Salesforce Is a Cloud Computing Kingby
Market Cap: $24b
Salesforce.com, No. 2 in this year’s Bloomberg Businessweek 50 ranking, has been outpacing rivals Oracle, Microsoft, and SAP in the business software market by exploiting companies’ desire to stop managing programs for thousands of their employees and outsource the job instead. The company’s stock has climbed more than 170 percent in the past three years and Chief Executive Officer Marc Benioff is expanding his portfolio of cloud computing software for sales, customer service, and online marketing by branching into new areas like human resources. Benioff spoke with Bloomberg News reporter Aaron Ricadela from his home in San Francisco about the competitive landscape and his plans for the coming year.
Why are competitors like Oracle, Microsoft, and SAP having a hard time catching you in cloud computing?
Well, they’re not really in cloud computing. We’ve defined a market and we’ve executed it. What we have continued to focus on is defining our space within that market. You don’t buy hardware and software and hook it all up—you use our preconfigured services over the Internet. We picked our place in that market for sales force automation, then customer service and support, now marketing. Each of those product lines had been growing very aggressively. We also only do business in eight countries in the world. By focusing on that, we have had our growth trajectory.
Salesforce was known as a supplier to smaller companies. Now you’re landing very large deals. How important are they to future growth?
We really have relationships now with almost all the largest SAP customers. We have a huge relationship with Philips for example. We’re not a big customer story, we’re not a small customer story. We have a full portfolio of customers. And that’s been very important, because where enterprise software companies have traditionally gotten themselves into trouble is, big deals can be lumpy—you hear that on these [analyst] calls all the time. And that’s not what you hear on our calls. We have had a much more even performance.
You made your mark in software for field sales teams, and expanded into customer service tools. Lately you’ve been promoting your marketing software as the next big growth area. What’s the opportunity for Salesforce here, and how are you standing apart from IBM, Adobe Systems, and Oracle, which are also chasing this area?
This is the third leg of the stool. When we talk to our large customers, they are spending huge amounts in marketing—in some cases 10 to 20 times what they spend on information technology. And a lot of that spending is getting turned into technology spending. So it’s a very, very exciting time in marketing. We spent approximately $1 billion in the last three years on acquisitions in the marketing area. We want to build a strong marketing product line, but mostly through acquisition. That’s different than how we built sales and service, which was organically. We can go faster by buying.
You made your biggest-ever acquisition last year, buying Buddy Media, which helps companies place ads on Facebook, for $745 million. There’s talk on Wall Street that you weren’t happy with the deal.
I feel good about the acquisition and I feel good about the direction with marketing. The most important thing for us is we continue to buy these No. 1 companies. Buddy was a No. 1 player, Radian 6 was a No. 1 player. We are building a $1 billion marketing business—that’s our No. 1 goal. We don’t talk about it, but the last time I checked were managing about 10 percent of Facebook’s ad spend.
Oracle, your former employer and now one of your biggest rivals, is talking a lot about cloud computing. Its vision is to save customers money and give them better integration when they buy all the components from Oracle, from the database to the middleware to the apps. That’s something Salesforce can’t do.
What our customers want is very deep sales, service, and marketing capabilities, and they want that as a unified experience. That is not Oracle’s vision. We have more developers and independent software vendors building on our technology than ever, and you can see it in our AppExchange. We have thousands of cloud-based apps that are deeply integrated into our service today and that customers have used really aggressively. I have a really good feeling about our vision of the future.
At Davos, you hosted a party with Sean Parker that was attended by Lloyd Blankfein and Marissa Mayer—and a lot of animal heads on the walls. It was billed as the “future of philanthropy.” What were you trying to accomplish?
It wasn’t really my party—I was there to give moral support, though I am paying for some significant part of it evidently. I’m friends with this guy who used to be the president of Facebook, named Sean Parker, and he’s had this vision to do a really spectacular party at Davos. We had done a philanthropy session, a large one, at the end of the Friday session at Davos, which was very well-received. In the last 12 years I’ve been to Davos 11 times. He came to me because we were working on the reelection of the president. He told me all the things he wanted to do and I said, “Whatever you want to do, I’m with you.” I do not claim to take credit for it being my party.