Salesforce ramps up to sell government agencies on its cloud business


The Salesforce.com logo on display at the DreamForce 2011 conference in San Francisco. Salesforce recently unveiled its Government Cloud offering. (David Paul Morris/Bloomberg News)

Salesforce.com got its start in 1999 selling software to businesses, helping them manage customer data for sales leads.

Fifteen years later, the San Francisco-based company is ramping up to reach a different audience: the federal government.

As part of this attempt, Salesforce debuted cloud services for federal agencies before 4,000 business partners and government representatives recently at a company-sponsored conference at the Walter E. Washington Convention Center in the District.

Spearheading the public-sector push is Vivek Kundra, an executive vice president at Salesforce who until 2011 served as the United States’ first chief information officer. As CIO, Kundra issued a “cloud first” policy, mandating that federal agencies take advantage of the Internet cloud as a way to reduce costs and develop new applications.

In an interview outside the conference, Kundra said that the shift may have started slowly but that momentum is growing.

“What we’re doing is not just introducing technology, but it’s disrupting business models,” Kundra said. “We’re actually excited about the fact that at the CIA, a [cloud] company like Amazon wins a $600 million deal. You have [software company] Concur at the [General Services Administration] that wins a $1.3 billion deal, you’ve got Google and a whole host of new entrants that are fundamentally going to change the landscape, but more importantly the expectation of technology leaders in the public sector.”

Salesforce, a cloud-computing pioneer, has been trying to get traction in the federal market since at least 2008. That’s when it opened a Herndon, Va., office to reach federal customers.

It has been slowly adding contracts since. In 2011, for instance, the GSA awarded Salesforce a $28 million contract to use Chatter, a Salesforce app for internal communication. The Department of Health and Human Services cleared the company to sell its new services to HHS agencies starting this month.

Overall, business with the public sector — federal, state and local governments — continues to be brisk, said Salesforce public-sector senior vice president Dave Rey. Although the company does not break down its revenue by sector, Salesforce generated $3.05 billion in sales in 2013, up 35 percent from the year before.

“As you start to see more and more government organizations do prototypes in the cloud, this is really starting to snowball where they’re trying to talk about innovation,” Rey said.

In April, Salesforce dedicated a business unit subdivision to public-sector­ sales, hiring industry experts who are managed by Kundra.

The company’s new Government Cloud represents an attempt to sell more comprehensive services — an entire software platform, instead of an individual application. Salesforce timed its announcement at the D.C. convention center ahead of a government deadline for agencies to report whether their systems meet cybersecurity requirements. Salesforce’s cloud offerings have been certified as meeting those standards.

Targeting the federal government is a smart business move, said Gartner analyst Michael Maoz, who follows Salesforce. A recent report by the technology research firm IDC projected that the federal cloud services spending would reach $1.7 billion in the 2014 fiscal year.

“It’s a horse race,” Maoz said. “Today it’s Salesforce, and later it’s going to be Oracle and Microsoft and IBM and HP. . . . Salesforce is really just doing what anyone with a business sense [would], and the government’s been very clear” about its requirements.

Still, Maoz said, Salesforce will have to be patient as government agencies adopt cloud capabilities at their own pace, which is likely to be slower than a private-sector client’s.

“The federal government will have to make some decisions about how deep it wants to go into this. If it wants to just leverage tools, then that’s one thing, [another] if you want to get some development tools that you want to use on the Salesforce platform. . . . How deep they go would depend on how much they like the Salesforce approach, as opposed to a hybrid.”

Mohana Ravindranath covers IT and small business for the Washington Post and its weekly Capital Business publication.
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