Over the years, I have had many terrific opportunities to interview Marc Benioff of Salesforce.com, and write about both him and the company he leads. So it’s funny (though not unusual in these days of 24-7 digital media) that I had never met him in person. This fact surprised not only me, but many individuals at Salesforce.com. To remedy this situation, I decided to drop in on a recent event Salesforce.com held in Manhattan. After all, it was only a one-hour train ride that stood between me and this man, the founder of Salesforce.com.
I give a lot of credit to Marc. He successfully proved to the industry (and world, for that matter) that you can launch a company selling hosted applications and make money by doing it. He even demonstrated that you can have a successful IPO in a tech-unfriendly environment.
Of course, Benioff didn’t invent hosted applications, but CRM software was something that was purchased exclusively as a premise-based solution up until Salesforce.com was launched. Before Salesforce.com showed the marketplace otherwise, many people believed that it was too unwieldy a process to host these types of solutions.
When the company became successful, competitors hypothesized that the company would win only the smallest of customers. Benioff proved the industry wrong once again by attracting and keeping large accounts such as New York-based global financial institutions.
So it was fitting that the company chose New York as its venue for the conference that kicked off at lunch and was held at the ultra-exclusive Mandarin Oriental hotel.
The conference began with Marc taking the stage and showing a slide of the world of software companies. There are thousands of software companies, he said, but only 40 have revenue at or greater than half a billion dollars. Salesforce.com has joined this elite group, and as a mark of his continued enthusiasm for the company he leads, he vowed to take the company to one billion dollars in sales.
From that point, Marc went on to say that the company has nearly 25,000 paid customers. He reminded us about the Web site http://trust.salesforce.com, which details API calls and pages viewed from Salesforce.com’s hosted system. API, as you may know, stands for “application programming interface.” An API call describes the process of another piece of software communicating with Salesforce.com’s information store. Forty-five percent of the transactions are API calls, meaning that, according to Marc, the company’s hosted application is becoming a more integral part of other companies’ software infrastructures.
To give you an indication of how much activity Salesforce.com customers generate, on August 29, 2006, nearly 52 million transactions took place, with an average speed of a quarter second per transaction. Marc was proud to tell us that there were three billion transactions in the second quarter of this year alone.
In addition, Marc touched on Salesforce.com’s customer base, which he described as split evenly between small, medium and large businesses. He made a point to say that the company is enjoying much success in the media industry, and highlighted a few customers in the room that were certainly household names.
Perhaps the most important point Marc made in his presentation was that the future of software, as he sees it, is in multitenancy. He took a shot at
Microsoft (News - Alert)
by saying the company thinks this model is wrong. Multitenancy means allowing users to share the same physical instance of an application; the instances of these applications occupy virtual partitions rather than physical stacks of hardware and software. In general, the hosted model relies on multitenancy to function properly.
To back up his case, Marc used examples of multitenancy we are more familiar with, such as the
eBay (News - Alert)
and Yahoo! models. Yahoo! Mail, for example, demonstrates how extensible and flexible this concept is, as there are millions and millions of Yahoo! Mail users.
From there, he went on a financial tangent, explaining how software companies today rely on upgrade cycles so they can accurately determine their revenue streams. He used Microsoft’s Vista as an example, as that software has been delayed, which causes trouble for analysts. Without a firm idea of when the software will be released, analysts cannot accurately predict quarterly earnings. In comparison, said Marc, Yahoo! and eBay do not have upgrade revenue cycles.
The discussion then headed into the wide world of hosted alternatives. For example, he mentioned that both
Google (News - Alert)
and Yahoo! will host e-mail for your company, and even let you keep your domain name.
Another example he provided was Google’s new spreadsheet, a Web 2.0 AJAX-based application that provides much of Excel’s feature set for free. Benioff made a point of saying that with traditional spreadsheet software, there can be conflict and contention as multiple people share the same spreadsheet. With Google’s hosted spreadsheet, these problems evaporate.
Having proven the case for multitenancy, Marc went on to talk about AppExchange, Salesforce.com’s open system that allows developers to create applications that immediately take advantage of Salesforce.com’s multitenant infrastructure and hardware/software. According to Marc, the growth of the AppExchange partner base is beyond what he envisioned; nine AppExchange partners recently received 100 million dollars in funding.
If this isn’t enough incentive to become an AppExchange partner, consider the following: Salesforce.com recently purchased Kieden Corporation, a company that has integrated Google AdWord technology into Salesforce.com. This allows a company to manage a campaign and be able to tell how many customers purchased products or services based on given ad campaigns. They can even drill down by keyword to see how many people purchased due to a particular ad or keyword. This service is called Salesforce for Google AdWords, and the cost is $300 per customer per month.
If you have heard any of my numerous keynotes around North America or read my columns on a regular basis, you’ll know that I am a fan of Web 2.0 and mashups. I am waiting for more interesting applications to come along so a typical business can use Web 2.0 to do some truly innovative things. Salesforce for Google AdWords is the first application that takes advantage of Web 2.0 to allow for accurate tracking of customers from Google’s AdWords. This is big news, and I think we may look back on this announcement as one of the pivotal moments of software history — when applications and data started to become more integrated.
But I can’t end there, as Marc is one of the more colorful figures in our market space, and his comments are seldom what you would expect from the CEO of such a large public company.
Knowing this, I approached Marc right after the session. Without skipping a beat, Marc looked at me and informed me that he visits TMCnet all the time, and regularly uses it as a resource. He provided me with some positive feedback: he told me he was not a fan of the way we display one of our ads, and gave me advice on how to improve what we do. It’s gratifying to know that Marc is a fan of TMCnet but just as important, his comments showed me that he really speaks his mind, which is very refreshing. In fact, we are investigating ways of improving our ad displaying mechanisms. Who knows — if we do a good job, maybe Salesforce.com will buy some :-).
Further in the course of our conversation, I presented Marc with a question I hoped would ultimately provide me with a unique quote. I asked him what he would do if he was the head of one of the software companies he competes with, such as Microsoft. Without a pause, he said that the Microsoft innovation engine is broken and the company needs to rewrite Excel, Word and Outlook. He went on to say that Microsoft needs to wake up and smell the coffee. As always, interactions with Marc, whether by e-mail or in person, are rather refreshing.
The impression I took away from our conversation is that Salesforce.com seems more energized than ever, and appears to be poised for more rapid growth. Most of their competition comes from much larger companies that do not embody the entrepreneurial spirit of Salesforce.com. This is a major advantage, and I predict that the company will see good times ahead if they can keep their systems running as they scale. CIS
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