The Industry According to Benioff

LOS ANGELES — How does Marc Benioff quantify success? Quarterly profit? Revenue growth? Surprisingly, the answer does not revolve around money at all. These days, Salesforce.com's cofounder, chairman, and chief executive officer defines success based on customers and partners -- and the way they are using Salesforce.com solutions. Taking the stage on Day Two of the Gartner Web Innovation Summit here, analysts Gene Phifer and David Mitchell Smith grilled Benioff with questions for the "Mastermind Interview" keynote presentation. Reflecting on the evolution of the software industry and Salesforce.com's own growth spurt from a pioneering software-as-a-service (SaaS) company to a platform provider -- and newest member of the Standard & Poor's 500 index -- Benioff joked that there are certain moments in the industry's development that represent what he called a "major paradigm shift."    

"We saw that Web 1.0 was all about transactions.... Amazon[.com] and eBay [were] Web 1.0 at its best," Benioff told the crowd. "Web 2.0 was a lot more about collaboration, communities, user-generated content, and sharing models. What Web 3.0 -- whatever you call it -- is, is that everyone becomes an innovator." Benioff then outlined the three tiers of the SaaS market:

1. First, there's a group of leading-edge companies that have been subscribing to CRM on the SaaS delivery model for some time now. These firms are now drilling down further in terms of implementation and customization and are currently looking to dip a toe into additional SaaS applications, such as Workday's efforts in the human resources field.
2. Next, there's a group of mainstream SaaS adopters. That tier is focusing on rolling out SaaS to replace old software. They want to move software into the next generation.
3. Finally, there are the laggards. Benioff said that, despite being behind the curve, these laggards have heard about SaaS successes and are now in the consideration stage. Benioff then predicted that all businesses would be using software-as-a-service applications within the next five years.

"People, especially top-of-the-line [companies], have already embraced SaaS and certainly we see that in our largest customers," Benioff said, citing as an example Cisco Systems, a company that standardized on Salesforce.com. "I think the next step for leading-edge [companies] would be [platform-as-a-service]." It's not just about consuming on the Web, Benioff added -- it's the fact that you can build your own applications by consuming services. He stressed how difficult it is to create the infrastructure to support software and to make all the pieces fit. That's where the Force.com platform comes in, he said, adding that it takes the "pain-in-the-butt" work out of the development stage.   

When Phifer asked Benioff what he thinks of a business creating its own "internal cloud," the SaaS pioneer practically scoffed at the suggestion. He mocked the mentality: " 'Instead of writing [our] own application [with the help of the Force.com platform] and spending time giving value to [our] customers, we can rebuild what somebody's already done and probably do it at a tremendously higher cost.' " Benioff pointed out that there are now more than 80,000 applications built on the Force.com architecture.  

When asked how Salesforce.com transitioned into a platform provider, Benioff said it stemmed from customers demanding increased customization such as unique workflow elements and tools. "It just went on and on," Benioff said. "We are very responsive and kept delivering until the very implementations did not look at all like it came from a company called Salesforce.com and we said, 'Well, it looks like we're in the platform business.' "

Wrapping up the keynote, Phifer asked Benioff to define success, and the CEO -- without a mention of revenue, growth, or profits -- emphatically talked about customers and partnerships. "We want to see our customers building and deploying and implementing customized applications," he said, laying out the first part of his parameters for "success." Part two, Benioff said, involves partnering with independent software vendors (ISVs). "Only recently -- in [the last] six to nine months -- have software companies come to us saying, 'We missed the SaaS thing. Can we use yours?' " Benioff says within one or two years he hopes -- expects -- the number of ISVs using Salesforce.com to expand dramatically.

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