February 26th, 2009 by Denis Pombriant, founder and managing principal, Beagle Research Group

Salesforce.com Chairman and CEO Marc Benioff delivered the good news to eager investors and financial analysts yesterday in his quarterly earnings call after the market closed. It was like a spring rain in a desert. For the year just ended—its 10th—Salesforce.com generated just over $1 billion in revenue, smashing its previous records, and adding 3,600 net new customers.

Ten years ago Benioff, Parker Harris, and a small group of determined San Francisco technology mavens and executives founded the company on the premise that the world ought to move to on-demand computing. While the idea was intuitively obvious to true believers, there was a great deal of doubt in the rest of the world. Skeptics complained that no one would trust their data to the emerging Internet or that an application that ran in a browser could be very powerful. Times change.

I remember very clearly the first time two people from Salesforce.com—Clarence So and former CEO John Dillon—briefed me, in February 2000. I had just started a job the prior month as a senior analyst at the old Aberdeen Group and for whatever reason I had decided to cover the emerging market of CRM and hosted delivery models.

My previous jobs had mostly been in software sales—and the first time I saw Salesforce.com’s product I not only thought, “This makes perfect sense,” but also, “Why wasn’t this available when I was selling?” It was such a clear idea, the kind of thing that I would later call a disruptive innovation.

Today Salesforce.com is the CRM market leader—if not in absolute terms, then certainly in momentum and mojo. They took on Siebel Systems in what looked like a preposterous and Quixotic adventure—and ended up eating Siebel’s lunch. Whoa!

The company has achieved a great deal in the last 10 years, making on-demand or software-as-a-service or whatever they decide to call it this week an increasingly conservative choice for new solutions, and not just for CRM. With ever-growing regularity, HR and back-office applications are now being sourced as on-demand offerings.

Nobody starts a company that builds conventional applications anymore. The economics simply don’t work. And it is so obvious that a new generation of innovators is not only building apps the on-demand way but building new business processes as well. Take Salesforce.com alumnus Tien Tzuo, who founded Zuora last year with a small cadre of friends. The vision? To deliver an on-demand billing-and-payment system for on-demand companies. It turns out that these companies have requirements not easily met by conventional billing systems. So the innovation process has started anew.

The business model took a lot of getting used to in a world where revenue charts for technology companies typically looked like blueprints for ski resorts. In a world where technology costs were high and products’ built-in obsolescence required replacement by subsequent larger investments, it was a challenge for a vendor to convince financial analysts that this way was better. Customers would respond to low total cost of ownership with loyalty. In the end the company’s momentum and happy customer base gave the financial whiz kids the encouragement to back the company’s IPO.

Steve Cakebread came on board as chief financial officer to help Salesforce.com in its successful pre-IPO courtship of the movers and shakers on Wall Street—and just a few weeks ago Cakebread left the company, perhaps to start the long process over again, this time as CFO of Xactly, an incentive management company. In yesterday’s call, Benioff graciously acknowledged Cakebread’s contributions.

There will be plenty of time later to discuss the company’s latest adventures in Cloud Computing, and to critique this or that. Today, we can savor the moment when on-demand computing hit the billion-dollar mark. Happy 10th birthday, Salesforce.com.

Denis Pombriant is the founder and managing principal of Beagle Research Group, a CRM market research firm and consultancy. His own blog can be found here, and he can be reached at denis@beagleresearch.com, or on Twitter (@denispombriant).

I’m a little disappointed in the “net add of 3,600″ users. Seems like that is way low. Attrition?

Mark

Comment by Mark Antill — — March 8, 2009 @ 1:45 am

I am a bit surprised a tthe low 3,600 net add of users.

This seems low.

Attrition?

Mark

Comment by Mark Antill — — March 8, 2009 @ 1:46 am

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