounts receivable, net ................................ $143,909 $146,982 $157,680 $266,555
Deferred revenue, current and noncurrent .................. 470,297 479,546 469,534 594,026
Cost of Revenues and Operating Expenses
Cost of Revenues. Cost of subscription and support revenues primarily consists of expenses related to
hosting our service and providing support, the costs of data center capacity, depreciation or operating lease
expense associated with computer equipment, allocated overhead and amortization expense associated with
capitalized software related to our application service and acquired technology. We allocate overhead such as
rent and occupancy charges based on headcount. Employee benefit costs and taxes are allocated based upon a
percentage of total compensation expense. As such, general overhead expenses are reflected in each cost of
revenue and operating expense category. Cost of professional services and other revenues consists primarily of
employee-related costs associated with these services, including stock-based expenses, the cost of subcontractors
and allocated overhead. The cost of providing professional services is significantly higher as a percentage of
revenue than for our enterprise cloud computing subscription service due to the direct labor costs and costs of
subcontractors.
We intend to continue to invest additional resources in our enterprise cloud computing application service.
For example, we plan to open additional data centers in the future. Additionally, as we acquire new businesses
and technologies, the amortization expense associated with this activity will be included in cost of revenues. The
timing of these additional expenses will affect our cost of revenues, both in terms of absolute dollars and as a
percentage of revenues, in the affected periods.
Research and Development. Research and development expenses consist primarily of salaries and related
expenses, including stock-based expenses, the costs of our development and test data center and allocated
overhead. We continue to focus our research and development efforts on adding new features and services,
integrating acquired technologies, increasing the functionality and enhancing the ease of use of our enterprise
cloud computing application service. Our proprietary, scalable and secure multi-tenant architecture enables us to
provide all of our customers with a service based on a single version of our application. As a result, we do not
have to maintain multiple versions, which enables us to have relatively lower research and development expenses
as compared to traditional enterprise software companies. We expect that in the future, research and development
expenses will increase in absolute dollars as we upgrade and extend our service offerings, develop new
technologies and integrate acquired businesses and technologies.
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