Services & Software

Benioff takes stock of software shifts

The CEO weighs in on cloud computing, an uneasy economy, and why Microsoft is still a dinosaur.

For years, Marc Benioff appeared in public wearing an "End of Software" button on his lapel--just to rankle Bill Gates, Larry Ellison, or any other software mugwump making a killing on selling packaged applications.

Nowadays, the peripatetic entrepreneur might just as well swap the old buttons out with a replacement bearing a new slogan: "Told you so."

His company,, which posted record fourth-quarter revenue, raised its outlook for its next fiscal year to between $1.03 billion and $1.035 billion. The company, which has become closely identified with the move toward software as a service, has registered 85 percent annualized sales growth over the last five years.

But now has company. Among other new rivals, the company will butt heads increasingly with Microsoft, which has committed itself to offering more software services via the Internet.

CNET caught up with Benioff to talk about the future of software services as well as his plans to re-create as more of a computing platform.

Q: In 2005 you said that Microsoft was a dinosaur facing the obsolescence of a technology and a business model. Fast-forward to 2008 and Microsoft just had a big event in Las Vegas, where Chief Software Architect Ray Ozzie got up onstage and articulated a vision that had a lot of similarities to what you're talking about vis a vis platform as a service, such as its SQL Server data services. So, has your opinion changed?
Benioff: No. If we had waited for Microsoft to create any of those, nothing would be created yet. Look at the whole software service phenomenon. Where are they?

I think Microsoft is still a dinosaur.

But what I'm asking today is whether you have changed your opinion. Do you think that Microsoft is still a dinosaur?
Benioff: I think Microsoft is still a dinosaur. More than ever, it tries to hold onto its monopolistic position around technology that they hold, whether it's SQL Server, whether it's NT, whether it's Windows, whether it's Office--these are their cash cows they don't want slaughtered.

But are those cash cows monopolies?
Benioff: Well, I think one was ruled a monopoly.

Right, but we're talking about SQL Server. We're talking about their software-as-a-service strategy, and so on. Can we consider those monopolistic?
Benioff: Well, not in the same way, of course. But the point is that they're trying to hold onto their past more than trying to create their future. This has been the great failing of Microsoft over the last 10 years. I haven't seen the level of innovation from them that we see from other vendors.

As the concept of the platform as a service becomes more of a reality over the next decade, do you think that Microsoft has an opportunity to be one of the big platforms?
Benioff: The evidence is that history, more or less, will repeat itself because there is no acknowledgement to some of the core tenants of this new paradigm. I think only in the cases where they will be dragged, kicking and screaming, and I think the best example probably is Gmail.

Google is doing really well with Gmail. I think that's why now you will see Microsoft have to respond with a multi-tenant e-mail solution. They have Hotmail, but not Hotmail for business per se. They're definitely going to have to do that.

With Ozzie taking over as chief software architect, Microsoft is talking more about how to take the plunge in software services. So where do you see the chief obstacle preventing them from turning this into a success? They've got all the developers in the world.
Benioff: I am not the CEO of Microsoft so I don't really know. You'd have to ask them why they haven't delivered on the vision. We're not unique in saying that it's the end of software. That's our phrase, but Microsoft has not delivered on the promise. They haven't used their power to innovate in the way that others have.

Do you say the same thing about SAP and Oracle as well?
Benioff: When I left Oracle nine years ago, Oracle's revenue was $10 billion a year. Today it's $20 billion a year. Where Oracle has innovated is in the business model. You've seen substantial growth and a substantial return to Oracle shareholders through that change. With SAP, you really have not seen innovation in the last 10 years. If you think about what is the one thing that SAP has ever innovated, what have they created that's unique to the industry or value-added technology? I have a hard time thinking about what SAP is going to be known for at the end of the day.

The application service provider model was popular in the '90s but got hurt when capital dried up and the economy went south. Do you see parallels with what's going on nowadays?
Benioff: I think it was because of the code. They were trying to repurpose other people's code and they were just trying to move your data center into their data center, but it was still the same old code.

These days, people go home and they're having a really great experience on the Internet. They're already using Web 2.0, with all these great applications and they're blogging and collaborating with their friends. But then they get to work and they don't have that same quality of application.

