Bloomberg News

Salesforce Expands Europe Data Hosting to Entice Governments (1)

March 03, 2014

Salesforce.com Inc. (CRM:US) is planning another two data centers in Europe as it seeks to lure government customers that have stricter data protection requirements, the company’s regional chairman said.

In addition to a planned center in Slough near London, announced last May, the biggest maker of customer-management software aims to set up one server farm in France and one in Germany by mid-2015, Steve Garnett said in a phone interview. These three markets are the most important ones in Europe, the region that is posting the highest growth rates for San Francisco-based Salesforce, he said.

With four data centers in the U.S. and one in Japan, Salesforce is following Google Inc. (GOOG:US) and Microsoft Corp. (MSFT:US) to add hosting capacity in Europe. The location of data centers determines which laws apply to the use and transfer of data, an issue highlighted by former U.S. National Security Agency contractor Edward Snowden’s revelations on the extent on government spying.

“There are restrictions particularly around the government sector and this will open up new opportunities,” Garnett said last week. “Our customers are passionate about getting maximum security and responsiveness of the data.”

Transatlantic Cables

Salesforce hasn’t decided where to build the French and German centers, and the Slough site will probably be running by August, Garnett said. All three locations will become “major” data centers, he said, declining to discuss financial details. The company will add 500 jobs in Europe during its current fiscal year, it said in a statement.

Decisions on where to locate of data centers are often influenced by the availability of power and the price of real estate, as well as the distance to landing sites of transatlantic cables, the proximity of which reduces latency, the time transmissions take to arrive. Salesforce’s customers in Europe include Bayerische Motoren Werke AG and Pernod Ricard SA.

The company’s push into Europe may help it better compete with rivals such as SAP AG, which also offers data and application hosting in the region. The market for cloud software in western Europe will reach $29.4 billion by 2017, Salesforce said, citing figures by research firm IDC.

The software maker’s shares (CRM:US) dropped 5.8 percent to $62.37 on Feb. 28 in New York, trimming this year’s gain to 13 percent and valuing Salesforce at $37.6 billion. Cloud peer Workday Inc. slid 4.8 percent to $109.92. SAP slipped 1.7 percent to 57.53 euros as of 10 a.m. in Frankfurt.

Europe Centers

Google has boosted the capacity of server farms in Ireland, Finland and Belgium. Microsoft has data centers in Amsterdam and Dublin and is exploring new potential hosting locations “across the world as part of our regular business operations,” it said in a statement.

Salesforce last week forecast first-quarter sales that may top analysts’ estimates as demand for its customer-service programs helps bring in large contracts. Europe accounted for 18 percent of Salesforce’s revenue in the fiscal year ended Jan. 31, up from 17 percent a year earlier. More than two thirds of sales were in the Americas.

To contact the reporter on this story: Cornelius Rahn in Berlin at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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