After the Revolution

"A David-versus-Goliath story is interesting, but [you have] to pitch the bigger picture."

Just in case anyone was foolhardy enough to accuse Benioff of having lost the ability to make a splash, as this issue went to press, Salesforce.com announced the unthinkable: Benioff would be appearing at Oracle OpenWorld in mid-October—his first-ever onstage appearance at his longtime rival’s annual event. (The news, as it happens, covers a partnership with Dell to target small and midsize businesses.)

Famously oppositional views on the viability of the SaaS model are hardly the only points of contention between Benioff and his former boss—and former investor—Larry Ellison, whom Benioff routinely refers to as his mentor. Ellison opted to blaze a trail of massive acquisitions for Oracle—“innovation through acquisition,” the company once called it. Benioff, by contrast, has mainly eschewed acquisitions over the past 10 years—a conscious decision, he says, “because we had so much raw momentum”—aside from five quite notable exceptions:

In April 2006, Salesforce.com purchased Sendia, a provider of wireless application technology, for $15 million in cash. In true Salesforce.com style, the technology has since been rebranded several times, from AppExchange Mobile, to Salesforce Mobile, and now Force.com Mobile. (“We had to completely rewrite it,” Benioff admits, “so it’s a totally different thing.”)

In August 2006, Salesforce.com took a major step in its interaction with Google, picking up Kieden for an undisclosed sum. The technology immediately became Salesforce for Google AdWords, and—perhaps of equally lasting importance—Kieden founder Kraig Swensrud is now senior vice president of product marketing. 

A quiet move from January 2007—the purchase of CrispyNews for an undisclosed sum—went completely unannounced for several months, but has since become one of Salesforce.com’s most talked-about offerings: Salesforce Ideas, the discussion-and-voting platform at the core of some of the highest-profile deployments, such as Dell’s IdeaStorm, MyStarbucksIdea, and the United States government’s Change.gov.

The March 2007 purchase of Koral Technologies, for an undisclosed amount, may be the deal that’s yielded the least publicity to date, but its technology formed the core of Salesforce Content.

Most recently, Salesforce.com splashed out $31.5 million in August 2008 for InStranet, a contact center knowledge-base specialist. That on-premises technology was reconfigured to operate in the cloud, and led to Service Cloud 2’s Salesforce Knowledge module. Alex Dayon, founder, president, and CEO of InStranet, is now Salesforce.com’s senior vice president of customer service and support applications.

In many ways, Swensrud and Dayon have become the best-known public faces of Salesforce.com after Benioff himself, handling product launches, media briefings, and customer conferences.

Of the five acquisitions—which he characterizes as “all relatively small technology niche add-on capabilities”—Benioff is clear about which one he expects to have the most lasting impact, not only for the technology it introduced, but also for the very experience of a successful deal: “InStranet is probably by far the most important,” he says. “We haven’t done a lot of aggressive acquisitions for whatever reason. I think there’s a lot of opportunity for us to look more strategically at a lot of our partners and customers and look more aggressively at acquisitions, because after looking at that InStranet success we have a lot more confidence that we can really make our products even better through not just organic development but through this acquisition idea.” 

In at least two instances, however, Benioff and Salesforce.com apparently were unable to land a fish they were eyeing and walked away from potential acquisitions empty-handed. (Benioff, for his part, denies that any serious opportunities were lost.) Interestingly, both examples involve Web-based offerings of office-productivity solutions. 

According to one former Salesforce.com executive who requested anonymity, the company made serious overtures toward acquiring Writely, a provider of online word-processing software that was eventually purchased by Google—and which formed the basis for Google Docs and the Google Apps office-productivity suite.

The other fish that got away—Zoho, a developer of in-the-cloud applications and platforms looking to undercut Salesforce.com on price and rate of technological advancement—was never really looking to get hooked, according to Sridhar Vembu, its founder and chief executive officer. In an exclusive interview with CRM earlier this year, Vembu confirmed Benioff’s interest in purchasing Zoho—which at the time was still operating under the name AdventNet—but revealed that he never even allowed Benioff to begin discussing potential offers: He simply had no interest in being bought, he said—bought by anyone, really, but especially not by Salesforce.com.

Benioff and Adler describe Behind the Cloud as a playbook for entrepreneurs—but, as Adler acknowledges (see Required Reading, page 36), if they’ve done their jobs too well, the result could empower an entrepreneur looking to do to Salesforce.com today what Salesforce.com did to Siebel Systems 10 years ago.

“Siebel executives did not see what was obvious (that we were trying to rattle them),” Benioff recalls in the book. “And as the company began defending itself and acknowledging [us], we chipped into its airtime.” Slide around a few company names in that sentence, and it could easily be a quote attributed to Zoho’s Vembu.

Benioff says that “a David-versus-Goliath story is interesting, but [you have] to pitch the bigger picture.… We talked about what our competitors did wrong. We introduced our solution. We explained why it was good for customers. We talked about the future and tapped into the large audience of people who cared about what would happen next.” 

Zoho is doing all that. In fact, Benioff’s description of how Salesforce.com went after Siebel may as well be a script for the battle now being waged by the new Davids (such as Zoho) against the new Goliath: Salesforce.com itself. 

Benioff claims that Salesforce.com is prepared to avoid the errors and missteps he ascribes to Siebel and, later, Oracle: It won’t be ruffled by stunts. It won’t validate the upstarts by acknowledging them. It won’t act defensively.

Vembu says that Benioff expressed interest at one point in acquiring Zoho—interest that Vembu says he flatly rebuffed. It almost doesn’t matter if Vembu’s side of the exchange is completely accurate—as news reports spread about the non-offer offer, Salesforce.com displayed no sign of being ruffled and validated nothing by acknowledging nothing. Any sincere intent to acquire Zoho might have been a sign of defensiveness, however—the same reflex Siebel showed when it purchased UpShot, an early Salesforce.com competitor, and Oracle showed when it acquired Siebel itself.

Despite a relative paucity of merger-and-acquisition efforts, Salesforce.com has made some minority- and majority-stake investments in application and service providers of interest. One of these deals, in fact, came to light just as this issue was going to press: FinancialForce.com, a provider of on-demand financial and back-office

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