My Foolish rival Tom Taulli does a great job of pointing out the beauty of's (NYSE:CRM) business model. Unfortunately, that tempting model has also spurred more profitable players with on-demand business software aspirations to dive into the market.

For example, Oracle launched a new version of its on-demand product in April, to initial stellar returns; that segment's sales grew 74% at Oracle this past quarter. But Oracle also mentioned ADP (NYSE:ADP), a Salesforce customer, as a "key win" to the platform during last week's conference call. ADP is big enough to share the wealth, since Web-based software is cheap enough for major corporations to cherry pick across all of the providers. Then again, that's yet another problem for Salesforce, given the industry's low hurdles in pricing and learning curves.

Tom also reflects back on Oracle's $5.8 billion buyout of Siebel. I see where he's going with that tempting visual. already commands a lofty $5 billion market cap, so why can't Oracle shell out another $5.8 billion to snap up the on-demand upstart? Well, Siebel's revenues were twice those brought in by Salesforce these days. Siebel also commanded 3.4 million CRM customers, a far broader base than Salesforce's. Oh, yeah -- Siebel was consistently profitable, too.

So I'm not budging. Anyone who thinks that Oracle's presence vindicates the niche needs to revisit what happened to Linux-enabler Red Hat (NYSE:RHT), another subscription-based company now feeling the pinch as software giants crash its party.

Tom brings up's AppExchange. It's a cool program, but that's old hat in cyberspace, where dot-com heavies like (NASDAQ:AMZN), Google (NASDAQ:GOOG), and even Facebook are opening their doors wide for third-party developer enhancements.

I don't think Salesforce is going to zero, but its current valuation is quite simply out of whack. Tom leans on an IDC study that shows the on-demand market growing at a 30% annualized clip over the next few years. Since the market share is Salesforce's to lose, you can bet on even more slowdowns in growth in the future.

Even Tom seems to see the narrowing alley, suggesting that the company needs to "expand into other software categories" to "keep revving the growth." If that doesn't raise red flags, then you probably deserve what you get if you buy into Salesforce at these high prices.

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Longtime Fool contributor Rick Munarriz wonders whether being an ex-Oracle exec is the key to launching a popular software upstart. He does not own shares in any of the companies in this story. The Fool has a disclosure policy.