Best Friends

Anyone wandering into the corporate offices of upstart CRM solutions provider salesforce.com should expect to hear some barking. The source? It might be CEO and chairman Marc Benioff’s golden retriever, Koa, who is known to roam company hallways when the boss is in. Then again, the sound may be coming from salesforce.com itself,. which today, a scant three years from its 2000 launch date, is actively nipping at the heels of such CRM big dogs as Siebel Systems and SalesLogix.

Expected to double last year’s sales totals to top the $100 million mark in 2003, salesforce.com represents one of the few Internet success stories to emerge more muscular than ever after the exploded tech bubble. But today’s achievements represent just a small part of the 38-year-old Benioff’s vision. He’s after much more than just building his company; Benioff’s master plan is to destroy the traditional client-server technology concept itself. He calls it “The End of Software.”

Typically clad in a Hawaiian shirt, the 6’5” Benioff makes an unconventional warrior, but in salesforce.com he wields a potent weapon. Unlike traditional CRM and sales automation applications which involve purchasing, customizing and installing often-costly software onto company systems, salesforce.com offers a 100 percent Web-enabled solution for sales organizations, requiring little more of users than Internet access. Up-front costs are virtually nil and customers simply pay per subscriber, on average about $65 a month. Salesforce.com’s customers now total 6,500 accounts, with 90,000 users.

Benioff says that the idea for an entirely online solution germinated in his mind when, as a senior vice president at Oracle, he got his first glimpse of a commercial Website using a robust Oracle database.

“It was really the beginning of the Internet, and I was using this incredible application Amazon.com,” he recalls. “And I said, ‘Why can’t all enterprise software be exactly like this? Why are we still pitching this old client-server technology to companies when that’s not what they should be buying anymore?’ They shouldn’t be buying stuff like ACT, SalesLogix, Microsoft or Siebel that was written a long time ago. Even when the technology itself has been refreshed, the business models of these companies are still old. It was clear to me that the Internet is a network that spans utilities that should be built around business models that are subscriptions.”

As a result of this revelation, Benioff says, he began to think about the Internet more as a pipeline network and to consider the possibility of delivering software the same way other consumer services are offered.

“That’s the way all modern networks are,” he explains. “Take water. You don’t pay for water five years in advance. We don’t have to dig a well to get water. The same with electricity or sanitation. I don’t have to dig an outhouse, and I don’t pay for sanitation services 10 years in advance. So why is it with enterprise software that we’re making people dig outhouses in their backyards and pay for septic service years in advance? It makes no sense when there’s a modern network. That’s what the Internet is. I had this vision that people don’t have to buy software anymore.”

To turn this vision into a reality, Benioff, with the blessing of his mentor and friend CEO Larry Ellison, took a leave of absence from Oracle. Combining $6 million of his own money and $2 million from Ellison with more than $60 million from other investors, Benioff rented a one-bedroom apartment in San Francisco and hired three developers to begin banging out the code that would one day become the salesforce.com product. That was in 1998. By December 1999, Benioff says, the company had lined up 20 customers, allowing him to depart Oracle and focus his activities entirely on the new startup.

Since then the company growth chart arrow has headed steadily northeast, with continuous growth in sales figures, client companies and subscriber numbers. Not that everyone has been easily convinced of salesforce.com’s staying power. In April 2001 Tom Siebel unintentionally provided fodder for Benioff’s company bulletin boards when he volunteered to the press, “There is no way that company exists in a year.”

That Siebel, the unquestioned top dog in the CRM software kennel, would take a moment to recognize a comparative pup like salesforce.com only served to validate the threat Benioff’s company and his application service provider (ASP) model represent to traditional CRM software vendors.

Credit for the company’s success can’t be attributed entirely to the convenience and flexibility of the salesforce.com solution, however. Observers rate as equally important Benioff’s single-minded dedication to evangelizing not only to potential customers, but also to the press, investors, other tech-industry power players, and pretty much anyone willing to sit still and listen.

But pitching product is nothing new to Benioff. At 22 and newly arrived at Oracle with an undergraduate degree from USC in hand, he was soon named the company’s rookie salesman of the year. At age 25 he became the youngest VP in company history. The following year he was put in charge of direct marketing, succeeding none other than the departing Tom Siebel, who then got just the first of many glimpses of Benioff in his rear-view mirror.

