Benioff’s coup
Last week Salesforce.com marked its tenth year in business. To celebrate, the company held a conference call to discuss its earnings and CEO Marc Benioff, brought presents for his investors.
The big announcement was that Salesforce had succeeded at generating just over one billion dollars in revenue for its fiscal year—the first time in history that any on-demand company posted numbers like that. Moreover, Salesforce reported that it gained 3,600 net new customers in the last quarter. It’s hard to say from that data whether companies in these economically distressed times are opting for on-demand or if this simply represents normal growth.
Other companies like Oracle and Siebel reached the billion-dollar milestone sooner in their corporate lives but I think that perspective compares apples and papaya. Software companies that reach the billion-dollar plateau have always done so on the basis of products on sale for considerable sums—often hundreds of thousands to millions of bucks. Reaching a billion dollars based on charging by the seat every month is an entirely different matter.
So a billion dollars worth of trickle-in revenue is even more impressive and it says a great deal about the acceptance of the business model as well as the technology. If Salesforce had a different pricing model, I think they would have gotten to this level a long time ago.
Critics might say that most of the seats represented by this revenue is SFA based but that can be said about almost any full suite CRM provider. There are many more sales people than marketing people in a typical organization hence more SFA seats to buy. Very large companies often have massive call centers too. No matter, Salesforce is selling in all CRM verticals and they are increasingly selling generic seats to companies that simply want to write their own on-demand applications.
It’s worth noting that there were other on-demand SFA solutions on the market when Salesforce.com got started ten years ago with names like UpShot and Salesnet. Each company had the same basic idea and each was dedicated to the multi-tenant model. But neither of those other companies is a freestanding entity today. Siebel bought UpShot and integrated it into Siebel’s on-demand offering. Then Oracle bought Siebel and Oracle CRM On-Demand traces its lineage through that line of inheritance. RightNow bought Salesnet then decided to stick to its service and support knitting.
I think a great deal of credit has to go to the CEO for Salesforce’s success. I knew the chiefs of UpShot and Salesnet at the time. Both are good people, good businessmen and each wanted to succeed. But, in my opinion, neither one really understood the disruptive innovation that on-demand computing presented. Or possibly the potential was more concept than reality and it took Marc Benioff to press the issue.
At the end of the day you could argue that it was Benioff’s vision that made the market. Without Benioff it is possible that on-demand computing would have remained a backwater, a cute idea for supporting salespeople the same way that social networking has pretty much remained a nice consumer idea.
It is interesting to note that the rise of social networking as a business tool closely correlates with the ability to form mashups with other on-demand products, notably Salesforce.com. And Benioff is behind some of it. He shared the stage with a Facebook executive late last year to announce the integration of their products and to promise that integrations with other social media were not far off.
Benioff’s vision of on-demand computing is older than Salesforce.com. As an executive at Oracle he championed the on-demand idea along with Evan Goldberg , a founder of NetSuite. Timing is everything and though the idea was mature enough when he was at Oracle, Benioff had to wait for a few technologies, like the Internet, to catch up.
As on-demand computing enters its second decade it’s worth taking a moment to consider where the original invention will take us next. Social networking, hand held devices and a vastly improved wireless Internet will no doubt contribute to driving computing deeper into our lives. But the style of computing will be far different from what we see today. It will be ubiquitous for sure, but it will also be personal to an unprecedented degree and I think it will owe a lot to on-demand, platform-based applications mashed up with social networking and who knows what else.
Discussion
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Yeah, I think the world of software may be about to go through some sort of big tectonic THUMP. It could have to do with a whole lot of air being let out of one bag or another as our economy adjusts. Question is, who’s got substance in their balloon and who’s soft and vulnerable? Couple of examples:
Information Week’s Bob Evans wrote a contrarian piece today wondering whether his readers (CIOs) are willing to enlist in Benioff’s “war.” Great remark: “He’s built a $1 billion-plus applications company during a time when echo-chamber experts were jadedly proclaiming, “There will be no more billion-dollar software companies.” In so doing, he not only exposed some of the chattering classes as the clueless twits they truly are but also reinforced the idea that innovation isn’t limited in time or place, and that great ideas brilliantly executed always will find a market.”
On a different front, but just as tectonic, yesterday Ad Age ran a piece Twitter: We Can Do What Google Can’t, about how Twitter search can dish up info that’s so new Google hasn’t even seen it yet. This is the first thing I’ve ever seen that could give Google any heartburn.
Sound impossible? Well, also yesterday somebody created a Greasemonkey mashup for Firefox, so now Firefox users can get Twitter results on the same Google screen as Google’s own results. It’s astounding: not only do you get everything Google thinks is tops about something, you get the latest buzz about it. (Try it; it’s surprising what a difference it makes. http://ow.ly/Asz)
Is Google noticing? I dunno, but the high tech Twittersphere is buzzing today with this, as expressed by no less than @TimOReilly himself: “Wow, the way Eric Schmidt is talking down twitter, Google must really see it as a threat. http://tinyurl.com/azasr5”
I don’t know where it’ll end up but I agree with you, some real, lasting coups may not be out of the question.