You're looking at applications that have been around for 10 or 20 years, and I think there's frustration. The industry has really delivered on the dream of the Internet, but when you get down to the CIO level, the CIO is struggling to match that experience inside the enterprise and out.

You've shifted from software as a service to platform as a service. How do you think you're doing in terms of colonizing the Web with your platform as a service in terms of getting companies to just shift over to this new model--where it's, you come to us and we do everything for you?
Benioff: It's taken about a decade of Salesforce to kind of get the software service movement to really happen. We will be 10 years old on March 8 of next year. People overestimate what you can do in a year and they underestimate what you can do in a decade, unless you're (Apple CEO) Steve Jobs.

I think that it's going to take a decade to make platform as a service happen because it's the re-creation of all the ISVs (independent software vendors), the technology also, the ecosystem, the implementation, and so forth.

And just in the same way that we don't want to be the only ones doing software as a service, we certainly don't want to be the only ones doing platform as a service. We want to be able to clearly show that this is the future of the industry, too.

How are you defining "platform" in this context?
Benioff: Platforms are things that an ecosystem can evolve around. We've seen that in our industry multiple times.

But platforms as a service?
Benioff: It is a really a new concept. Certainly, eBay is a platform as a service in many ways because there is an ecosystem that is evolving around it. But I think we mean something more along the lines of .Net as a service or the traditional application servers delivered as a service. In the same way that before you had to buy an operating system and database and an application server, you will be able to get that all delivered to you, as a multi-tenant shared service. This is a tremendous revelation for the IT department because to build new apps, you don't want to have to invest a risk that's traditionally associated with the software industry.

Does this mean that you're done with the "End of the Software" slogan that you started with nine years ago?
Benioff: No, I think that this amplifies it. It's now also really the end of software as regards to software development platforms. I think that is really key. The other really exciting thing is that it's not going to be established players--the Microsofts and the IBMs and the Oracles--who are going to bring this. It's not going to come from those who have been the traditional platform vendors the last two or three decades. A wave of new companies is going to create new value in our industry.

A wave of new companies is going to create new value in our industry.

When will bring online productivity software applications that we're seeing from Google or Zoho or other companies?
Benioff: Those are not technologies that we want to create. We have our hands full in terms of doing our core areas.

So do you see as being a platform not just for business applications but for consumer applications? So, for example, the next Facebook could be developed upon the Salesforce platform?
Benioff: It's possible and, of course, we would encourage it, but today our platform is mostly designed for the requirements of enterprises. That includes the scalability, reliability, availability, redundancy.

But consumers need that as well. They don't want their mail systems or their Facebook going down.
Benioff: Right, but they tolerate it more than enterprises do. We're more architected for applications where there is a cost from the customer and they're paying for a level of reliability. I am not saying that that cannot happen, but at the end of the day we haven't seen the next Facebook being built on Salesforce.

What about the brand name. Do you plan to keep
Benioff: It's something that we constantly review. We have invested a tremendous amount; it has a lot of brand equity.

What are your thoughts on a slowdown or recession and what it means for the tech business?
Benioff: We haven't really had any technology companies report numbers or make statements that this was affecting them. Maybe we will see it at some point, but I don't know. You get where you read about it and you see it on CNN and, of course, the stock market has a 200-point bear selloff. I think that's why it's on everybody's mind. But so far, tech companies haven't reported that it's an issue.

Does this kind of economic climate, where there's lots of uncertainty, make it easier or tougher for someone selling software as a service?
Benioff: The power of software as a service is that it's less risk than software, no matter what. That's because the traditional software model has you buy the software and then you attempt to implement it. The risk is all yours. You're kind of paying up front. With software as a service, you pay as you go so the risk is mitigated over time. If it's not right for you for whatever reason, you're not as far into it as the old model. The old model was you bought everything--the software, the hardware, the implementation--and then you had to make the determination: Is this the right product for me?

Does the sales pitch change a lot because of what's going on in the economy?
Benioff: I don't think it does today, but maybe over time it does. I don't think we're far enough in this. Technically, at least, we're not yet in a recession.

That's what they keep saying...
Benioff: But it's a bear stock market.