Q&A: 10 questions with Salesforce's Marc Benioff
A decade after starting his company, Benioff has defied skeptics and shown his software-as-a-service business model can work. He's not afraid to admit a little unorthodox marketing helps, too.
Ten years ago, Marc Benioff's new venture, Salesforce.com, was greeted with skepticism by the software cognoscenti--and enthusiasm by people who love a good party.
Salesforce was one of the first companies to embrace the notion that software could be delivered as a service over the Internet, rather than as something that's stored on a PC or on a server in the data center. (For more on Salesforce past and future, read these pieces from CNET's Charles Cooper and ZDNet's Larry Dignan.) When it was launched, Salesforce looked like a long shot: The dot-com boom was slowing and software giants like Oracle, Siebel Systems, and SAP looked like they could squash the young San Francisco company before it got its start.
Spin forward 10 years: We now call what Salesforce does "cloud computing." Siebel, along with a list of other billion-dollar software outfits like PeopleSoft and BEA Systems, is now part of Oracle. Salesforce not only survived its early years, it has topped $1 billion in annual revenues, and become a textbook example of how a small company can outdo bigger competitors with a very good idea, unorthodox marketing, and, yes, a few good, buzz-generating parties. (And let's not forget all that Salesforce chocolate consumed by tech reporters over the last decade.)
Salesforce CEO Marc Benioff agreed to answer a list of questions sent to him via e-mail regarding the past and future of his company. The following is a condensed version of his answers:
CNET News: The coming-out party for Salesforce.com was a big shindig at a club on Van Ness Street in San Francisco, if I recall. I believe you hired the B-52s to play. At the time, the dot-com world was about to collapse, and you looked a little crazy. How important was it to you to make a splash?
Benioff: The launch was all about announcing the creation of a new vision, a new way of thinking about the software industry. We were making a dramatic, audacious break from the past, and we felt that our launch had to capture that. The fact that you remember it 10 years later is a pretty good indication that we made an impression.
Where did the idea for Salesforce come from? In 1999, providing software as a service was not all that easy from a distribution standpoint.
Benioff: In the late '90s, I was looking at all these Web "sites" (as we called them then) like eBay, Amazon.com and Google and I was amazed at their marriage of technical complexity and usability. They were actually rich, data-driven applications that were constantly getting better and better. But as a user, I didn't have to do anything. I never worried if I was on Amazon.com 5.13.2 or 5.13.3. I was always on the most current version, and I never had to crack a manual to tell me how to use it. And I loved using it. But none of my business applications performed this way. So I saw a huge opportunity. Salesforce.com was the start of that.
Marketing on the cheap through public relations and creating buzz was an early key to getting your company off the ground, wasn't it?
Benioff: In both good times and bad, people are always eager to hear about challenges to the status quo. And we have rarely seen a status quo that needed challenging like traditional legacy enterprise software. That hasn't changed--we're still gunning for the "End of Software," but now in the entire enterprise.
You brought attention to Salesforce through guerrilla marketing, such as hiring actors to stage mock protest rallies outside Siebel Systems conferences. In hindsight, any regrets about doing that?
Benioff: The reality is that the protests going on outside were nothing compared to what real users were saying on the inside. My only regret is that there are still customers using software that doesn't help them a bit.
Do you worry about someone doing the same to you?
Benioff: In our industry, lack of focus on the customer, complacency, and failure to innovate are the mortal sins. We work very hard to make sure that doesn't happen to us.
When you founded this company, you dallied with calling it an application service provider. Now...are you a cloud computing company, a software-as-a-service company? What's the latest term to apply to your company?
Benioff: Even though we are a challenger and a disruptor, we are also pragmatists in many ways when it comes to the terms that we use. You need to meet the market where it is, and yes, that changes over time. The ASP model is not the same as ours, so it made sense not to embrace the term. Today, I think the industry has gravitated towards "cloud computing" and I think that suits us.
You've reached $1 billion in revenue. Congratulations. But as you know, $1 billion in revenue is often where the growth of a software company stalls. How is Salesforce going to be any different?
Benioff: I believe that we have the right services for right now. We already have a killer sales force automation product, and our customer service and support service is experiencing great growth right now. Then there's the Force.com platform. For the first time you can build, test, deploy and run apps all in the cloud. Because Force.com allows companies to build new applications without buying hardware, software, or data center space, it's an increasingly appealing platform in these days when capital is scarce and credit is tight.
Customer turnover is always a concern among analysts regarding Salesforce. What are you doing to control it and has "churn rate" improved?
Benioff: Our attrition rate has been less than one percent of customers per month since we went public. It has been remarkably stable. I would stack up our attrition rate to just about any subscription-based business out there. We aren't changing our playbook here: we work to make our customers successful. Success is the biggest predictor of loyalty.
Who's the biggest competition for Salesforce right now? What about three to five years from now?
Benioff: SAP, Oracle and Microsoft are our biggest competition. The majority of software spending is still in client-server (computing architecture), and that's the share that we are fighting for every day...I still think SAP, Oracle and Microsoft will be major factors, and by then they may have credible offerings in this space. There may also be more cloud computing companies who have reached scale by that point.
Will you still be running Salesforce 10 years from now?
Benioff: I certainly admire technology executives like Michael Dell, John Chambers, and Larry Ellison, who have a long-term view of their companies and their industries. When I look back at the past 10 years, I think, "Wow, I can't believe what we have accomplished." And yet when I think about the new areas that we are targeting, like the Force.com platform and application development, I feel like we are just getting started. But I hope that you'll check in with me before our 20th anniversary.