The Wall Street Journal-20080122-Business Technology- An Early Adopter-s New Idea- Salesforce-com Sees Future Built on -Platforms-
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Business Technology: An Early Adopter's New Idea; Salesforce.com Sees Future Built on 'Platforms'
In the past few years, the idea of using the Web for tasks that were once accomplished with software on computers has gone mainstream.
Among the early proponents of that shift for businesses: Salesforce.com Inc., the maker of a popular online service that helps salespeople keep track of customers. Salesforce and providers of other "software as a service" applications, work by storing customers' information on their own computers and letting customers access it by logging on to a Web site -- a break from the approach of installing software on their own computers and storing the data themselves.
Now Marc Benioff, chief executive officer of Salesforce, is trying to sell chief information officers on what he says he thinks will drive the next phase for Internet services -- a Web-based "platform" called Force.com that lets other companies and CIOs build their own online services using Salesforce.com's technology. A "platform" describes technology that takes care of basic computing tasks and sits underneath other software programs.
For businesses, such a platform may make it easier to build online services for tasks such as manufacturing processes and tracking retail orders. The platform would let techies develop and distribute their services using the platform provider's resources, such as its data center and security technology, as opposed to their own. That may mean an expansion of available online services, including applications that CIOs could cobble together themselves. Force.com made its debut in September.
Salesforce.com began its platform push, under a different name, two years ago but has had only modest traction so far among CIOs. The San Francisco company hasn't broken out the amount of revenue that comes from its platform, but the vast bulk of its revenue is thought to still come from its core customer relationship management products.
In a recent interview, Mr. Benioff, 43 years old, discussed the rise of online services for businesses, his company's revamped platform and the potential impact of an economic slowdown on CIO spending. Excerpts:
WSJ: Two other high-profile software-as-a-service companies, NetSuite and SuccessFactors, have gone public in recent months. Your motto is "no software." Will companies really eventually use the Internet to replace all of the software they once installed on PCs?
Mr. Benioff: That was the first thing we said: "This is the end of software." Today, if you go to Sand Hill Road, [venture capitalists] aren't investing in software companies anymore.
WSJ: What's an Internet platform?
Mr. Benioff: Think of it as an Internet operating system. Instead of Windows on a PC, Force.com is an operating system that runs on the Internet.
In layman's terms, it means any [software] developer in the world can distribute, develop and make money by using Force.com. At the end of the day, no one -- not the customer or developer -- had to do anything but have Internet access. You don't have to buy a database, a data center, you don't have to worry about all the security yourself.
We've become, in many ways, the virtual CIO. This is going to be a growing trend, because of the Internet.
WSJ: What are the hurdles to getting customers to sign on to the idea of the Salesforce.com as a platform?
Mr. Benioff: You have to be persistent and patient. You have to really focus on it over a long period of time, and that's really our greatest challenge.
When we started, we were the only software-as-a-service company out there. Now, you can think of 20 companies. That's our dream: I don't want to be the only one saying, [software as a service], because then, it's not really an industry.
So our first 10 years were all about making [software as a service] mainstream. I think our second 10 years will be all about making the platform-as-a-service mainstream -- and I do think it will take that long.
WSJ: What's the impact of Microsoft, SAP and Oracle getting more aggressive in software as a service?
Mr. Benioff: It's a fantastic for us, because it validates the market. They used to say, "Big companies will never use software as a service." Now, they're doing an about-face and saying, "This is the most important thing." And we love that, because big CIOs -- people who are really conservative -- wait until the industry leaders say this is happening.
The big software companies, like Microsoft, Oracle and SAP really need to step back and ask what's really going on in the industry. They're not winning new deals. They're just buying old companies. We're trying to figure out where the future is.
WSJ: But they're very profitable. On a recent Oracle earnings call, Oracle CEO Larry Ellison said Salesforce.com "[doesn't] make any money." (In its fiscal year ended Jan. 31, 2007, Salesforce.com had revenue of $497 million and net income of $481,000.) How can you become more profitable?
Mr. Benioff: We've made huge investments in this company -- data centers, infrastructure, technology and also stock options which weigh on our profitability. It really has to be about growth. We remain in a market-share war. What's more important? More profitability or winning Citibank [as a customer]? Investors have made their decision. We're continuing to invest, and we're continuing to work to grow our company and increase market share, but we're also continuing to grow profitability.
WSJ: What's been the impact of the subprime crisis and a potential recession on technology companies? How has it affected the way people are spending?
Mr. Benioff: In the past, we've been able to see big economic downturns before they happen. Certainly, over a year ago, we had mortgage companies calling us and laying off their sales forces.
If this were a recession, we would see customers cutting back their sales forces. But we're not. When I see some big company call us and say, "We had 3,000 salespeople and now we have 2,500" -- and maybe it will happen -- I'll say, "Maybe that's a recession." But I don't see that type of behavior today among our customers.
I think we have to be careful about not getting hypnotized into thinking there will be a recession.
WSJ: How might end users be using technology in the office five or 10 years down the line?
Mr. Benioff: I think the big news is that there will be no office. The office is becoming more virtual every day, and the technology that's making that happen is the huge wave of mobility -- all these new mobile devices that are emerging -- mobile laptops, mobile phones, on and on and on. We're going to see video able to come more rapidly. I have [a video-conferencing system] here, and it's on my laptop, too. Wherever I am, I can have a video or audio conference, I can collaborate, I can share information. This focus on collaboration and sharing, whether it's using video or text, is where we're all moving to. And it's all going to be done via the network. Customers are going to be able to just subscribe to this stuff and get it anywhere.
