Global CIO: Salesforce.com CEO Benioff On IT Scams And Cloud Power

When Salesforce.com CEO Marc Benioff talks about "what a scam traditional enterprise software and hardware is," maybe he's only saying that because he's the leading proponent of cloud computing, which is traditional IT's worst nightmare.

Maybe, but maybe not.

In fact, Benioff felt justified in making that "scam" charge because he runs his entire company's infrastructure on 1,500 Dell PCs and 100% cloud software. That's a $1.3 billion global company with 70,000 customers, 15 billion database transactions per quarter, five 9's of reliability, and transaction times of less than 300 milliseconds.

On 1,500 PCs and nothing-but-cloud software.

Now I think we can all agree that "scam" is a bit harsh to describe the entire traditional enterprise IT landscape—I think even Marc Benioff himself would admit that. But in a separate comment, he was dead-center perfect in saying that a "sea change" is underway due to the rapid rise in not only cloud-based applications but also cloud-based platforms, a combination that is winning converts among CIOs who are gaining confidence in the cloud as they see more and more viable cloud options available to them.

And as we've discussed before—particularly in a column called Global CIO: Cloud Computing's Deadly Vulnerability—it's not just Salesforce.com and a few teenagers who are saying that cloud computing's time has come. In fact, it's exactly the opposite: the CEOs of Hewlett-Packard, Oracle, IBM and many mid-sized companies have also said that cloud computing offers enormous promise and have begun aligning their strategies, products, and services around the cloud.

In fact, we put "The Cloud Imperative" at the very top of our list of CIO priorities for the coming year in Global CIO: The Top 10 CIO Issues For 2010.

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But Benioff stands alone in his combination of passionate advocacy and proven cloud achievement—did I mention that Salesforce.com runs its entire global infrastructure on 1,500 PCs?—and his next wave of cloud leadership will take several shapes: the new Chatter social-media application for the enterprise; an expanded professional services organization that will help large enterprises with complex cloud/on-premise integrations; an increasing emphasis on the Force.com platform; helping large enterprises develop new cloud apps in areas such as global supply chains; and broadening the company's role as an "enabler" of the cloud-computing imperative.

And while Benioff stresses that there is an enormous amount of work still to be done before cloud computing begins to reach its potential, he's equally pointed in his efforts to prove it's an idea whose time has come.

"A year ago, liquidity was such a big issue, and so CIOs looked at alternatives like the cloud more aggressively than ever before," Benioff said in a recent interview at Salesforce.com's San Francisco headquarters. "But today, not only is the economic environment a little better but you've also got analysts and cloud-computing customers and investors who've all become very bullish on the concept."

That bullishness is shaking up the entire IT industry, Benioff says, with feisty new companies and technologies and approaches emerging while established companies try to find the right balance between their traditional models and the new cloud opportunities. I asked him about an opinion shared by IBM CEO Sam Palmisano and HP CEO Mark Hurd: that cloud computing has enormous promise, but is an "unfortunate" name (Palmisano) and simply a bad name (Hurd: Global CIO: Hewlett-Packard CEO Hurd's Strategy: The Infrastructure Company"I don't like it—no, I don't like it").

"A whole new generation of companies have emerged, and a whole new wave of innovation has emerged: companies that run apps in EC2, or another Facebook app that runs off the internet," Benioff said. "And in the midst of all this, we want to be the catalyst for change and innovation in the software industry.

"Our premise is this: instead of having to buy more software and more servers, you can just get going—and in much less time and at a much lower cost. And inevitably in times of such extreme change, some companies get left behind, and they have difficulty meeting their customer needs and embracing some of these bold new ideas, so they resort to naysaying and get caught in the status quo and they have a very hard time trying to get out of that. You have to understand that the pace of acceptance is different for every company," he said, and that their current uncertaint about the cloud "has a great deal to do with their tolerance for change."

As we wrote last week in Part 1 of this 2-part series about our Global CIO conversation with Benioff, he's got a soft spot for customer-side companies struggling with that pace of acceptance, even though it often means that while they philosophically grasp the cloud's power and potential, they are still not mentally ready to make the leap. From that Part 1 column: "People are riding the curve at their own pace, and that's just the way it is," Benioff said during an interview in his San Francisco office. "That's reality, and it's not necessarily a shortcoming that everybody's not seeing it the same way or jumping on board aggressively. Everybody gets there eventually."

