Salesforce.com Sees Its Next $1B Market

Salesforce.com, the $1 billion vanguard of the software-as-a-service (SaaS) industry, is betting its next $1 billion in revenues will come from disrupting the call center industry.

The company that declared death to on-premise software with SFA, its flagship on-demand customer relationship management (CRM) tool, and which has built an entire ecosystem of SaaS offerings around its AppExchange platform, is at something of a crossroads.

Salesforce.com is the first SaaS vendor to generate $1 billion in sales, most of that generated by SFA, and a smaller percentage by its ecosystem. However, Salesforce.com will be hard-pressed to maintain its growth in the largely tapped-out SaaS CRM market, as my colleague Larry Dignan at sister-site ZDNet points out.

Salesforce.com’s answer is a customer service tool that it see as the logical extension of CRM. Just as it disrupted the enterprise software market with SaaS, it plans to disrupt the call center market with the Service Cloud, which it introduced in January, along with integrations with Facebook and Google.

Today, it’s announcing an integration with Twitter.

The idea is that call center agents can monitor conversations about their products on social networks like Facebook, Twitter and on Google, and offer consumers help by pushing content from their corporate knowledge bases.

Granted, though, it sounds creepy to imagine that you could be griping about your Dell laptop on Twitter and have Dell pop up saying “@Mike have you checked to make sure your power cable is plugged in?”

But Salesforce.com is eyeing a market with potentially explosive growth. Alex Dayon, senior vice president of customer service & support at Salesforce.com, told me the market represents a $3.4 billion opportunity.

Dayon was formerly CEO of InStranet, which Salesforce.com acquired in August 2008.  According to Salesforce.com’s recent 10-K, InStranet “offers a knowledge management application for business to consumer call centers.”

Dayon told me that Salesforce.com grew 52% in this market in 2008, from around 2,500 customers to over 6,800 today. That’s still a needle in the haystack of the company’s total 55,400 customers (representing 1.5 million actual users), but you can see why the market has Salesforce.com salivating.

Salesforce.com would be going up against many of the usual enterprise software suspects–Remedy, Oracle (via the PeopleSoft and Seibel applications) and Amdocs. But Dayon told me, “it’s more of a green field, it’s a replacement market.”

According to Dayon, Salesforce.com’s customers are looking to refashion their approaches to customer service because they realize that current call center operations leave a lot to be desired, and that 50% of customer-service related questions have migrated to Google and other community sites. “Soon, two-thirds of those interactions are going to be in the cloud,” Dayon said.

The Service Cloud includes a dashboard that is intended to help companies overcome the poor experience of siloed voice, Web and e-mail customer service applications they offer frustrated consumers. But the real hook is the ability to proactively find conversations in the cloud and appear with a solution like Johnny-on-the-Spot.

Of course, there are almost as many ways this could go wrong as there are potential customers. Companies like Starbucks, Dell and Comcast, which are current customers of the Service Cloud, may suffer a backlash if consumers see this activity as intrusive.

Their experience with outsourcing call centers overseas certainly taught them that U.S. consumers will hang up if they hear a foreign-sounding accent and call again and again until hearing an American-sounding one. Each of those calls costs money and resources, more than offsetting any savings that outsourcing was to have produced.

There’s every reason to believe that if consumers are as unhappy with this social approach, they’ll find make it equally painful for Starbucks et. al.

And based on a on search on the word “Dell” which I ran on March 22, I’m not convinced that customers of the Service Cloud get the social Web. In response to one Tweet, a Dell rep responded, “glad to see your tweet. We’ll keep you up to date on all the great deals in the Dell Outlet.” More marketing messages is the last thing consumers want or expect when they use Twitter.

Worse, the one serious customer service issue about Dell on Twitter that day (”OSX on a Dell Latitude D630 but cant get wireless at all: I installed iATKOS on a partition of this laptop…”) has gone unanswered. Granted, it’s a tough one, but people can answers to simple questions off the packaging. If this cloud-based customer service is going to work, it’s going to have to provide answers to complicated questions.

Meanwhile, Twitter users already seem annoyed: “i don’t understand peoples fascinations [sic] with making twitter accounts that only say “win a dell computer” or “I LOVE MY NEW LAPTOP.”

Dell and others will create the opposite effect of what they’re looking for if they don’t approach the social Web on its own terms, and that in turn will have an adverse effect on the Service Cloud that Salesforce.com is counting on as its next-gen growth engine.

Another potential pitfall is the quality and relevancy of results returned by the search technology used by Twitter, Facebook and even Google. This, of course, puts a new light on Twitter’s recent focus on search (it announced the acquisition of search engine vendor Summize in February and introduced a search function earlier this month), but doesn’t give me any more confidence in its efficacy for this purpose.

You can easily see call center agents finding too many false positives for it to be worth their while.

Salesforce.com will officially introduce the new service today with customary fanfare, including a keynote by CEO Marc Benioff at the Sheraton in New York. I’ll be there, and I’ll try to see how Salesforce plans to address those potential pitfalls.