Oracle Has Salesforce.com in Its Crosshairs: Analyst

One analyst claims Salesforce.com's future is in jeopardy due to rivals such as Oracle, VMware and Red Hat beating the company's SaaS suites with virtualized software systems.

Salesforce.com (NASDAQ:SFDC) may be performing well in the enterprise software market now, but at least one analyst fears for the software-as-a-service provider's future with rival enterprise giant Oracle looming large.

Global Equities Research analyst Trip Chowdry claims that prospective customers see limitations in the multi-tenancy architecture Salesforce.com used to put itself on pace to earn $2 billion in revenues this year. This view, cultivated with the help of some 450 enterprise customers and 10 CIOs, is causing some to look at a virtualized approach espoused by Oracle and its forthcoming Public Cloud solution.

Unveiled at Oracle OpenWorld Oct.  5, the Public Cloud offers applications, middleware and database software hosted and managed by Oracle. The Public Cloud also includes social networking software on the front end.

"Customers we spoke to find Oracle's architectural approach to be superior to that of Salesforce.com as it provides a better isolation and control environment vs. Salesforce.com," Chowdry wrote in a research note Oct. 30.

Moreover, Oracle will launch Web-based enterprise apps covering customer relationship management (CRM), human capital management (HCM) and social network tools. Salesforce.com does not truck in HCM, which Chowdry said could yield reduced enterprise wins for the company versus Oracle.

Also, Oracle's cloud database is likely to be superior to Salesforce.com's Database.com offering, given its decades of experience in the space. Chowdry explained that Oracle has access to source code and has optimized the database all the way from the chip level to the cloud level to provide more efficiency.

Oracle isn't the only player competing with Salesforce.com. Chowdry noted that VMWare's Cloud Foundry and Red Hat's Open Shift are all picking up momentum at the expense of Salesforce.com's own  platform-as-a-service (PaaS) offering of Force.com and Heroku.

"These competitive challenges may reduce Salesforce.com's win-rates, lengthen sales cycle and put margin pressure resulting in multiple compression," Chowdry said.

Salesforce.com declined to comment on Chowdry's report, in which the analyst reduced his estimates for the company's next two fiscal years and downgraded his price target for Salesforce.com to $95 for the next 12 to 18 months.