• SaaS by the Numbers: 2012 Growth and Investment Strategy

    It must be both a blessing and curse to be the CFO of one of the industry’s fastest growing and most visible technology companies.

    In a private financial analyst session, Graham Smith, salesforce.com CFO, shared the company’s aggressive growth plans and investment strategy, revealing how the SaaS giant is preparing for the next wave of cloud adoption. However, this investment strategy was underwhelming as it relates to its indirect partnering model.

    Smith shared his company’s 4-pronged investment strategy:

    1. Distribution capacity

    2. Product innovation

    3. Evangelism

    4. Customer success

    The company’s single biggest investment this year has been in headcount, with staff up 44% year over year in sales and marketing and 56% in R&D (in the most current quarter). Smith admitted that this investment creates a 6-9 quarter profitability drag until annuity sales catch up to investments.

    And, clearly they continue on their acquisition spending spree to round out their development platform and non-CRM application functionality. Radian6 is their most recent purchase.

    They also expect to literally double revenues outside the Americas in the coming year, with a goal to reach 1/3 of total sales. A large part of this sales expansion will come through aggressive outbound marketing and cloud evangelism activities, in the form of major customer events like Dreamforce and an aggressive advertising campaign.

    Their investment in “customer success” is focused on continued build-out of their global data centers, which they plan to expand further into the APAC region and western Europe next year.

    So, all the right indicators growth, customer adoption and service renewals are there. In fact, the SaaS leader touts an 8- consecutive quarter decline in renewal attrition, landing at a “mid-teens” % in the most current quarter. But, they remain committed to a capital investment strategy to build for the future, recognizing (and providing formal financial guidance) of its impact to gross margins. The references to the role of indirect partners in driving growth in application development, services delivery or customer evangelism was minimal. Smith referred to new “resellers” as Intuit, Dell and NTT, and clearly the legacy global SI’s were much more visible at this year’s event (Accenture was the only Diamond sponsor). But, the company has a long way to go to prepare its partner community to handle the explosive growth (and investment) it expects.

    Beth Vanni, Vice President of Amazon Consulting, brings over 25 years of experience in technology sales and marketing to Amazon Consulting, with a specialty focus on partnering strategies and supporting operational plans. Beth has led groups in Marketing, Market Development, Business Development and Sales Operations, responsible for the functional areas of marketing communications, product marketing, program development and administration, promotional & incentive plan development, alliance management and worldwide sales operations.

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