Behind the Cloud

The Untold Story of How Salesforce.com Went from Idea to Billion-Dollar Company-and Revolutionized an Industry

Marc Benioff, Carlye Adler

• Publisher: Wiley-Blackwell
• Year: 2009
• ISBN:
  9780470535929
• Edition: 1
• Topic: Business
• Subtopic: Sales
• Index: Business

How did salesforce.com grow from a start up in a rented apartment into the world's fastest growing software company in less than a decade? For the first time, Marc Benioff, the visionary founder, chairman and CEO of salesforce.com, tells how he and his team created and used new business, technology, and philanthropic models tailored to this time of extraordinary change. Showing how salesforce.com not only survived the dotcom implosion of 2001, but went on to define itself as the leader of the cloud computing revolution and spark a $46-billion dollar industry, Benioff's story will help business leaders and entrepreneurs stand out, innovate better, and grow faster in any economic climate.

In Behind the Cloud, Benioff shares the strategies that have inspired employees, turned customers into evangelists, leveraged an ecosystem of partners, and allowed innovation to flourish.

PART 1

The Start-Up Playbook

How to Turn a Simple Idea into a High-Growth Company

Play #1: Allow Yourself Time to Recharge

Some ideas hit with a big bang. Others take time to stew. The idea for salesforce.com had been simmering since 1996 when I was a senior vice president at Oracle. I had been there for ten years and was becoming something I had never anticipated: a corporate lifer.

I knew that I needed a change, but I wasn’t sure what I wanted to do. Quit? Start a company? Take Oracle in a different direction? I was searching for balance in my life as well as an opportunity to pursue something meaningful. I took a badly needed sabbatical from work and rented a hut on the Big Island of Hawaii, where I enjoyed swimming with dolphins in the ocean and having enough time by myself to really think about the future.

My friends, including Oracle colleagues, came to visit. We had long talks about what the future would look like and what we wanted to do. Katrina and Terry Garnett were among those who spent time with me. Terry and I became friends when he ran marketing and business development for Oracle. He later moved to Venrock, the Rockefeller family’s venture arm, celebrated for its wise investments in companies like Apple and Intel, and he was making investments in early-stage start-ups. I had a great respect for his market instincts. One day, during a swim, we began discussing online search engines and how the Internet was changing everything for consumers.

I was intrigued by Web sites such as Amazon.com, which revolutionized the way consumers shopped. I thought the Internet would change the landscape for businesses, too. I told Terry that I was exploring how to take the benefits of the consumer Web to the business world. He enthusiastically encouraged me to pursue my own Internet technology business. “You’ve been at Oracle forever; you know the safe route,” he said. “But I think you are an entrepreneur. I think you can do something new.”

After three months in Hawaii, I traveled to India for two months with Arjun Gupta, a good friend who was at a similar crossroads. We had an incredible awakening in India. One of our most invigorating meetings was with His Holiness the Dalai Lama, who talked about finding one’s calling and the importance of community service. We also sought insight from the Hindu guru and humanitarian leader Sri Sri Ravi Shankar. But the most pivotal meeting for me was with Mata Amritanandamayi, commonly known as Ammachi, “the hugging saint,” because she warmly embraces everyone who comes to visit her. She’s hugged at least thirty million people and has calluses on her face from so many encounters. Known as the “mother of immortal bliss,” she has dedicated her life to easing the suffering of others.

Arjun and I met privately with Ammachi, and it was she who introduced me to the idea, and possibility, of giving back to the world while pursuing my career ambitions. I realized that I didn’t have to make a choice between doing business and doing good. I could align these two values and strive to succeed at both simultaneously. I told her I was thinking about leaving Oracle, and she told me, “Not yet.”

My sabbatical was one of the most productive periods of my career; it was certainly one of the most influential. Don’t be afraid to take time off when you need it. You could learn something that will change the course of your life, and at the least you will stave off the burnout that plagues so many driven, entrepreneurial people.