During his selling tenure at Oracle, Benioff developed what he calls his strategy of modeling, which has nothing to do with high fashion, but everything to do with fashioning a complete understanding of the customer’s needs.

“Modeling means asking your customers questions that help you understand who they are as people,” he explains. “You want to know five things. First, what do they want? What is their vision? Ask them that and get them to be clear about what they desire. Then write it down. Second, why is that important? What are the values, the principles, and the beliefs that are guiding that vision? Get them to prioritize – is this more important than that? Is it more important than this? Once you understand your client’s vision and values, you are really able to communicate effectively to them how your product is going to help them.

“Step three is, how are we going to get there? What is the customer going to do to achieve that? Ask that, and they might tell you, ‘We’re going to do an RFP, talk to competitors, check your references, get our legal department involved, get buy-in from the CEO and sign the contract. Then I’m going to an implementation training class.’ They explain all that and you say, ‘After you do all these things, will you have realized your vision? Will you have accomplished your goal?’ So you get a sense of that. Then step four is to ask what is currently preventing the customer from realizing that vision. I call these the obstacles. And they could be politics, a tight budget, the existing product, a good relationship with the current supplier – all that. You want to know what the customer’s roadblocks are.”

Finally, Benioff says, salespeople need to determine what success means in the customer’s eyes. “You ask, ‘How will you know that you have reached your vision?’” he explains. “They’ll say something like, ‘Well, productivity will have increased 30 percent, my users will tell me how happy they are, our profits will be up 20 percent, our customer service will be better,’ and so forth.

“Now as much as I believe in implementing the five steps, I still feel that salespeople have to be themselves and have to figure out what their own five steps are. You can get training and learn all about strategic selling, but ultimately you have to be true to yourself and determine how you want to get at the same core points. But for me, these five keys were critical to learning how to model my customers.”

As Benioff has since discovered, however, the modeling strategy has applications beyond just the salesperson-customer relationship. He says the five steps now invigorate nearly every process within the company and have even helped salesforce.com stay on course in a rapidly changing business climate.

“The five steps are a powerful tool for more than just modeling the customer,” he says. “At salesforce.com we model potential hires when we interview them. We model our business all the time. Getting clear about your vision and values is very important to make your own product and company successful. You can model yourself. You can model your product. You can model your company – whatever you’re working on. You can say, ‘What do I want for my company? What’s my goal? What’s important about it? How do I get it? What’s preventing me from having it? How will I know when I have it?’ You can model the whole thing.”

Benioff admits that many of his philosophies about business and selling stem from a combination of his own experiences and the lessons eagerly learned by carefully studying successful individuals from an incredibly broad range of backgrounds. From Oracle’s Ellison he says he learned to constantly challenge and lead the market and industry. Leaders are never complacent, he says, and must constantly be growing, adding new products and new technology while always striving to improve as an organization.

Another influential figure he identifies is Secretary of State Colin Powell who, in his work with the charitable organization America’s Promise, inspired Benioff to launch the salesforce.com Foundation, a philanthropic initiative focused on providing relevant access to technology for youths in underserved communities. [www.salesforcefoundation.org] In the spiritual realm Benioff talks about being impressed with the boundless passion of Billy Graham and the impact of meeting the Dalai Lama who, he says, is that rare individual capable of combining in one person the tenets of compassion, nonviolence and the search for self-actualization.

Benioff even credits salesforce.com’s angel investor from Japan, Chikara Sano, with the idea for keeping a corporate canine around. Since prehistoric times, Sano told Benioff, people have unconsciously felt more comfortable and safer with dogs around, whether to ward off wild animals outside the cave or to identify the UPS delivery person approaching the home. Hence the frequent presence in the office of Koa, whose unofficial title is “Chief Love Officer.”

But for evidence that Benioff is willing to take learning lessons from nearly every possible quarter, one need only ask which outside expert has recently had the greatest impact on the organization. The surprising answer: rapper MC Hammer.

Says Benioff, “There are a lot of incredible people who have valuable ideas. MC Hammer is outside of the technology industry, but we’ve been glad to have him come in to the company a few times. He says, ‘Look, salesforce.com is a hit. Congratulations. Now you’ve got to do the four things that rappers building a hit song need to do. One, you have to create momentum to keep that song going. Two, you’ve got to get people talking about your song, get testimony, have people tell their friends how much they love the song. Three, you need to build a community of people who come to concerts – people who love using salesforce.com. And four, you need to make sure those people stay with you.’