"The curve" to which Benioff refers is an allusion to Geoffrey Moore's work regarding the impact on businesses of technology's relentless increase in power and decrease in price, and Benioff insists that the ultimate impact will lead companies to not only believe in cloud computing but to invest in it as well.

Addressing a large audience of CIOs at the Google Atmosphere event in London three months ago, Benioff asked, "Are we riding this technology continuum, or are we not riding it? Because if you're not, your competitors are. And they're riding it because they have to do things at a lower cost, they have to do things that are easier to use, and they have to be more competitive than you are. . . . So we have to grab that technology brass ring and run with it, and today that brass ring is cloud computing."

One example: Salesforce.com is preparing to run with its new enterprise-strength social-media application called Chatter, which goes into beta next month before being offered as a more-powerful and –flexible alternative to Microsoft Sharepoint.

"We want to take Chatter up very aggressively against Sharepoint and show what cloud computing can do when you combine the best features of social media with enterprise applications," Benioff said. "We've got a whole different approach to collaboration than Microsoft does.

"Think about Facebook: the amazing thing about it is it lets you know so much about so many people that you really don't care about," he said with a chuckle. "But what if you could apply that type of leverage and engagement and widespread knowledge to the business world or to enterprise applications?

"That's really the power of this model we're creating with Chatter," which will allow Salesforce.com to "change Customer Relationship Management into Collaboration Relationship Management. I think that when we give our customers that sort of power and capability, they'll be ready to get rid of complex and limited and closed systems like Sharepoint and, in particular, Lotus Notes."

Since Chatter is completely web-native and optimized for the cloud, the next version of the product will deliver a capability that I believe will be a major if not the primary differentiator for enteprise apps in the next two or three years: the ability to weave customers intimately but securely into your company's operations.

"And with our next version of Chatter, we're going to have the capability to bring customers on board as part of the workstreams, and we think that's going to be another great opportunity for CIOs to go forward and create change and innovation within their organizations," Benioff said.

Another big opportunity for Benioff and Salesforce.com is professional services, specifically in helping large customers integrate and optimize their existing on-premise applications with Salesforce.com's applications and tools. In the last quarter, Salesforce.com handled 15 billion database transactions for its customers (you can check it out the stats here), and Benioff said that half of those involved data exchanges between customers' legacy apps and Salesforce.com apps. From the company's 2009 annual report, page 5:

As the customer realizes the benefits of our service, we try to sell more subscriptions by targeting additional functional areas and business units within the customer organization and pursuing enterprise-wide deployments. We also want to provide professional service offerings that are complementary to our service and enable us to sell subscriptions to larger customers who require assistance with complex integrations and customizations.

One such customer is Dell, which has 80,000 Salesforce.com users. The two companies have worked together to create a customized vendor-relationship application for Dell, and Salesforce.com is now developing a new global supply-chain application for the company, Benioff said at the Google Atmosphere event last year.

In explaining last week "why you're seeing us have some success," Benioff said, "Lots of CEOs as well as CIOs have undergone enormous change in the past year—they need to be able to deliver high availability, high reliability, massive scale, broad transformation, etc." And while it takes time for the message to be embraced, more of those CEOs and CIOs are beginning to believe that the cloud approach offered by Salesforce—infrastructure, apps, development platform, AppExchange, and collaboration capabilities—can "give these CEOs and their companies the real ability to change."

On top of that strategy, Salesforce.com and Marc Benioff have some impressive numbers to toss around: 70,000 customers, $1.3 billion in annual revenue, continued growth through the global recession, multiple customers with more than 50,000 users, and so on. But to me, the real stunner is this one, because it shows that that after all the talk, the simplicity promised by the cloud can be delivered:

The entire Salesforce.com global cloud-computing business—all 70,000 customers, all $1.3 billion in revenue, all 15 billion quarterly database transactions—runs on 1,500 PCs.