Salesforce.com takes on the big boys in software
The company's CEO Marc Benioff preaches a "no software" gospel
alwayson-network.com
A recent reminder that the major software industry disruption we've been expecting was starting to sizzle came from one of the smartest, more seasoned venture capitalists I know, Tony Sun, a long-time partner at the venerable Rockefeller family-backed VC powerhouse Venrock Associates. "I don't think you will see us investing in any software startups for a while," Mr. Sun told us on a recent visit to his offices on Sand Hill Road in Menlo Park, California. "There are 700 public software companies trying to sell their products out there, so it is a pretty saturated environment."
A second reminder came from Salesforce.com's CEO, Marc Benioff, who bragged to us that his privately held company, which offers a Web-based customer-relationship management platform, had $23 million in sales for 2001, its second full year in business, went cash flow-positive last November, and will be profitable in September. He also boasted that "70,000 salespeople are using his service over 20 million contact relationships!" Why is this so significant? Well, Mr. Benioff has been bucking industry convention by offering his software as an online subscription service for $65 a month per user. "We have all the features of Siebel, but there's nothing to buy, no CD to install, no maintenance, no backup, and no need to upgrade!" Mr. Benioff likes to bellow. "Let the Internet be your network, your backbone, and take the advantage of its power!" Not surprisingly, he is so pumped about his vision that the company's slogan is "No software."
But before I got too drunk on the Salesforce.com Kool Aid, I checked in some of the old guard. After all Siebel Systems' founder, Thomas Siebel, has been predicting the demise of Salesforce.com for a year now, and PeopleSoft's CEO, Craig Conway, recently said, "Marc Benioff is trying to get in the big leagues with a Wiffle ball and plastic bat." (Interesting note: all three of these characters used to work together at Oracle under Mr. Flamboyant himself, Larry Ellison). After a meteoric rise, Siebel Systems, which was founded in 1993, just before the Internet became the obvious new commercial highway, has suffered stalled sales and a battered stock price.
PeopleSoft has faired better than most of its peers. Since Mr. Conway became the boss in 1999, he has been successfully guiding the company's strategy and many of his customers toward the Web-based, real-time computing model. "In a real-time enterprise, businesses processes must be 'always on,' and all applications have to work seamlessly on the Internet," Mr. Conway evangelizes. PeopleSoft 8, the latest version of the company's software, goes a long way in helping customers move in this direction-almost half of PeopleSoft's customers are either in development or already live with the system. Mr. Conway admits that helping large enterprises transition their business processes onto the Web is challenging because you have to deal with legacy systems that were either internally developed or from other vendors.
Basically, the toothpaste is already out of the tube. Over time, the entire business-to-business world will be converted into very smart and powerful Web-based, as Andy Grove likes to say, "machine-to-machine" environment. But this will be a very complex and lengthy transition. It is akin to the transition to the client/server paradigm that began in 1988. That revolution took about eight years to mature. Even Mr. Benioff admits he couldn't have started Salesforce.com any sooner than he did (1999), because Web technology and the browser weren't robust enough to support his service. Today, we are witnessing the beginning of the client-to-client revolution over the Web, which will be bigger and even more radical than the last transition.
Back on the venture front, Mr. Sun says that, although great software deals may be few and far between, he still thinks it's a great time to be an entrepreneur and venture investor. "Historically, the best companies are started in the down times because during those periods entrepreneurs are very focused, creating core value, and building enduring businesses," Mr. Sun says. From a broader economic viewpoint, he also noted that the United States has only one option if it wants to maintain its high standard of living-stay on the innovative edge. "Innovation still comes from startups," he says. "Even John Chambers from Cisco understands this, and that is why I am still doing what I do."
Marc Benioff [Salesforce.com] | POSTED: 01.13.03 @14:37 |
