On June 3, Marc Benioff, the affable CEO of Net startup Salesforce.com Inc., was playing host to 400 customers, business partners, and journalists at the Grand Havana Room, a tony cigar bar on the top floor of a midtown Manhattan skyscraper. The occasion: a press conference introducing the company's newest technology. Dressed in a dark suit with his ever-present "End of Software" button on his left lapel, Benioff was schmoozing guests when he got a call on his cell phone from a representative of Arnold Schwarzenegger. Would he buy a few tickets to a charity screening on June 27 of the actor's new movie, Terminator 3: Rise of the Machines?
Click-click-click went Benioff's brain. He was planning on introducing an update of Salesforce.com's Web-based customer-management software at about that time anyway. Why not become the primary sponsor of the event, invite hundreds of business associates to the screening, and grab attention for his new product -- all in one swoop? This plan came together in a matter of seconds. In the end, he hosted 600 guests at San Francisco's Galaxy Theater and then whisked away 20 customers and prospects -- plus Schwarzenegger -- to a private dinner nearby.
If this seems like a jarring blend of dot-com-era excess and 1960s-style do-goodism, well, so be it. Benioff, 38, a former Oracle Corp. (ORCL) executive, has fashioned an environment at Salesforce.com where a relentless, must-win drive is balanced with an eclectic blend of Eastern spiritualism, parties, and charity. He believes that mixing these personal interests with the best traditional business practices yields an "integrated" company where people escape the traps of conventional thinking and operate more creatively. "We need a constant reinforcement that we're a different sort of company with a different set of values," he says.
What's so different about Salesforce.com? The San Francisco company is threatening giants such as Siebel Systems (SEBL), Oracle, and PeopleSoft (PSFT) with a new way of delivering the software corporations use to manage their businesses. Rather than hawking multimillion-dollar packages that sometimes take more than a year to install, Salesforce.com sells software as a service delivered via the Internet. Corporations typically pay $65 per month for each user, and they don't have to worry about the headaches of buying and maintaining their own computers and software. Although customer-management leader Siebel Systems Inc. denies Salesforce.com is a threat, the upstart is gaining customers fast, with a total of 6,900. SunGard Data Systems Inc. (SDS), for instance, just agreed to use the service for 1,000 salespeople worldwide. "We don't have an appetite to pay $18,000 a head and spend years installing software," explains Bettina A. Slusar, senior vice-president of global account management for SunGard.
The upshot is that Salesforce.com has emerged as one of the few bona fide successes among dot-coms born in the late 1990s. In the quarter ended July 31, the four-year-old private company recorded revenues of $21.6 million, double a year earlier, and logged a $127,000 profit, its second sequential quarterly profit. New requests for service grew so rapidly this summer that Benioff plans on boosting his staff of 400 by 20 to 25 people per month for the rest of the year, double the previous rate. Meanwhile, Siebel Systems saw its revenues decline 17.8% last quarter and is cutting staff. Benioff rubbed it in by sending recruiting e-mails to Siebel Systems employees. He may be spiritual, but he's no saint.
Investment bankers are attracted to Salesforce.com like 14-year-old boys to Britney Spears. It's expected to deliver one of the hot initial public offerings of 2004. "This is a company that will attract plenty of attention," says Evan M. Newmark, global head of technology banking at UBS Investment Bank (UBS), who is angling for a piece of the action. "Like Dell on the hardware side, they're a disruptive business model."
Benioff faces a host of challenges as he tries to turn Salesforce.com into the next Dell. Traditional enterprise software makers are gunning for him like never before, and rivals such as UpShot Corp. are also delivering software over the Net. If that's not enough, software giant Microsoft Corp. is targeting one of its sweet spots: small to medium-size companies. Critics question whether Benioff's offbeat management ideas can succeed as his company becomes more complex and operates with a bull's-eye on its back. "I find it hard to believe that Marc is doing a good job as CEO," says John Dillon, head of software maker Navis LLC, who was Salesforce.com's CEO until he and Benioff had a falling-out in 2001. "He's not operational. He doesn't have the wherewithal to manage people."
