eWEEK at 30: Salesforce Shows Enterprises How Cloud Computing Works

By Chris Preimesberger  |  Posted 2014-01-10

eWEEK at 30: Salesforce Shows Enterprises How Cloud Computing Works

When someone says "the cloud," the first example people usually think of is Amazon. Likewise, when someone says "software as a service," the first example is most often Salesforce.com.

It's like Xerox and copiers, Kleenex and tissue paper, or Coca-Cola and soft drinks. It takes an extraordinary market presence—not to mention staying power—to become the preeminent enterprise in a specific sector.

Salesforce earned its high-recognition place at the table in about seven years; Amazon did so for its Web services business in even less time. That speaks volumes about the power and influence of those two companies.

Salesforce grew into the most influential software-as-a-service company to date. This San Francisco-based company has planted its stake in the ground for being ahead of its time and as such is historically significant in the world of IT.

It made CRM a commonly used and recognized term and is now moving headlong into social networking (Chatter.com) and platform-as-a-service software (Force.com) as its next major initiatives.

It's a software services company, reliant completely on big data centers and heavy-duty hardware and software, whose tagline is "The End of Software."

At a time before broadband networks became common, Salesforce showed the enterprise world that IT services and sales tools didn't have to be contained within the walls of a data center, and that sensitive business data could become portable and secure at the same time. It demonstrated that in-the-field employees didn't need to carry briefcases that could be lost, tampered with or stolen.

Best of all, it enabled enterprises to tally sales results quicker and more effectively, an important consideration at a time when enterprises are under more pressure than ever to show positive results and be able to fix sales and revenue problems before they get out of hand. In addition, thanks to its analytics capabilities, Salesforce has empowered customers with better ways to project sales, thus helping corporate planning in a big way.

Salesforce fundamentally streamlined the way businesses—especially new-gen companies that rely on the Internet for most of their business—operate while showing numerous other cloud services how to do it.

How Salesforce Led the Way to the Cloud

An ever-increasing number of enterprises continue to move to public cloud services, software development platforms in the cloud, as well as cloud data storage and backup. Salesforce can take a lot of credit for doing much of the pioneering work that demonstrated that these cloud platforms were safe and reliable.


eWEEK at 30: Salesforce Shows Enterprises How Cloud Computing Works

Salesforce has many value propositions, but the main one that has put the company in the history books is that its Web-based tools set workers free to work from any location, on any device, and at any hour of the day. It also enables enterprises to obtain business services that they otherwise would have to collect individually or develop on their own, and generally for far less cost.

Financially, there is a long list of significant facts and figures connected with Salesforce.com, to be sure, but one astounding factoid is this: Here is a world-renowned company, growing by leaps and bounds in number of customers, income and influence that has not yet posted a profit.

You read that correctly. Salesforce started in the red in 1999 and 15 years later it's still officially in the red—although the company has nearly $1 billion in cash. Its market cap is $34 billion, and the stock price has been in the $50 to $55 range for the last five months.

This growth all has been at a steady pace. After one year in business, in 2000, the company had a respectable 1,500 customers. By 2001, the number had doubled to 3,500; by 2004, it was up to 14,000; and by 2008, it was at 51,800. The company broke the 100,000 customer mark in 2011 (104,000) and continues to add multiple thousands each year.

Last November, Salesforce.com became the first enterprise cloud computing company to deliver a $1 billion quarter. In its third fiscal quarter, which ended Oct. 31, Salesforce reported that its revenue rose 36 percent to $1.08 billion, exceeding Wall Street expectations. However, the company reported a loss of $124.4 million, or 21 cents a share, compared with $220.3 million, or 39 cents a share, a year ago.

However, founder, CEO and Chairman Marc Benioff insists that black ink is around the corner because there's so much business coming in the pipeline—$4.2 billion worth in deferred revenue, according to figures released by the company in its fall 2013 quarterly report. So things are looking up, as they say.

An 8,000-Employee Company That Thinks It's a Startup

Since Benioff, a fourth-generation San Franciscan, left Oracle and founded Salesforce.com in March 1999 in a rented Telegraph Hill apartment, the company has grown to become a $34 billion conglomerate with 8,000 employees and 130,000 customers. Its headquarters is at One Market Street, the renovated office complex that was once the headquarters of the South Pacific Railroad, a bastion of old-school American industrialism before it was taken over by rival Union Pacific Railroad.

Benioff told eWEEK in 2011, "We have 6,000 people working at Salesforce, but we still have the feeling of being a startup."

Benioff knew what he wanted with Salesforce early on, said Charles King, principal analyst with Pund-IT in Alameda, Calif.


eWEEK at 30: Salesforce Shows Enterprises How Cloud Computing Works

"Benioff approached the Internet differently," King said. "Before the [tech] bubble burst [around 2000-2001], the hot new trend was for an Internet company to become an 'application service provider' [ASP].

"This was the early version of the cloud, but the key factors weren't in place yet to make it work correctly. I remember talking to some of Benioff's people about their new startup in about 1999 and asking them if they were an ASP. They immediately said: 'Don't ever mention that term in connection with us again. We're not in that boat.'"

Emergence of Broadband a Huge Factor in Salesforce Growth

The convergence of several factors is the reason for these changes: the emergence of broadband connectivity as a de facto standard, vastly improved servers and networking equipment, relatively inexpensive (and virtually limitless) storage capacities and great improvements in the deployment of online services since the ASP days of the late 1990s.

Salesforce made sure it was ahead of the curve and ready for all those tech advancements. "Businesses have to be ahead of the trends so they can be there waiting for their customers, when they move to the new tech," Benioff told a New York audience Jan. 8 at the launch of the company's new Salesforce1 platform-as-a-service package. "Otherwise, they risk being left behind their competitors."

But Benioff doesn't think that first version of the Internet took the industry to a new level.

"The first version let us have browsers, which was very important because that let us get out of the operating system," Benioff told eWEEK. "The browser was kind of Cloud 1, which was, 'Now I have a browser, so I can access an app in a standard way and get out of the proprietary APIs of the operating system.' That was a huge shift."

Moving to Cloud 2

"Now we've moved to Cloud 2," Benioff said, "and we have native environments [such as Apple iOS and Google's Android] that are very exciting." Salesforce made the adjustment to make available native apps for all its products several years ago and not rely strictly on the Internet to deliver its services.

Benioff's mission hasn't wavered in the dozen years Salesforce.com has been supplying online sales and management tools to corporations, small and midsize businesses, and single-owner proprietorships: to help companies do their business more effectively—and to do it without selling on-premises IT hardware and software.

"The world is changing rapidly," Benioff said, "and we're moving into this mobile, social world that's [running] on next-generation open platforms. That's very exciting. All of our customers are rethinking their applications: to run their company, to work with their customers, to collaborate, to share information.

"A lot of these customers are still on old platforms, like Lotus Notes or Microsoft SharePoint, and they want to evolve. We're here to help them do exactly that."


Rocket Fuel