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THS: So, basically, you are on the same page with that. That's basically the "the End of Software" philosophy you've promoted. MB: Yeah, we believe that this new idea of on-demand services will replace the traditional very high cost, very complex, very high failure rate traditional enterprise software. And that's what we've been working on the last six years is to do everything we can to destroy that software industry. We even registered a URL theendofsoftware.com in 1999. THS: The endofsoftware.com, is that just adjoined to your website or is it totally different? MB: No, is not even a live website, it was just kind of our stake in the ground that we believed strongly enough in the end of software that we would even put it down as a URL. THS: A few years ago I spoke with Cary Fullbright, Vice President of Product Strategy, and at that time we were very excited about the ASP model that was set for take off. We all know what happened. But now again there is a kind of resurgence in the ASP model, a validation of sorts, and I was wondering what has changed in the last couple of years to resurrect the model. MB: Well, honestly I think Salesforce.com has been a lot of it. We have proven that this is a real model, that it can work (and) that you can generate revenue and profit and take a company public and that has raised a lot of eyebrows. You know we have been very fortunate to be able to execute well in this marketplace and to severely injure Seibel Systems and other enterprise software companies and show customers that they were paying more than they needed to pay for this type of functionality and because of that I think we are at a new level now and we have a lot of other on-demand service providers starting up. In fact, even, we have a community starting up around us; we have a lot of what we call Sforce partners who are building solutions on top of Salesforce.com to get to our customers. THS: Are there any market indicators or trends in the field that shows that the on-demand or ASP model has legs? MB: Well, the best (thing) to do I think is to look at our company. We remain one of the fastest software companies in the world at a time where enterprise software companies aren't growing at all. So, that's a pretty good indication that there is a tremendous opportunity with the model itself.
THS: In the last quarter (Q3) there are some excellent numbers in your earnings report: revenues increased 82 percent; paying subscribers rose 81 percent; net income climbed 84 percent; customer gains were 62 percent greater. How do you plan to sustain that level of productivity in your company? That's very hard to replicate obviously. MB: Well, the most important thing is of course we have (been) sustaining these (types of) numbers (and growth) for the last five years. But the most important thing to us is making the customers successful. Most of our leads come from our existing customers and the most important thing for us is to show people this model works. There is still a lot of naysayers out there and we have to deal with them one at the time and we have to work hard to make sure that companies realize that they can be more successful than they have ever been before using this model. THS: All right, in terms of your marketing strategies a number of them have been pretty extravagant. I was just wondering if there was a method to that madness and what you've gained from those types of marketing events? MB: We needed to get our message out there, and there was a crowded market when we launched our company in '99; there were a lot of other companies, and of course we survived but a lot of companies didn't survive. But one of the ways that we survived is we had to build our brand quickly, we knew we weren't going to be able to build it through advertising or through other traditional marketing means so we developed this kind of approach which we call customer success marketing. And customer success marketing is all about promoting customer successes through outrageous events like the ones you sited. THS: So, as far as you are concerned you are going to continue with those as they have proven to be effective. MB: That's correct. THS: Can you quickly give us your thoughts on the Oracle/PeopleSoft acquisition? MB: Well, you basically have with (the) Oracle/PeopleSoft (deal)... the enterprise software industry is basically mature now, and in enterprise applications these companies are coming together because there really aren't any other major growth opportunities unlike (the case) in our industry. We are still relatively young industry with a high growth rate.
