SaaS

Marc Benioff: Innovation, Not Infrastructure

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Taking the stage at Software 2007, Salesforce.com CEO Marc Benioff did not disappoint the standing-room only crowd of 2,000 software executive attendees.

By the end of his keynote address, the audience laughed nervously as Benioff equated Oracle to a “one night stand,” said software companies were protecting their “cash cows” and called on entrepreneurs to rise up and take on SAP, Microsoft and Oracle.

In sharing stories of the origin of the Salesforce.com products, platform and community, Benioff provided insight on how innovation played a key role in the development of his company, and how other software startups can leverage that success.

Building the Amazon.com of Enterprise Software

Salesforce set out to deliver the simplicity and ease-of-use of Amazon.com – and to revolutionize the industry in the process.

“Why is Salesforce here? We’re here as an agent of change in the industry. We really saw an opportunity in an industry that is dominated by providers who are working in a client-server model to do something new.

When I was at Oracle in 1988, IBM was the largest technology company and DEC was the second largest. I don’t think IBM is the largest anymore and I don’t think DEC even exists anymore.

It is amazing how fast that can happen – in a period of just a few years. The transformation that [Oracle was] about then was moving the paradigm from mainframe to client-server. We saw the opportunity that PCs were going to make things cheaper and easier to use than the mainframe and that that would be a catalyst for change in the industry.

Then I was sitting in my office in 1996… I was using Amazon.com – a great application, very easy to use, robust. I was noticing that everyday they would have new features and functionality but I didn’t install it or have to upgrade it. As I used Amazon and went on to use eBay and so forth and I asked myself a very simple question: ‘Why can’t all enterprise software be exactly like Amazon.com?’ And literally, that is what we did.

In 1989, I quit my job at Oracle to make a company that looked like Google or eBay or Amazon – companies that I admired – and do it exactly like they did. “

“This will be my mission … to redefine the software industry really in two basic tenets.

First the concept of multi-tenancy… Just as an office building has multiple tenants and is a shared facility, eBay is multi-tenant. Google is multi-tenant. Yahoo is multi-tenant. Amazon.com is multi-tenant. Just about every Web site you use as a consumer is multi-tenant. You have your own user name and password but guess what? eBay has not set up a separate database and server for you. It is the most proven, most scalable, most reliable architecture in the world.

The second [tenet] was subscriptions – pay as you go. At Oracle, we used to have this business model, I think it was called “Get the Money and Run”or something like that. At the end of the quarter, we would work with the customer and give the discount and then we would be out of there.

But “Salesforce is like a marriage. Oracle was more like a one night stand. And the reality is that we live with our customers every day. It is a much more intimate relationship because we know what they’re doing, they know what we’re doing and we have to have some kind of give and take, push and pull to make it happen. And that is really important.

It turns out that these ideas – multitenancy and subscription service – are now the fastest growing segment of the software industry. Whether you talk to Gartner or McKinsey or IDC, or any major analyst, everyone recognizes that the innovation, the venture capital, the movement, the action, is all in the software service industry. We have been very fortunate to have our wagon hitched to the right star, and off we’ve gone at Salesforce.”

Growing to Serve Large Customers

Innovation has helped Salesforce to grow its revenue and customer base from one that serves small and mid-sized businesses to one that serves even the largest enterprises.

“Our revenues have been very strong – I’m sure you’ve seen our chart climb up, and seen me doing different presentations over the years. We had a very strong fourth quarter and subscriber numbers have also shown strong growth…

These results have culminated in many customers coming to Saleforce.com, not just where from the markets where we started – small and medium customers. Some of the largest customers in the world now use Salesforce.com as their CRM standard.

You know, Merrill Lynch, Cisco… Many of these companies were standardized before on Siebel or Oracle… It shouldn’t be any coincidence that Cisco and Dell, two of Oracle’s largest customers are now standardized on [Salesforce]… Some of the largest implementations in the world are now on-demand as well.

In fact I just got back from Japan last week where I announced that the Japan Post, one of Japan’s largest organizations – 400,000 employees, 25,000 locations – now has the largest on-demand implementation in Japan. They’re starting out with 5,000 Salesforce subscribers and we see tremendous opportunities within Japan Post.

It is very exciting to see on-demand grow and do so on a global basis. Salesforce has really been blessed by receiving broad industry recognition for this innovation – as being the catalyst for change in the software industry, by being one of the leaders…

Innovation is really at the heart of our soul. We want to move the industry forward. We do not want to see the stagnation that so many of the large companies have placed on the industry to preserve their ‘cash cows’ or their monopolies.”

The Three Pillars of Salesforce.com

Benioff says the power of Salesforce.com comes from its three pillars: products, platform and community.

“Salesforce.com success is built on three pillars. Many of you know us for our applications, easy-to-use…low cost applications, whether it is Salesforce automation, marketing automation, alliance management, content management, or customers creating custom applications. This is what Salesforce has traditionally been known for over the past eight years…

We’re moving into a new area – the platform. More and more we see this as a tremendous opportunity with our AppExchange and Apex. We see this as the second pillar of Salesforce. More and more, our customers and ISVs as partners see us as providing some very unique technology there.

Finally [the third pillar is] our community. All the Salesforce users, the partners, the ISVs and everything they do online, our conferences, our events, these are the three pillars of Salesforce.”

The Birth of the Platform

Delivering software as a service requires a tremendous infrastructure. Benioff describes the genesis behind offering the Salesforce platform to other ISVs.

