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Marc Benioff predicted the end of software years ago. Longtime executive at software giant Oracle Corp., and personal friend of Oracle Chairman and CEO Larry Ellison, Benioff decided Internet-based applications would eventually replace traditional offline software. He might have been right: A recent Gartner report dubs salesforce.com, which Benioff founded in 1999, "The Future of Software."
The company is the world leader in online customer relationship management (CRM), helping salespeople at companies like Time Warner Communications and BroadVision keep track of contacts and calls through wireless devices and online. About 50,000 salespeople use salesforce.com to check their calendars and receive special reminders of upcoming meetings and events.
In contrast to traditional enterprise applications, salesforce.com is a monthly online subscription service. While many traditional software companies have suffered in this economic downturn, salesforce.com's revenues are growing, with the company projecting profitability in the first quarter of 2002, says Benioff. On Aug. 8, Benioff talked about industry trends and the future of his company with BusinessWeek Online reporter Olga Kharif. Here are edited excerpts of that conversation.
Q: Why would an organization want to use your online sales applications?
A: You know, in today's sales environment, the biggest problem is layoffs. Let's say you have 30 salespeople, and sales are not so good. So you need to get rid of 10. Your problem is not that you have 10 less salespeople but that you don't know what those 10 salespeople you got rid of knew. You've lost your institutional memory: Who were their contacts, what conversations did they have, what was their pipeline? When companies previously had to reduce their sales forces and they lost the institutional memory, their sales went down. Our software motivates salespeople to put all of that information into the service so companies retain it even after some employees leave.
Q: Why would corporations chose online sales applications instead of traditional sales software?
A: Well, with online applications, you can go totally wireless if you want to. You can use your pager, Palm -- you can use whatever you want. Or companies would use these applications for getting something running in a foreign country. A number of our customers, like Berlitz, use our products in nearly 40 countries. Getting sales software running otherwise would be a very difficult proposition.
Q: How has your company been doing this year?
A: We're fortunate. Last year we did $7 million in revenue. And this year we should do about $25 million. And we have a lot of customers -- a lot of mainstream companies who are signing up. And we've achieved about 70% in our gross margins with no debt.
Q: In these uncertain times, several months ago you increased the price of your product from $50 per user per month to $65. Why?
A: Because we weren't charging enough. Customers didn't really believe that they were getting a good product. We charge more so the customers would say, "There must be more value." We're in a really good market.
Q: How do you think CRM products will evolve over the next few years?
A: Customers need to manage their sales forces' marketing groups and customer-support groups. But they want a very easy-to-use solution. And most of the stuff today has been very hard to use. The product has to be very easy to customize, with custom fields, custom pick lists, configurable screens and paths. It has to have this Amazon.com-like way of customizing. It has to be something that the everyman can do, every company can do.
Q: How do you plan to change your products?
A: In the next year, what we're going to start really focusing on is to greatly expand the way that you can assess Salesforce.com. So you can use Excel, or Word, or PowerPoint, or whatever to access our products. But that said, we're also very focused about growing our business in Japan and growing our business in Europe.
Q: The CRM industry has been consolidating. Do you think you'll be bought?
A: I don't think so. I think we're going to be an independent company. We're a fast-growing, strong company, and we're a leader in online services. We have an excellent revenue stream, good customers who are happy.
Q: How have you been impacted by the economic downturn?
A: We are acquiring customers at approximately the same rate. Our problem is different: Because our customers are subscribers, they haven't bought anything. They're just kind of renting. So, for example, some of our large customers, like BroadVision and MicroStrategy, have subtracted users this year -- because they've had layoffs. When a company lays off employees, it reduces the number of subscribers. We would have tripled this year if we didn't have companies laying off.
Q: Sounds like you manage a lot of risk.
A: We have to manage attrition, basically. But attrition is actually a relatively constant percentage. It was a little bit higher in the first quarter of 2001, but mostly attrition is constant. It's about 3% to 4% per month. So we have to sell above that attrition number. So it's just another variable in the business. That's all it is. It's not a scary, horrible thing.
Q: Do you think the worst times are behind us?
A: Yes. We have a database of 2,800 companies. It's like a microcosm of the economy in our database. From Jan. 1 until Apr. 15 -- it was a horrific time in the U.S. economy. There were a lot of layoffs, and it was very unstable. But right around May 1, it became more stable. And June and July have been relatively stable, with a slight uptick. Tiny. I fully expect [Federal Reserve Chairman] Alan Greenspan is going to want to talk to us. Absolutely. If I were him, I'd call us.
Edited by Beth Belton
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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