Hot customer relations management (CRM) software maker Salesforce has filed for an initial public offering that may raise about $115 million. If the IPO goes ahead next year, this will give investors a chance to invest in a fast-growing and just-profitable threat to the big guns, including Siebel (NASDAQ:SEBL), Oracle (NASDAQ:ORCL), Microsoft (NASDAQ:MSFT), and SAP (NYSE:SAP).

Salesforce is a pioneer in the application service provider (ASP) world. It rents software to its 110,000 customers at 8,000 locations in 70 countries for use via the Web. The company says its product manages the entire sales cycle, "from contact to cash." Using the Web means it can provide upgrades more easily, save customers from investing in more servers, and underprice competitors.

"Underprice" is an understatement. Some reports say that Salesforce's CRM offering is available for as little as $65 a year per user, versus what can cost $18,000 per seat from other companies. It's so cheap, the software becomes akin to a utility, and some sales managers reportedly bypass their IT departments to purchase from Salesforce directly.

CEO Marc Benioff is a Silicon Valley phenomenon with a talent for securing media coverage, notably with a Business 2.0 magazine splash in October, where he said that "Microsoft is the present, but we have the potential to be the future." Benioff, now 38 years old, went to work for Oracle after college and became one of its all-time top sales executives. Benioff was a seed investor in CRM leader Siebel -- whose founder Tom Siebel also worked for Oracle's Larry Ellison -- and sold his $50,000 stake for $25 million in 1999 to found Salesforce.

But in this world of top-flight competitors, CRM leader Siebel isn't sitting still. It bought Salesforce competitor Upshot in November, and is partnering with IBM (NYSE:IBM) to offer CRM on demand. (How strong is Siebel? Find out on our discussion board.)

Salesforce turned profitable in the nine months through Sept. 30, mostly due to a credit from a lease release. It faces not only competition from Siebel and others, but at least three other challenges: 1) whether customers' security concerns can accept renting rather software than buying, 2) whether products can easily be integrated with other customer software, and 3) whether the company can grow enough with its current products and expand into other areas.

A puppy nipping at the big guns' heels or a Rule Breaker? If the IPO happens in 2004, and you are interested in this company, read the company's S-3 registration statement with the Securities and Exchange Commission, available through, and know that it's always tough for an upstart to overthrow the established order.

Get great stock ideas for the year ahead in our Stocks 2004,available now!