Another Hot On-Demand Software Vendor?

I don’t know it it’s the next Salesforce.com, but on-demand HR software vendor SucessFactors is getting a nice pop on the last trading day of the year. The only news I can see is a very positive note from Pacific Crest analyst Brendan Barnicle, who initiated coverage with a rating of “outperform.”

SFSF (its ticker) offers on-demand software for managing a variety of HR-related tasks, including employee performance management and recruiting. It went public in November and claims to have customers in 156 countries.

SucessFactors hasn’t taken off like a rocket a la Salesforce. It closed at $13.25 a share after its first trading day on Nov.7, and peaked at just below $15 in early December. At the moment it’s up about 6% to $11.88 a share, on a slow trading day with most tech stocks showing red on my screen.

SFSF won’t make money in the near future, says Barnicle, but he figures that the stock is worth about $18 a share, based on a rise of booked revenue of 42% next year and 50% in 2009.

Salesforce, of course is profitable and been a very good buy for investors, appreciating by 274% ($17.20 a share to $64.45 a share) since going public in June 2004.

SFSF is up against Taleo, Kenexa, and Salary.com, Barnicle said in a brief interview, while Salesforce is duking it out with Oracle and other big fish of the CRM world.

What I find most interesting here is Wall Street’s continuing interest in the on-demand model. As we enter 2008, we’ll see more and more challenges to conventional software business models.

Speaking of which, I’ll toot my own horn — after all it is almost New Year’s eve — and point you to a piece on the IW site regarding the increasing commercialization of the open source business model. Have a safe holiday and a profitable New Year.

I welcome your comments, tips and suggestions. Reach me at bill.snyder@sbcglobal.net.