Play #2: Have a Big Dream

I saw an opportunity to deliver business software applications in a new way. My vision was to make software easier to purchase, simpler to use, and more democratic without the complexities of installation, maintenance, and constant upgrades. Rather than selling multimillion-dollar CD-ROM software packages that took six to eighteen months for companies to install and required hefty investments in hardware and networking, we would sell Software-as-a-Service through a model known as cloud computing. Companies could pay per-user, per-month fees for the services they used, and those services would be delivered to them immediately via the Internet, in the cloud.

If we hosted it ourselves and used the Internet as a delivery platform, customers wouldn’t have to shut down their operations as their programs were installed. The software would be on a Web site that they could access from any device anywhere in the world, 24/7. This model made software similar to a utility, akin to paying a monthly electric bill. Why couldn’t customers pay a monthly bill for a service that would run business applications whenever and wherever?

This delivery model seems so obvious now. Today we call it on-demand, Software-as-a-Service (SaaS), multitenant (shared infrastructure), or cloud computing. In fact, Nicholas Carr, former executive editor of the Harvard Business Review and one of the most influential thinkers in the IT industry, has since written two best-selling books validating this idea. Carr has even suggested that “utility-supplied” computing will have economic and social impacts as profound as the ones that took place one hundred years ago, when companies “stopped generating their own power with steam engines and dynamos and plugged into the newly built electric grid.”¹

The industry has come a long way, but consider that when we started, we didn’t have these industry supporters, or even these words, to describe the computing revolution we believed was beginning. Although there was yet to be any kind of SaaS industry, I believed that all software would eventually be delivered in the cloud. I would soon find that in order to pursue my dream, I had to believe in it passionately and be ready to constantly defend it. This lesson learned during our earliest days still guides us today.

Play #3: Believe in Yourself

While I was in Hawaii, the customer relationship management (CRM) company Siebel Systems went public. I had worked with the founder, Tom Siebel, at Oracle, and was familiar with a sales force automation product called Oracle Automatic Sales and Information Systems (OASIS), which he had developed and had parlayed into Siebel. I thought a program that allowed salespeople to track leads, manage contacts, and keep tabs on account information was a great idea, and I had been an early angel investor in his company. Siebel took off, and the IPO netted me a great return, yet I also knew the product’s flaws. This made me think about sales force automation (SFA) or CRM as an application category with revolutionary potential to be delivered on-demand, as a service.

SFA is a huge market; every company has some kind of sales force. In the late 1990s, when I was investigating the category, there was certainly room for improvement. Enterprise software was especially burdensome for the customer. It required maintenance and customization that needed months, or even years, to get right. It also required a hefty IT resource commitment, and more money than many companies wanted to spend on this aspect of their businesses. It struck me as curious that although this software was so troublesome, it remained wildly popular. I attributed this to the fact that if the software could increase sales productivity by even 5 percent, it made a meaningful difference to a business. What would happen, I wondered, if we offered a product that could increase productivity by the same amount, or more, and we made it easier to afford and use? Could you get a return on investment in six to twelve months rather than in three to five years? Replacing the traditional client-server model for an on-demand service that was simple and inexpensive seemed like a sure thing to me.

I had a number of conversations with Tom Siebel about creating an online CRM product. Typical licensing software was selling for extraordinary amounts of money. The low-end product could start around $1,500 per user per license. Worse, buying pricey software wasn’t the only expense. There could be an additional $54,000 for support; $1,200,000 for customization and consulting; $385,000 for the basic hardware to run it; $100,000 for administrative personnel; and $30,000 in training. The total cost for 200 people to use a low-end product in the 1990s could exceed $1.8 million in the first year alone.²

Most egregious was that the majority of this expensive (and even more expensively managed) software became “shelfware,” as 65 percent of Siebel licenses were never used, according to the research group Gartner.³

I told Tom about the SaaS CRM solution I envisioned. We would have “subscribers” pay a small monthly fee ($50 to $100, which added up to less than half the cost of the traditional systems), and we’d “operate” it so there would be no messy installation for the customer. Tom liked the idea so much that he invited me to join Siebel.

