The Economist writes about the company’s emergence as a harbinger of a new model for software:
Although their audiences are differentthe sales departments of companies for Salesforce.com, consumers all over the world for Googletheir technological visions are similar. Both have achieved success by finding new and simple ways for people to use their web browser. Google has done this by improving the way that people find information; Salesforce.com by enabling the salespeople of companies to access and manage all their information on clients’ accounts, and to market through a simple web page that intentionally looks a bit like Amazon’s or eBay’s.
The second generation of ASPs is different. When Salesforce.com signs up a new client, it simply creates an account on the software platform that ties together its farms of server-computers. In investor jargon, it therefore has huge operating leverage: the initial start-up costs for hardware and software were high, but since break-even each new client’s revenues have been almost pure profit. Salesforce.com made its first profit, of $3.5m, in the fiscal year that ended in January. It has signed up 9,800 firms with 147,000 subscribers.
Although still small, Salesforce.com has already caused an upheaval in the CRM industry. Rival start-ups with similar business models have emerged, such as RightNow Technologies, NetSuite and SalesNet. The CRM industry’s leaders, Siebel Systems and PeopleSoft, have lost some momentum to Salesforce.com and have belatedly started offering their software as a service through the web. This leaves them awkwardly praising their fledgling web offerings while at the same time preaching that the old model of selling software, their revenue mainstay, is still the best way for most customers.
They use two main arguments against the ASPs. First, software as a service is much harder to customise for the special needs of big firms. Second, it is harder to make it work with a firm’s existing software applications. Companies want their CRM to integrate with their billing system and everything else, says George Ahn, the CRM boss at PeopleSoft. Salesforce.com’s mottoNo Softwareis thus hot air, says Mr Ahn, because it takes lots of software and fiddling to get it to link to the rest of a client’s systems. There is no magic pixie dust that makes integration go away.
Mr Benioff shrugs. The evolutionary advance of the second generation of ASPs over the first is precisely that customers can now customise their pages, as easily as consumers arrange their Yahoo! or AOL pages to their liking. And the task of integration too has been solved. In fact, argues Mr Benioff, clients can do themselves a favour by letting Salesforce.com worry about hooking their various systems together. Increasingly, the vision says, all that users need to understand is how to navigate a web page, leaving them to get on with life. That is the same for Salesforce.com as for Google.