“To do that,” says Benioff, “we have to create a great product and stay ahead of the curve, because there’s no barrier to entry. There’s always another rapper coming along. There’s no doubt in my mind that MC Hammer is a brilliant guy. He’s seen the highs, he’s seen the lows and he understands his industry and business very well. When I look at his industry, I think he has tremendous insight. Those four things are dramatically influencing a company like ours. We ask ourselves those questions: How do we increase momentum? How do we get more testimony? How do we build community? How do we make sure that we maintain market share with retention?”

The title to MC Hammer’s signature hit, “U Can’t Touch This,” might also provide the perfect metaphor for salesforce.com’s continuing success despite the calamities that have befallen the tech industry. Follow Koa as he pads around the company halls, and you’d never know that the NASDAQ was hovering around Mendoza Line levels. Tight economic times notwithstanding, Benioff still places a high priority on fun – and backs his words up with cash. In February 2002, he threw a “Freedom from Software” party at Carnegie Hall featuring a musical performance by David Bowie, and in September he dropped $100,000 to celebrate salesforce.com’s 5,000th customer by renting out Pac Bell Park, home of the San Francisco Giants baseball team.

Asked if he agrees with the assessment that he’s a man who “always seems to get what he wants,” Benioff demurs, noting that what the CEO wants and what’s the right thing to do are not always the same. To underscore his point he cites some of the massive ethical lapses that have plagued Corporate America the past few years.

“That may be a perception about me,” he says, “but I don’t feel it’s the reality. I try to create only what is ecologically sound. So if what I want does not promote the greater good, then I try my best not to create it.

“In other cases where we have basic goals for market share, revenue and beating our competitors – those things are mostly ecological. But we have to pursue them with integrity, good business practices, consistency and leadership. I believe in our management team, and I’d put them up against anyone’s. But we will only do things within a certain constraint. There have been issues at companies like Enron, WorldCom and others where they created things that were not ecological. So that’s why we’ve built into the company structures to make sure we maintain the highest levels of integrity, ethics and values.”

Benioff’s infectious optimism and faith in the Web-based delivery model aside, salesforce.com’s future success and the likelihood of “the end of software” are far from certain. On the one hand market researcher IDC predicts that ASPs will grow from $3 billion in sales in 2002 to $20 billion by 2006. Meanwhile Siebel is struggling, with a 50 percent drop in license sales in 2002. Yet the substantial majority of salesforce.com’s customer base remains among smaller sales organizations that can’t afford the high price tags that come with traditional CRM solutions. Some industry experts wonder whether Benioff’s charisma and enthusiasm will be enough to convince larger enterprises to abandon the security of control over their own information and technology. These are precisely the organizations salesforce.com is targeting, however, and a few recent converts include divisions of Avis, Kikkoman, GE, Nokia and Time Warner. In addition, salesforce.com is running all North American operations for AOL.

It’s clear that Benioff derives a great deal of glee from each account stolen away from his bigger rivals, many of which are run by former colleagues from the Oracle proving ground. But in harmony with his belief that the office door should never be an obstacle to fun or friendship, Benioff expresses regret that more of his competitors don’t share his Eastern-inspired perspective on the nature of business competition.

“I’ve been disappointed by the way some of my friends have reacted when we’re competing in business,” he says. “The Japanese believe that business is temporary, but relationships are eternal. That means that one day you’re competing against somebody, one day you’re working for somebody, one day you’re partnering with somebody, but the relationship is the most important thing. I compare business to tennis. Larry Ellison, Tom Siebel, Craig Conway of PeopleSoft – all competitors of mine, and I’m playing tennis. I hit the ball over the net, the ball comes back, and it goes back and forth. But when we walk off the court we should still be friends – I don’t expect to make enemies playing tennis. But some people think that if you are competing against them in business it’s a personal attack. This is lunacy. And it also creates a situation where they lose perspective and they’re not able to lead their businesses properly. They should be friends with me, have lunch with me, want to know what I’m doing.”

The rest of us don’t have to go to lunch with Benioff to get a pretty good idea of what he’s doing. Failing some major catastrophe, he plans to spend the next 10 years playing enough tennis to build salesforce.com into a $10 billion company. That, he figures, should be just long enough to realize his vision of the end of software. In the meantime, the “chief love officer” should have plenty of tennis balls to play with.