In 10 years, salesforce.com founder and CEO Marc Benioff has turned CRM-as-a-service into a $1B business with 55,400 customers. Both numbers are impressive. It took SAP more than 35 years and an acquisition of Business Objects to cross the 50,000 customer mark (BOBJ pushed them over 80,000).
Few application companies make it to the $1B mark. And even fewer make it to the $2B level. In fact, there are only three companies there today -- SAP, Oracle, and Intuit. And Intuit is questionable in the enterprise applications category as QuickBooks represents about 20% of the company’s $3.1B in 2008 revenues. If we stretched the definition to include business intelligence/performance management, we could add SAS to the very short list ($2.267B in 2008).
Believe it or not, the only other companies to cross $2B were Siebel Systems and PeopleSoft. Siebel made it to $2.1B in 2001 before beginning a precipitous decline that stopped when Oracle bought the company in 2005. Likewise, PeopleSoft crossed $2B in 2001, too, and dropped slightly below that mark for a few years before acquiring J.D. Edwards in 2003. The company was later bought by Oracle, too.
Looking back at history, i2 Technologies crossed the $1B line on the basis of its meteoric rise in supply chain planning software. Siebel and PeopleSoft made it twice as far on the strength of their creation of the CRM and HR software markets, respectively.
Salesforce.com has made it this far by proving the viability and vitality of the SaaS market. It has done it for the most part by leveraging sales force productivity applications. How much further can it take sales force automation? Are there another 55,400 more customers to sell? Or, does it need to expand into other productivity sectors like human capital management?
The company has also been able to get this far because of the lack of a serious competitive threat from SAP and Oracle. The industry’s two largest vendors have given the SaaS/cloud vendors a free ride for the past decade. While both offer SaaS or On-Demand versions of CRM, salesforce.com has had little trouble selling around them.
This will change this year. SAP and Oracle are planning to offer suites of products encompassing CRM, HCM, and procurement. While executives at the large vendors remain concerned about the poor or non-existent margins relative to on premise deals, their field sales forces are screaming for affordable products that can be implemented relatively quickly.
Marc does have a couple of advantages that his predecessors didn’t – his Force.com platform and AppExchange. To date, there are more than 200 “native” applications being developed that extend his software into new areas like financials and HCM. He can leverage the data collected by his AppExchange site to see exactly which of these third party applications are gaining traction by looking at downloads and test drives. This provides a natural, target-rich environment for acquisitions.
Still, even with those advantages, he needs a lot of luck and a good economy. Much of his success has been due to the company’s strong momentum. I would hate to see him stumble and end up like Siebel or PeopleSoft as a trophy on Larry’s wall.