Salesforce.com: What Economic Downturn?

CEO Marc Benioff says the CRM service company is a force to be reckoned with.

Despite a slumping economy, Salesforce.com is showing substantial profits. With approximately 3,300 customers signed on in three years and a 300 percent revenue growth last year, the San Francisco-based CRM service company is turning some heads. Salesforce.com's president and CEO Marc Benioff, spoke with CRM Senior Editor David Myron to discuss the company's success, and expectations for 2002, as well as Saleforce.com's attempt to facilitate "the end of software."

CRM: To what do you attribute your success?
Marc Benioff: Salesforce.com is doing excellently. Revenues increased 300 percent in 2001 and we expect to have another spectacular year this year. We currently have about 3,300 companies who pay us to manage their CRM online.

We are pioneering a concept that we call "the end of software." We believe that what the Internet does is render traditional enterprise software solutions obsolete. We've been at this now for three years. The service has been live since March of 2000. We have signed up a lot of significant companies that use our service. Those companies include major software companies like Adobe, Autodesk, Microstrategy, and BroadVision. But we also have a lot of Fortune 500 companies who use our product, including Dow Jones Newswire, USA Today, Fujitsu, Time Warner Communications, Siemens, and recently Alcatel. So we are aggressively moving our company forward.

CRM: What about future growth??
Benioff: The next major stage for our company's growth is we routinely close transactions for sales forces of multi-hundreds of users, but we are looking at the much larger multi-thousand-user customer. For that customer, we've built an entirely new product that we will roll out in February, which is a family of products, that we call Enterprise Edition. These products include an entire platform that adds not only to our sales support and marketing components, but also adds an entire Web services foundation so companies can have XML interoperability between our service and either other Web services or legacy systems. We are delivering very aggressively on this enterprise vision.

We are also including some advanced customization technology that we call Multi-Org, which allows you to have multiple organizations all looking at the database with different user interfaces but with the same data. A customer can have different customer interfaces throughout different regions and countries that all access the same data. They can all look at our database and have different user interfaces, different fields, different customizations, different changes, and etc…. They can have whatever user interface they want. This feature has been very well received by our customers.

We're also introducing major new functionality in products, prices, and annuity management, and delivering an enterprise console. Our technology is a clear proof point that the end of software is upon us. And companies don't need to buy the traditional hardware/software combination to be successful when implementing CRM.

CRM: How much can customers save using your service versus buying a software license?
Benioff: It's actually a fairly substantial amount. Most of our wins are directly against Siebel Systems, which is probably what you'd expect. In the Siebel wins, [our customers] pay us between $65 and $125 per user, per month. So if you have 100 users at $100 per month, you're going to pay us $10,000 per month or $120,000 per year. The same solution from Siebel Systems would be $5,000 per user. That would be a $500,000 licensing fee to start. Plus, about $250,000 for the hardware and another $250,000 for customization and changes and other associated software. On top of that, you have annual maintenance and support fees. So it's a substantial savings over the traditional model.

CRM: Which companies are your biggest competitors?
Benioff: Most of our competition is directly against the traditional software players. We haven't really bumped up against any other major online player at this point. We are the largest online supplier. In fact, we are larger than all of the other online suppliers combined. We are by any measure the largest ASP by revenue, profit, cash flow, number of users, number of customers… anyway you slice it.

CRM: What is your outlook for Salesforce.com in 2002?
Benioff: Our outlook is very aggressive for 2002. We've already seen a substantial growth rate and momentum coming into the year and we feel very good about our current revenue projections for the year. We're expecting more than a 100 percent growth.

CRM: That's impressive in today's climate.
Benioff: Yes. Well, we grew 300 percent last year and last year was no picnic. We are the fastest growing CRM company.

CRM: What's the smartest move your company made in the last six months?
Benioff: Continuing to listen to our customers to deliver the changes to the products so we can fully support them, but at the same time innovating with a variety of new technologies and new features and new components that they might not even be aware were possible. We're truly listening to our customers as well as the overall marketplace and where the products and the technology need to go.

CRM: What are some of these new technologies that your customers are asking for?
Benioff: One of the big ones is XML. An XML wrapper on Salesforce.com turns it into a comprehensive Web service. It allows it to interact with other Web services as well as ERP applications like SAP, Oracle, PeopleSoft, and etc…. This XML API gives that panacea of being able to pass objects in and out of our database. So our application looks like it's within your network. That's a tremendous advantage to our customer base.

We're also adding, in February, a new marketing module that allows our customers to track not only the time a lead comes in from their Web sites, but also what opportunities are associated with what campaigns. So, for example, I can know that a particular deal closed because of an article, ad, or direct mail piece. That's a tremendous advantage. So it's the combination of offering a common sales force automation, customer support and service, marketing automation, reporting and analysis, and a Web services platform together really give you that total solution. We haven't built islands of information. We don't have separate products. We have one integrated service.

CRM: Is there any corporate restructuring going on at salesforce.com?
Benioff: We did go through a transition with our management team [about six months ago]. John Dillon, who was our president and CEO, left the company. And when that happened, I became president and CEO. I was president and CEO before. We also made some reorganizational changes when that happened, but there have not been any other high-level departures.

CRM: Do you share in John Dillon's strategy moving forward? Do you bring anything new to the table?
Benioff: No. Not really. John really left for personal reasons. I was already involved heavily in the strategy of the company. So there have not been any strategic changes. The company continues to do the same types of things that it was doing before. We're just doing them better every day.

CRM: Do you expect any more restructuring in the next six months?
Benioff: No. I don't. The company has really done outstanding. We are, according to Morgan stanley, the second largest CRM company, right behind Siebel Systems. They say we are the fastest growing [CRM] company. They acknowledge that we have affectively competed against a number of other players. We continue to sign up Fortune 500 companies. We have valuable brand names into our mix. While other companies' license revenues have stalled last year, we more than tripled the company. Things are good here for us.