While that may have been true a couple of years ago, Benioff seems to have come into his own as a manager since then. He has recruited a handful of tech industry veterans, including Jim Steele, a former IBMer who runs worldwide sales, and Steve Cakebread, who left his chief financial officer post at software maker Autodesk Inc. (ADSK) to become CFO. Meantime, Benioff concentrates on his strengths -- strategy and marketing. His unorthodox management style has helped turn Salesforce.com into a force to be reckoned with. While it's still a fraction of the size of the giants, it is they who are under pressure to respond to the hotshot upstart.
Benioff has a long history of swimming against the current. While his parents were busy running a women's clothing store south of San Francisco, and other kids were absorbed in sports, their teenage son programmed games on his Commodore 64 computer and created a business selling the computer games. When his classmates at the University of Southern California were choosing majors, he was already dreaming about the mark he would make on the tech industry. He chose Oracle for his first job in 1986 because it was an industry rebel. Yet ultimately, Oracle was frustrating. During Benioff's 13 years there, he always stood on the company's fringe -- running small PC- and Internet-related businesses, few of which flourished. The Internet seemed to offer the path to transforming the industry, but he wasn't sure what role he should play.
The result was a three-year quest for personal and professional fulfillment that shaped the quirky Marc Benioff of today. He took a leave from Oracle in 1996 and rented a house in Hawaii, where he swam with dolphins and dreamed of building a business that would do for corporate computing what Amazon.com (AMZN) (AMZN) Inc. did for consumers. Then he traveled in India with friend Arjun K. Gupta, seeking both enlightenment and career direction. One of the gurus they met, Mata Amritanandamayi, urged them to give back to the world even as they pursued their ambitions -- advice Benioff took to heart. "Spirituality and technology are the yin and yang of Marc," says Gupta, now a venture capitalist. "Most people make their work their religion. Marc does both -- together." Back at Oracle, Benioff helped CEO Lawrence J. Ellison set up a charitable foundation and plowed into new Internet projects.
It was the winter of 1999 when he left Oracle to start his own company. Finally, Benioff had a chance to create an organization based on the ideas he had pulled together during his long Oracle internship -- melding Internet technology, the software-as-service business model, and philanthropy. From the start, Benioff decided that 1% of the company's stock, 1% of its profits, and 1% of employees' time would go to charity. He calls it "compassionate capitalism."
No way is Benioff your conventional boss. He frequently shows up at work in a Hawaiian shirt with his golden retriever, Koa (the company's "Chief Love Officer"), at his side. He has taken many of his managers swimming with the dolphins near his second home in Hawaii. At 6-foot-5, with longish brown hair and a ready smile, he comes off like an overgrown, happy-go-lucky kid. How does he stay so calm? "He meditates. He doesn't put stress on himself," explains Benioff friend Robert Thurman, a religion professor at Columbia University.
His zenlike approach to life even permeates the elaborate management process he uses to run Salesforce.com. It's called V2MOM -- standing for vision, values, methods, obstacles, and measurement. It's about laying out a broad strategy, getting all the employees to agree on goals and methods, anticipating problems, evaluating tactics, and measuring results. Any new initiative is put to the V2MOM test. "It gets tiresome, with the endless iterations we seem to go through," says Chief Technical Officer David Moellenhoff. "But when we come to a consensus, it's enlightening. You really do make a breakthrough." This year's master plan gobbled up 100 hours of executive meetings.
Marketing extravaganzas are another essential part of the company's success. Early on, Benioff cut way back on traditional advertising in favor of what he calls "relationship marketing." By inviting employees, customers, potential customers, and the press to high-profile events, he spreads good feelings about his company and exposes prospects to satisfied customers. Not only does the company round up leads at these events but it also receives scads of favorable press coverage. Even Keith Raffel, chairman of rival UpShot, admits: "We're drafting on their marketing machine." On Sept. 5, Benioff plans on hosting 600 customers, prospects, and journalists at his "100,000 Enlightened Users" event in San Francisco -- starting with an appearance by the Dalai Lama and concluding with a party celebrating the company reaching the 100,000-user mark. "The key to our growth is you have to get these messages out there," says Benioff. "It all comes back to our financial success -- otherwise we don't do it."
Meet with the Dalai Lama? Swim with the dolphins? It's business as usual, Marc Benioff-style. And if he keeps it up, enterprise software may never be the same. By Steve Hamm in New York