A Force to be Reckoned with

They’ve gone from ankle-biter to head-turner as the rise of on-demand software just keeps on coming. And with AppExchange and a peach of a new programming language called Apex, Salesforce.com is proving it has the momentum and the tools to go head-to-head with the big guns. Business Management caught up with company President Jim Steele to talk about the company’s rampant growth, why the customer comes first and what it’s like to be causing waves at the biggest software companies in the world.

As President of Salesforce.com, Jim Steele cites customers as his number one responsibility. Overseeing global sales, he focuses on advancing the company’s winning software-as-a-service (SaaS) strategy, ensuring customer success and growing the customer base. According to him, his team “lives and breathes customers” – which involves feeding customer requirements back into their development organization and working with his counterparts on the services side to offer implementation and consulting services to help customers be successful.

Since Steele came on board nearly four and a half years ago, he’s witnessed Salesforce.com bloom from a pre-IPO newbie with a maverick vision to a bona fide force in the enterprise software industry.

“When I started, we were a little startup (pre-IPO) that was just a little disruptive force in the business. I called ourselves an ankle-biter at that point because none of the big guys really took us that seriously. But we started to nip away at their heels. Now we’re the factor standard for Sales Force Automation and with our recent announcement of AppExchange and Apex, the new on-demand programming language, we’ve kind of grown up into the enterprise space. After announcing a full-blown platform, our large customers and partners around the world in all different kinds of industries now look at us as a strategic partner versus kind of a pinpoint solution that we may have been a few years ago.”

Waking up the competitors

It all began with an idea that came to Marc Benioff, CEO of Saleforce.com, around the time he was using Amazon.com in the late 1990s. What if all software was as easy to use as Amazon and all these consumer web companies? If enterprise-class software could be as easy to use as consumer web-based tools, what would that mean in terms of adoption and usability?

Benioff’s vision, which prompted him to found the company, was based upon the realization that all the fuss about technology detracted and distracted the users from what they were really trying to accomplish. His idea centered around making all that transparent – in other words, masking the technology and its complexities from the users in order to enable them to focus on their business.

“Benioff decided to create salesforce automation (SFA) software and build it from the ground up as a web-based application, leveraging all the internet technology that the consumer web companies used but for businesses,” Steele says. “We’ve simply leveraged all the internet technologies like Ajax and wikis that have become kind of standard practice for the business Web 2.0 environment and created a company around it. We only do on-demand because that’s our religion and we believe this is the best way to deliver technology.”

Benioff’s vision has proved to be more than just a wild idea. Today Salesforce.com boasts approximately 27,100 customers and more than half a million subscribers. Attributed with pioneering the ‘end of software’ movement, Salesforce has brought credibility and force to the on-demand sector. And with clients like Cisco and Symantec, it’s clear that Salesforce.com isn’t just blowing its own trumpet.

“We’ve kind of been the evangelists and pioneers in the on-demand or SaaS space. Five years ago many companies thought we were stuck in the small and medium-sized business market and never really took us seriously as an enterprise solution. But the market has dramatically shifted and we’ve stuck to our guns with our message of ease-of-use, rapid deployment and very successful implementations based on customer success, and the rest of the market has really struggled to deliver in this particular space.”

Having built Salesforce.com from the ground up based on internet technologies, its place in the on-demand space has been a natural fit. The struggles the rest of the market faces come from the fact that most of their technology is built on client server technology and there’s no easy way to transition it as a service over the internet.

“Companies like Oracle, Microsoft and SAP, who have been around for the last 20 or 30 years, built their technology based on client server technology so what they’re struggling with is how to transition to this new world of the internet,” Steele notes. “They’re trying to do it in an unnatural way by shoving technology over the internet that was not intended for that purpose. What Salesforce.com brings is this pure Web 2.0 focus. By delivering successful customers like Cisco, Merrill Lynch, ADP and Morgan Stanley, we’ve established a credibility that was needed for this space.”

Expanding its footprint

Salesforce single-handedly paved the way for software as a service with its remarkably successful web-based CRM software. While Salesforce continues to strengthen its CRM offering, it’s also making strides to step further outside its core solution.

Having built a respectable customer and subscriber base, Salesforce is focused on expanding its offerings to satisfy existing customers more than growing its client base. “Since we have such a nice size critical mass of customers and subscribers, we want to continue to deliver more value to those existing customers,” Steele says. “Three or four years ago, the only thing we could really sell to our customers was SFA. While we made our name on SFA, we’ve now expanded well beyond that and offer a full CRM management solution including marketing, campaign management, customer service and support, and our call center solution. We’ve also separated the platform that we deliver all this technology on as a separate pillar of strength for Salesforce. Many of our customers started off as SFA customers and now we’re back in selling them on expanding their footprint with Salesforce to other areas of their business.”

Its rapid release cycle – Salesforce has averaged three releases a year for the last seven years – has helped the company deliver continual enhancements to users. Their latest announcement, the Winter ‘07 release, includes a variety of things aimed to help the productivity of the user. A slew of new additions are planned – everything from territory management announcements to pop-up reminders to new telephony integration with their call center to client management – along with a new feature called Salesforce Consule, which offers single-click access to every kind of data relevant to a user’s job.

As part of the Winter 07’ release, Salesforce has also unveiled Apex, the world’s first on-demand programming language, which will be available to AppExchange users in early 2007. Apex is a breakthrough development in the on-demand sector, as it allows customers and developers to write code on top of Salesforce’s infrastructure, infinitely expanding the scope of applications that can be delivered on demand.

AppExchange, the key component that has allowed Salesforce customers to build off of their CRM platform, will also see a new user interface with the Winter 07’ release. Enhancements to the directory will make it even easier to share customizations and install and upgrade applications. While AppExchange is only about a year old, Salesforce.com has had nearly 500 applications built on it already and Steele insists it’s only the beginning.

