Ask HN: Why does Salesforce need such large overhead? | Hacker News Reader

Ask HN: Why does Salesforce need such large overhead?

11 pointsmarcamillion10 comments

If you look at their financials - http://www.google.com/finance?q=NYSE:CRM&fstype=ii - and click on Annual Data, you will see that for their last fiscal year their SG&A was approximately 80% of their Gross Profit.

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?

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%.

So why on earth is their SG&A so high?

Thoughts, anyone?

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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.

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.

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

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.

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.

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.

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.

End users like the 37signals approach to doing the useful things and then getting out of your way.

Management like the Salesforce approach, which gives them an almost infinite amount of reports they can run and monitoring systems they can implement, and the illusion this means they have a better understanding of how their sales team is performing.

That said, I still think it's possible to design an incredibly complex and extensible CRM with better usability and workflow than salesforce.

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

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.

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