Through further discussions, however, I realized that Tom saw the potential only with the small business division, a tiny percentage of Siebel’s market. I saw the idea as having much wider appeal. I thought it was something that could revolutionize the software industry. I knew Internet-based applications would eventually replace traditional offline software. I became passionate and obsessed with this idea, and decided to go after it on my own.

Play #4: Trust a Select Few with Your Idea and Listen to Their Advice

I was certain that I wanted to start salesforce.com, but I wasn’t ready to openly discuss my idea. In fall 1998 I met for lunch with Bobby Yazdani, a friend from Oracle and the founder of the human capital management company Saba Software. We were getting together to discuss Saba, in which I had invested.

Like me, Bobby was struck by the transformation that was happening because of the Internet. We knew we were witnessing a major shift, and it wasn’t long before our conversation turned to the subject of ambition and entrepreneurship.

“The number-one mistake entrepreneurs make is that they hold their ideas too closely to their chest,” Bobby said. “Their destiny is their destiny, though. If they share their ideas, others can help make it happen.”

I considered what Bobby was saying and silently acknowledged how I hadn’t mentioned the idea of starting salesforce.com to anyone since Tom Siebel. Maybe Bobby had a valid point. I told him I wanted to build CRM online and deliver it as a service.

“It’s very good you told me,” he said.

“Why’s that?”

“I have three men working for me as contractors. Not only do they have SFA experience, but they have experience with major Internet applications as well. They are the best of both worlds.”

I couldn’t believe this coincidence, or my good fortune. Bobby explained that the three developers had their own company, Left Coast Software, and that he had wanted to buy them out, but they weren’t interested. They wanted to grow something, and felt that Saba was too far along. “They are brilliant engineers with good vision,” Bobby said. “Let me introduce you to Parker Harris.” I wasn’t aware of it at the time, but by the end of that lunch my destiny was set.

Play #5: Pursue Top Talent as If Your Success Depended on It

I met with Parker Harris as soon as possible. “So, are you guys good?” I asked.

“We’re some of the best people you’ll find in the Valley.”

I liked that confidence, especially considering that it was bolstered by what I had already heard. Still, I prepared myself for a very short meeting. Although Parker seemed like a promising technical candidate, I wasn’t sure that this was the next move he had envisioned for himself. I’d heard that Parker had recently returned from a six-week trek in Nepal and told his business partners that he wanted to do something more meaningful than helping salespeople sell more. I was concerned that Parker would be fundamentally opposed to SFA and that he would think it boring because he had done it before.

I also thought that enterprise software was boring, but my vision was to do something much bigger. My vision was “the end of the software business and technology models” as we knew it. I believed that this was a great story and would appeal to Parker, who had majored in English literature at Middlebury College. Building this service also provided an intellectual challenge inasmuch as it had to be highly scalable, reliable, and secure; the service had to be something every customer could use simultaneously. I knew that the scaling test would be compelling to any great developer. I also had a trump card: Parker wanted to be in San Francisco. Every day, he endured a long commute from his house in the city to the Saba offices in Redwood Shores. “I have the same problem,” I told him. “Salesforce.com will be in the city.”

Parker was sold, but he had to get his business partners, especially the more pessimistic Dave Moellenhoff, to see the light.

Play #6: Sell Your Idea to Skeptics and Respond Calmly to Critics

On a Saturday morning in November 1998, the developers from Left Coast Software came to my house on Telegraph Hill to discuss building salesforce.com. I had written a short business plan in preparation for the meeting. After the developers read it, Dave told me all the reasons why it was “a crackpot idea” and would never work.

“It’s an enterprise sale,” Dave said.

“This is totally different than all of enterprise software. It’s the next generation of companies that don’t even sell software. It is a new, more democratic way. It is the end of the software technology model. It is the end of the software business model. It is the end of software as we know it,” I replied.

“You’ll have to invest a ton of time to land customers,” Dave said. “Why would they trust this? Why would they buy this?”

“People want to be a part of something that is the...