THS: Do you think that trend in the industry would continue? MB: Well, there just aren't that many enterprise software companies to put together - that's the problem. THS: Do you think, on a smaller level - maybe not even the enterprise - some of the smaller players, are going to get scooped up by some of the bigger players? MB: Well, you know we've heard about this for about two years this consolidation trend, but how many have there been? One a year? Two a year? I mean I don't know, I would just say look at the path and it will probably continue. THS: Do you have any thoughts about the competition or the open source CRM companies that are starting to emerge? Do you perceive that as a threat to Salesforce? MB: Not really, I think even if the software is free, they can't afford it. Because the majority of the total cost of the ownership of software is still buying the hardware, buying the other application components, the load balancers, the security, the application servers, and the database servers; there are a lot of different components and people to run all of it. What we did was, we removed the complexity, we removed the people, we removed the upgrading and the updating... we removed the risk and those companies certainly are not removing the risk. In fact if anything they might be adding more to it. THS: Some other trends are starting to emerge such as the integration of RFID into retail operations. How is that going to impact anything that you do in terms of new releases and in terms of how you work with existing customers to help them in that supply chain. MB: Well, I think RFID is going to create really big databases of information much more so than we've seen before. And how it relates specifically to CRM is, you know, we'll be able to fully integrate it (for) access to the systems to bring our customers better information on how their customers are doing. THS: Would you say this is part and parcel of integration of CRM to other software programs perhaps? MB: Yes. THS: Do you see that as a driver for not just your company but for CRM companies in general? MB: Yes. THS: In terms of how you follow market trends with your own customers, your own relationships with your customers, do you follow some other technology trends and get involved in them. For example, you know Voice over IP is going to have an impact in call centers and things like that. How involved are you with those types of technologies as you make plans for your own company. MB: Well, we are very involved with a lot of different software vendors. You may know about our Sforce program which allows other customers to build applications on our platform and in fact there is over a hundred Sforce ISVs (independent software vendors) at this point who build production solutions on top of our platform. Over 60 of them displayed their solutions that our DreamForce conference which happened in November '04. I would say that is very important for us to continue to succeed - to be as open as possible to make our Web services capabilities as broad as possible so that we continue to develop our ecosystem. THS: How well is the Sforce 5.0 release from September-October '04 going? How is the customer response to that? MB: Very good. Sforce has been around now I guess about a year and a half, and in that time we have seen tremendous uptake of Sforce in our customers and also by the ISV community and we are extremely pleased with that. THS: Would you have the same thoughts about CustomForce.com. MB: CustomForce.com is still an emerging new technology. It's only been available for a few months as you probably know, but we are seeing a lot of customers begin to build and deploy new types of functionality into our systems and we are studying that very closely. CustomForce.com lets customers build new applications using our tools like inventory or HR or even manufacturing capabilities; and bringing that to the on-demand model between customer-built set management applications and all kinds of things we never imagined. And we expect CustomForce to be a tremendous opportunity for our customers to fully customize our product as well as to create entirely new apps. THS: In terms of metrics I'm sure you probably read about them and you are fed up about them, but I still want to get your reaction to them. Gartner and companies like that come up with failure rates on CRM implementations at 65 percent in 2002 to 85 percent in 2004. Even the Wall Street Journal reports show CRM failure rates at 50 to 80 percent. When customers see this kind of thing, and you are trying to win customers, how do you deal with that issue? MB: That is because most customers really have experienced those failure rates with the large software products like Siebel and that's why we have been so successful because they are looking to get away from those failure rates, by moving to an on-demand model. THS: You've said that we are at the tipping point in on-demand software. Could you elaborate on that? MB: We really believe that we are on a threshold time where companies are willing to look at on-demand democratically for the first time. Small, medium or large companies... we are seeing, you know, a lot more traction for on-demand computing. What we think that means is that this is the time when customers are evaluating a new product (and) they'll look at software and they'll (also) look at on-demand. That's very exciting because the company can make a purchase decision based on that and before, maybe a year ago, they were only willing to look at software products. Now they are willing to look at our model as well. THS: Since this is still very much a new year, what are your major objectives for 2005? MB: We are really working hard to make this the tipping point for on-demand computing and we want to make sure that when companies are putting together their short list for evaluating new services - whether it is Salesforce.com for on-demand CRM; or SupportForce.com for on-demand call centers or contact centers; or CustomForce.com for on-demand application development; or Sforce, which is basically our on-demand platform - that customers are willing to evaluate us as well as looking at the software alternative. And that is our big goal for 2005, to get into the minds of customers and to let them know they'll be more successful than ever before using this capability. |
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We believe that this new idea of on-demand services will replace the traditional very high cost, very complex, very high failure rate traditional enterprise software. And that's what we've been working on the last six years is to do everything we can to destroy that software industry