“We envision thousands of applications covering all different kinds of industry verticals and IT and business requirements, so you’ll see things like HR solutions or finance solutions available to our clients. We can’t be all things to all customers, but with our platform we can provide customers an opportunity to either build their own applications or access applications that other companies or third-party ISVs have built. The whole idea is to create something of a one-stop shopping platform for on-demand applications.”

Salesforce is also capitalizing on other existing web technologies to diversify their offerings and join in the ‘mashup’ frenzy. “We’ve announced a new marketing offering called Salesforce for Google AdWords, which is a great way for companies to use Google AdWords to drive their marketing and lead generation. All of the leads that come in are captured on Salesforce.com. This is where we’re kind of mashing up the power that Salesforce.com has in terms of managing and sharing information with the search engine capability of Google. It’s just a great combination of two web services that are delivering this new technology.”

Salesforce’s foundation on internet technologies has enabled them to integrate quickly and easily with other web technologies and continue to provide speed to market with their solutions. “We want to be the hub for managing and sharing all the information about your customers and be able to manage your forecasts, territories and responses to your customers – but we want to do that with other technologies that are out there and always be open to that,” Steele says. “That’s one of the benefits of the Web 2.0 open source and open environment where we can integrate with other technologies.”

On-premise to on-demand

The growing trend of mashups and fusing web technologies has only further propelled the rise of the service-based paradigm and the downfall of traditional software. With on-demand gaining a strong foothold in the enterprise software sector, the pending shift from on-premise to on-demand is reminiscent of the shift that occurred from the mainframe to client server.

“In the late 1980s, IBM owned a large share of the mainframe model of computing and dominated 80-90 percent of the market share,” Steele recalls. “Then Microsoft and other software companies like Oracle, Dell and HP came along and completely changed the model. They shifted the model of technology to client server and away from the mainframe, and IBM almost went out of business because of that. The same fundamental change is going on now – from client server to on-demand – and the primary driver behind it is the whole focus on speed-to-market.”

The difference in speed-to-market with on-demand versus the traditional mode of on-premise software is substantial. “If you’re opening an office in Eastern Europe, with on-premise software, you’d have to send over an army of IT people to install the server and the software, and to train the people locally,” Steele explains. “It can be a very time-consuming, very expensive proposition; and it could take years before you actually transition that to the new technology. Typical on-premise software takes 12-18 months to actually install and get up and running – and then you’re always caught behind the wave of upgrades and trying to get to the latest releases.”

In contrast to on-premise, on-demand only takes a few months. And Salesforce has a litany of customer success stories to attest to its speediness: ADP was up and running in approximately four months with 1500 users, AOL Interactive Marketing in three months with 400 users, and Symantec in four months with about 4000 users.

In a constantly shifting marketplace that expects data at its fingertips, that type of speed is a huge differentiator that can’t be overestimated. “With Salesforce.com and on-demand, you can literally turn a company on immediately, provided they have access to the internet,” Steele remarks. “The primary differentiating factors are speed-of-deployment and speed-to-market. We’re talking about a very competitive environment where information is changing all the time and the competitive landscape is changing – you can’t keep up with that with traditional on-premise software.”

And it seems the competitive advantage offered by Salesforce is now becoming clearer. Not only has the company acquired a critical mass of customers, it’s acquired big-name clients with big IT budgets. “We have some very large enterprise customers – like Symantec, Cisco, ADP and Merrill Lynch – who can afford any solution they want or can build their own solution. The reason they chose Salesforce is not necessarily because they’re trying to save money and go with the cheapest solution but because they wanted to choose a solution that would scale, be quick to deploy, drive high user adoption and satisfaction, and ultimately be a platform for managing and sharing information inside that company.”

While Salesforce has notably taken off, Steele insists they’re only scratching the surface of on-demand. “I think we’re just at the very beginning. We’ve definitely proven this model now for all companies, shapes and sizes – we have one-person companies up to our largest customer with 15,000 users at Cisco – and we have customers from every different industry and something like 60 plus different countries around the world. However we are really just scratching the surface. I think many countries – especially as you go to parts of Europe and Asia – are really just starting to embrace the on-demand or SaaS model now. They’re not the early adopters that many high-tech companies were in the US, so on-demand market share is still relatively small compared to on-premise. It’s probably 90 percent client server and maybe 5-10 percent SaaS, so there’s still a lot of room for growth.”

It’s clear that the market is shifting dramatically, and on-demand software has only just begun to make its presence felt. Market analysts estimate that approximately 25 percent of all IT will be delivered in an on-demand model within the next five years. In addition, the IDC research group predicts the on-demand CRM applications market to increase to $2.2 billion by the end of 2010.

Despite the anticipated blitz of competitors who are likely taking notice and will inevitably enter the market down the road, Salesforce plans to continue to execute on its game plan as always. “We’re very confident that as much as the competition has woken up to our strategy, it is not easy to deliver an IT infrastructure. We became the virtual IT for our customers and as a result they have to trust us; you have to have credibility and we’ve been doing this for eight years now so we know how to do it.”

With AppExchange, a sizeable client base and plans to expand its reach in the market, Salesforce expects 2007 to be a definitive year. “I think this is the year that we’re no longer this ankle-biter company talking about a very narrow part of the market. It’s pretty clear that SaaS is now becoming the mainstream and all the big competitors of Salesforce are now looking to get into this market. So we’re going to leverage our success, we’re going to sell beyond SFA and CRM, we’re going to drive more ISVs and partners to AppExchange as a viable alternative to develop new applications and you’re going to just see continued innovation from us.”