First Coffee for September 13, 2005

David Sims : First Coffee
David Sims
| CRM, ERP, Contact Center, Turkish Coffee and Astroichthiology:

First Coffee for September 13, 2005

By David Sims
david@firstcoffee.biz

The news as of… well, now, here in San Francisco for Dreamforce ‘05 First CoffeeSM’s just going to post as needed, next week we’ll be back on the early-morning stuff.

Oh, the music? That’s one of the great things about being back here in America, the CD selection. First CoffeeSM picked up, among others, Al Green’s Greatest Hits, Duke Ellington’s underrated Blues In Orbit and The Definitive Collection: Patsy Cline:

Quote of the Day, from somebody yakking away on a telephone here at the Moscone Center where they’re holding Dreamforce ‘05: “I fell off the idiot train about 500 miles ago.”

Lord I’m one, Lord I’m two, Lord I’m three, Lord I’m four, Lord I’m five hundred miles from where I fell off the idiot train…

First CoffeeSM had a chance to sit down with the affable Jim Steele, president of salesforce.com. “I don’t really care about the title,” Steele said, noting that he considers himself more of a chief sales officer.

When he first heard about the idea of renting software online via the hosted model, thought the product wouldn’t work for anyone but small companies. Oh “the whole idea sounded great for SMBs,” he said, but not for any company of any real size, of course. He couldn’t imagine why a company big enough to afford to buy the installed software would take on the hosted model instead.

Steele was working for IBM was when the whole ASP thing came out, and IBM did NetGen, basically to jump on the ASP bandwagon. Steele, as well as anyone else with a pulse, noted that the ASPs by and large failed to deliver on the promise. Then about three years ago, when he got the call from salesforce.com, he said, “I thought, ASPs haven’t done that well, what’s the difference, Marc?” It still sounded like the same thing.

Benioff emphasized to him that software and service are connected, and they weren’t talking about selling third-party stuff, because – as Steele thought – if someone’s buying software hosted, and it’s the same as the installed model, why would I buy it from anyone other than who made it?

So he was intrigued, and when he talked to customers he found they were happy with it, they liked it. So his question to Benioff was “Marc why do you need me?” Benioff said “You’re my enterprise experiment.”

Steele thought that sounded kind of weird, he didn’t want to be anybody’s “experiment,” but Benioff said that while salesforce.com was seeing some results in the SMB space, “if we can sell to big and small companies alike, we’ll be the first to do it.” And “that challenge drew me in,” Steele said.

During the conversation First CoffeeSM asked why there was so much resistance to the hosted model from established vendors such as Siebel. Steele explained that Benioff and Tom Siebel had worked together before Siebel started Siebel and Benioff started salesforce.com, and had something of a friendship. As a matter of fact, Benioff was one of the early investors in Siebel, but he took the money he made investing in Siebel and used it to start salesforce.com, something to compete with Siebel.

So Tom Siebel really wanted to cut Benioff and his upstart company off at the knees, it was personal at that point. And then of course Tom Siebel issued a string of death pronouncements on salesforce.com, saying next year salesforce.com won’t exist, and the next year he said in twelve months that company’ll be gone, this goes on for years and finally he turns around and buys UpShot, to compete with this company he couldn’t believe would last until Christmas.

“We were worried for a while,” Steele said, because salesforce.com saw UpShot as a product that could be serious competition. All water under the bridge now, of course. And one wonders how Oracle is going to keep Siebel intact, now with all the CRM products they have there.

Steele sees the fact that the CRM market right now is split between the legacy guys like Oracle, SAP and Microsoft and the on-demand guys influences the ways companies go about selling their products. The way the legacy guys, the Oracles and SAPs sell is they go into their existing customers and say buy our CRM, to complete your suite, and the customers say it’s not that good, so the Oracles and SAPs basically give them the licenses free to keep the competition out.

The legacy guys are into maintaining their software businesses, “left to their own devices they’d sell software all day long,” and the way Steele sees it, they’d have to cannibalize their businesses to become an on-demand company. He doesn’t see that happening, obviously, so he’s not overly concerned that Microsoft or Oracle is suddenly going to run salesforce.com or the other hosted CRM guys out of business.

One of the big advantages of the on-demand model, that First CoffeeSM heard from exhibitors at the expo, salesforce.com execs and customers is that the model forces the CRM vendor to prove their worth every month, or else it doesn’t get renewed – “We’re the most paranoid company in existence,” Steele declared at one point, “we never take out customers for granted.”

First CoffeeSM also heard this from Bonnie Crater, the vice-president and general manager of salesforce.com’s customer support division. Before working for a hosted vendor, at a previous company, Crater says “we were pretty much guessing what features the customers wanted.” Having a customer pay you every month, they let you know what features they want pretty clearly. And you don’t say “Oh, that’ll be on the .6 release next year,” given salesforce.com’s model they can be constantly upgrading.

The big guys, when they go in to a 1,000-seat company they’ll say hey, better buy 2,000 licenses at this special lower price for when you grow. “We start small,” Steele explained, “and say ‘let’s get it started in this one department, only buy what you need now,’ they see it works, and they expand it.”

So why is it so hard for the on-premises vendors to simply add hosted as an option? “It’s not in their blood. It’s not their passion, you can’t have two religions, you can’t have two passions, and our passion, our religion is hosted, it’s about the user experience, not the IT experience,” Steele thinks. When you sell someone service instead of software, “it’s not about speeds and feeds, it’s not about features and functionalities, it’s about the user experience.”

When he was at IBM as the client-server computing model was taking root Big Blue was in the glass house, Steele says, “protecting the Alamo of our mainframe business. You didn’t get fired for losing business to the client-server guys,” their concern was losing business to the other mainframe makers. So there we were, he says, defending the mainframe business “when the real battles were being fought all around us.”

He sees Siebel’s being swallowed up by Oracle not as a huge surprise, and he gives Siebel its due as “the ones who invented CRM, they certainly made our success possible, they had the vision and the dream, but they fell short in the execution.”

Asked what the biggest public misperception of salesforce.com is, he thought and said the days of CFOs coming in to look at their books to make sure they were a viable, solid company are over, but the one misperception that lingers is how people don’t realize “how operational Marc is.”

Benioff is seen as the Big Picture Guy for salesforce.com, the visionary, but as Steele says, “He knows all the numbers, he’s up on the details of the company, yes he’s the idea guy, the visionary, but he also really understands the inner workings of the company. He has the flair but he’s also shrewd about running the company internally.”

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