“It’s an interesting story. Back in 1999, we had an idea to deliver CRM as a service – I’m sure many of you have heard the story…

I had a vision for a contact manager and built a little prototype. But to get the prototype to work it is going to take a lot of effort… Looks like Amazon, it is easy to use but I have to get these infrastructure services down: the network, the storage, the operating system, the database server, the application server, the Web server, the datacenter, disaster recovery…

Then there are the application services – the security, the sharing models, the integration, the APIs, the multi-language capabilities, the multi currency capabilities, the workflow engine, the analytics, the multi-device capability -getting it right on the Blackberry, the mobile phones – and messaging and search.

Then I have to worry about operation services – authentication, availability, monitoring, upgrades, network backup center…

And then finally, I have to do the business services – the ordering, the provisioning, the licensing, the renewal, the upgrades, the marketing and then I have to sell it.

I have to do all this [infrastructure work] to build my little contact manager on demand. It is kind of amazing what you have to do to build an on-demand application. Kind of unbelievable – and kind of ridiculous – but because we were the first ones out there, we had to do it.

So when we look at that IT infrastructure and operation services and application services and business services, and the platform infrastructure that it represents, and we look at our application, we were like, ‘Maybe there is another business plan here…’

Let’s break the platform off from the applications and offer the platform separate from the apps so that entrepreneurs can be empowered to compete against all these big enterprise software companies that are trying to do everything which is something I just do not believe in.

Let’s empower the entrepreneur, let’s empower the software industry to make it happen. And that’s very much what we have today: the Salesforce platform. We’ve put about $100 million in the platform so far. It is built on two completely mirrored data centers on opposite sides of the country… It handles 80 million transactions per day and 646,000 users using it.

You’ve got these ideas to do software as a service but you don’t know how to get to the customers because you have this infrastructure barrier.

The infrastructure required is so deep and so heavy that we want to take that barrier away. We want you to create and run your applications on our platform – whether you are a Salesforce customer or whether you’re an ISV – we want you to build your applications on our platform because we want you to inherit all the capabilities that we’ve spent the past eight years building.

A lot of people are doing just that.

Customers have already written more than 100,000 custom applications that are in our database… and we have 575 commercial applications available on our platform in our AppExchange.

We now have a multi-tenant virtual machine that is currently in beta that all of our users can access that runs Apex code. You can write code that runs on our servers – not just configurations and graphics and tabs, you can actually write custom code that tells us what to do. We’re the only ones who have a multi-tenant virtual machine. “

Six Steps to Develop an On-Demand App

Benioff says Salesforce aims to empower entrepreneurs at every stage of the product development process.

“We want you to be successful. We want you to fight, just like we are, against SAP and Microsoft and Oracle who are all out there in all niches and all categories and all verticals. That’s not our strategy. We’re focused just on CRM area and the platform. We want you to use this platform to go out and pick your niche, pick your geography, pick your platform, pick your application and go…

There are six steps to making this happen…

Number 1 is the Idea Exchange…. If you’re a Salesforce.com customer and you’re mad at us…Or you have an idea for something that we should do. We have a Web site that you can go to and you can post it: ideas.salesforce.com.

You’ll see thousands of ideas from our customers from all over the world. We also built one for Dell – Ideastorm… The idea is for us to communicate with our customers, grab their ideas and let them communicate with one another to refine them…

There are so many good ideas here that we will never get to all of them. So we encourage [others] to build those ideas and make it happen. We are working with Appirio who found an idea on the Idea Exchange and launched a product.

Now how can I build it? We have a platform… Step 2 is free access to our platform. And we’re the only ones with an on-demand platform like this…

We think that as these developers start to develop for this platform, they will need to work together in the community [(Step 3).] We built a whole developer network site that lets developers do this inside our own systems. Over 37,500 developers on there today…

There are almost 50 companies who have set up shop in our AppExchange headquarters. This is an incubator [(Step 4)]. They pay $20,000 per year per cubicle. They are in our facility building their apps and we are helping them – how to architect… how to do sales and marketing.

But you don’t have to physically come to the incubator to be part of the community… We built a way for developers – whether in our incubator or in Hong Kong – to easily distribute their applications all over the world. That’s what is going on with AppExchange [(Step5)]. AppExchange now has over 500 apps and we’re adding 50-60 apps per month… Our Salesforce customers have one-click implementation to add the apps to our system.

Now that you have your apps, you want to sell them. We’ll help you. We want to sell your apps because it is in our interest. We want a percentage of what you sell and if you want to sign up for our AppStore program [(Step 6)].

Becoming a Better Corporate Citizen

Benioff called on other software companies to improve their philanthropic ways by adopting the Salesforce.com model for corporate charity.

“While we’ve been recognized for our innovation, we have also been recognized for our philanthropic model…When we started the company, we took 1 percent of our equity and put it in a 501c3 public charity…

We’ve done 50,000 hours of community service through this… 501c3 non-profits use Salesforce and all its services for free… and we’ve already given away $10 million in grants – pretty amazing for a company the size of Salesforce.com.

But even more amazing is that because 1 percent of our equity was in the foundation, our foundation is now worth about $50 million.

The software industry has really been a laggard when it comes to strategic corporate philanthropy. We really think that this model is a model that many software companies can adopt and become a leader in this area… This is one of the most rewarding and most exciting parts of our business.

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