In the late 1990s, Marc Benioff was working at Oracle when he had an idea that would revolutionize the way companies conduct business — CRM delivered as a service, or the on-demand/cloud-computing model that we know today. The idea was to offer companies enterprise-class software at a low, predictable monthly cost.
The idea was so well-received that even Tom Siebel, CEO of Siebel Systems and a former Oracle colleague, offered Benioff a job to create an on-demand offering — but one specifically targeting small and midsize businesses. Benioff, who had made millions as an early investor in Siebel’s company, didn’t want to limit his focus, so he turned Siebel down and used some of those millions (and the millions of a few others) to start his own company.
Benioff’s idea was a significant departure from the traditional way of selling software, the on-premises model, which requires customers to make large up-front investments. Too many CRM vendors relied on this model to quickly make millions of dollars without ensuring their customers’ success.
This approach gave the CRM industry a well-deserved black eye at the turn of the millennium, but the change from the on-premises to the on-demand model was too jarring for many traditional CRM software companies. They were accustomed to receiving those large sums of up-front cash, and believed switching to a revenue model of small monthly payments would be too disruptive.
Wrongly focused on their own success — or what made the most sense for them — instead of the success of their customers, these vendors applied Band-Aid fixes to the traditional model in an attempt to keep customers happy in the short term. In most cases, it didn’t work. And, all the while, the on-demand model kept growing in popularity.
It’s been a decade since Benioff founded Salesforce.com and despite numerous obstacles — even the threat, during the dot-com implosion, of bankruptcy — the company has grown from a small startup in a one-bedroom apartment to become the largest on-demand/cloud-computing CRM company in the world and the third-largest CRM vendor overall.
That’s not all. The on-demand model has revolutionized the CRM industry: Over the past few years, a period that includes one of the worst recessions in history, the CRM market has enjoyed steady growth, largely due to the general acceptance and popularity of the cloud-computing model.
Even — perhaps especially — in a difficult economic climate, the benefits of the cloud-computing model remain relevant and valuable, providing users operational as well as financial flexibility. Not only does it enable customers to switch providers if they aren’t happy, it allows them to scale down the number of users to cut costs and, when business picks up, to add more users when they’re ready. And customers are the ones validating this model: Benioff expects his company’s annual revenue to reach a record $1.25 billion by the end of the year, proof of just how valuable it is to focus on making customers successful.
The cloud-computing model and Salesforce.com’s participation in it have had such a significant impact on the CRM industry that we’ve dedicated this entire issue to the company. Our feature package, “The Next Billion” (page 21), which includes an exclusive interview with Benioff, looks back at how Salesforce.com became the first billion-dollar software-as-a-service vendor, and looks ahead at what the next chapter may bring.
For the rest of the November 2009 issue of CRM magazine — a look back at the first 10 years of Salesforce.com — please click here.
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