

Ask HN: Why does Salesforce need such large overhead? - marcamillion

If you look at their financials - http://www.google.com/finance?q=NYSE:CRM&#38;fstype=ii - and click on Annual Data, you will see that for their last fiscal year their SG&#38;A was approximately 80% of their Gross Profit.<p>Why is that? Is it because they are the first real 'large' cloud computing company, so they have to kinda beat the path to customers and raise their awareness or are they doing something wrong?<p>Their Cost of Revenue is very low, for a tech company at only 19.75% of Revenues. As opposed to Google's 37.39%, and Apple's 60.62%.<p>So why on earth is their SG&#38;A so high?<p>Thoughts, anyone?
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anonymouslambda
Selling into and servicing the SMB (small and medium business) market requires
a lot more SG&A. There's less scale than selling into large enterprises.

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sabat
With the name that Salesforce has, their only issue would be convincing SMBs
that they need a CRM -- not that Salesforce would be the one to pick. Maybe
they still need to convince those SMBs of their need for CRMs. Maybe.

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amorphid
Much of there SG&A is from a salesforce. Their product requires people to
spread the word.

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sabat
I know a couple of people who work there. Salesforce is bound to be modeled
after Oracle, from whence founder Benioff came. (It's also where he made all
his connections, benefitting from a lifelong friendship with Larry Ellison.)
IIRC Oracle has a similar pattern of big internal expenditure.

4000 employees: that's the number I just dug up using the internets. That
right there is a lot of overhead for a company that should be taking a more
can-do, shoestring approach.

In summary: they waste because they feel they can. Salesforce is a big name,
and so they're partying like it will never end.

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marcamillion
Interesting...I never would have guessed that it was frivolous...but that's
just RIDICULOUS!!!

$1.3B revenues with $80M profits, and crazy spending just because they can.
Ugh...I shirk at the thought.

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iuguy
It seems to me like they could be prime for disruption.

The latest redesign is dreadful. It's like they decided that CRMs should be
exactly like twitter, or facebook or OH MY GOD LOOK BIG SHINY THING WE MUST
HAVE THAT IN THE RELEASE!

When it was rolled out nobody knew where their stuff was, it took a couple of
days for everyone to get used to it. A good CRM should get out of and stay out
of the way of sales. You should spend as little time as possible in it. Not
updating statuses or following accounts (no, seriously it does that).

I'm not surprised they're only making $80 million profit given the stuff
they're blatantly wasting their time on.

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sabat
I've never heard of anyone who thinks that Salesforce is a well-designed,
easy-to-use app. Disclaimer: I haven't used it much, so this is just based on
other people's opinions.

Disruption: sure. Bound to happen. Someone is going 37signals this thing at
some point (i.e. make a simple app that does everything you need but no more).
The hard part: busting through the Salesforce marketing machine. The name is
everywhere, and I expect to start hearing "no one ever got fired for choosing
Salesforce" any day now. It's just like IBM used to be: big, mediocre, and
widely used.

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neworbit
... and now they're no longer widely used? ;-)

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sabat
IBM ain't what it used to be, that's for sure. Still in the game, certainly.
Similarly, I don't expect Salesforce to die out any time soon, but the market
share it commands may diminish if seriously better competitors emerge.

