Salesforce.com growing its European business

Although Salesforce.com Inc.'s professional services business had higher revenue growth than the company overall, it would rather leave that market to others, according to the head of European operations.

Salesforce.com provides professional services for its CRM (customer relationship management) product, but it's not a main business, and other companies have been encouraged to fill the gap, said Steve Garnett, president of Salesforce.com's Europe operations.

In April, Salesforce.com reported 70 percent growth in professional services revenue compared to 63 percent growth in overall revenue year on year.

An Irish company, Enterprise CRM Ltd., is supporting Salesforce.com's software with 15 consultants, in particular smaller companies that want customization of the service. It started business in October 2005.

Unlike larger competitors in the field, such as Accenture Ltd., Enterprise CRM only does Salesforce.com-related work.

Enterprise CRM specializes in "short, sharp engagements," enabling businesses to quickly start running Salesforce.com, said Chairman John Appleby, who previously founded Salesforce.com's Europe operations. Larger consulting companies tend to shy away from those shorter contracts, Appleby said.

But three-day or five-day contracts can turn into more work, as businesses want to customize features, he said.

Colm Mulcahy, Enterprise CRM's chief executive officer and managing director, said the company is expecting interest to rise because of Salesforce.com's marketing efforts and as familiarity with the concept increases.

Salesforce.com's momentum is driven by big-name clients using its software, such as Cisco Systems Inc., Nokia Corp. and Merrill Lynch & Co. Inc.

"Everybody in the CRM market is looking at Salesforce.com and saying 'We have to take these guys seriously' now," said David Bradshaw, analyst at Ovum Ltd. in London.

But European IT managers have been somewhat uncomfortable with software-as-a-service, even though they might already be using similar online services such as firewalls, Bradshaw said.

The hang-up comes with the belief that data is safer when it is hosted within the company itself, he said.

Garnett said the U.S. has been faster to adopt new software than Europe, but the software-as-a-service model is gaining traction in Europe. Salesforce.com recently added Finnish and Dutch versions and also supports the major European languages, Garnett said.

"Do some IT people still feel that they should be doing everything themselves? Yeah," Garnett said. "There are some of those guys, but they are a diminishing bunch."

Salesforce.com had revenue of US$104.7 million in the three months to April 30, up 63 percent year on year. In Europe, the company reported revenue for the quarter of $14.9 million, up 59 percent.

While the company won't say how many of its 444,000 users and 22,700 customers are in Europe, Bradshaw estimates that there's a close correlation between revenue and subscriber numbers.

Salesforce.com's revenue model is different from traditional software companies, which tend to make most of their money when the software is initially sold.

Garnett said Salesforce.com doesn't make money initially with new clients, but after the subsequent years as clients renew their contracts.