Behind the Cloud E-Book

Marc Benioff

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 376

Veröffentlichungsjahr: 2009

Beschreibung

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.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Foreword

Introduction

PART 1 - The Start-Up Playbook

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

Play #1: Allow Yourself Time to Recharge

Play #2: Have a Big Dream

Play #3: Believe in Yourself

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

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

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

Play #7: Define Your Values and Culture Up Front

Play #8: Work Only on What Is Important

Play #9: Listen to Your Prospective Customers

Play #10: Defy Convention

Play #11: Have—and Listen to—a Trusted Mentor

Play #12: Hire the Best Players You Know

Play #13: Be Willing to Take a Risk—No Hedging

Play #14: Think Bigger

PART 2 - The Marketing Playbook

How to Cut Through the Noise and Pitch the Bigger Picture

Play #15: Position Yourself

Play #16: Party with a Purpose

Play #17: Create a Persona

Play #18: Differentiate, Differentiate, Differentiate

Play #19: Make Every Employee a Key Player on the Marketing Team, and Ensure ...

Play #20: Always, Always Go After Goliath

Play #21: Tactics Dictate Strategy

Play #22: Engage the Market Leader

Play #23: Reporters Are Writers; Tell Them a Story

Play #24: Cultivate Relationships with Select Journalists

Play #25: Make Your Own Metaphors

Play #26: No Sacred Cows

PART 3 - The Events Playbook

How to Use Events to Build Buzz and Drive Business

Play #27: Feed the Word-of-Mouth Phenomenon

Play #28: Build Street Teams and Leverage Testimony

Play #29: Sell to the End User

Play #30: The Event Is the Message

Play #31: Reduce Costs and Increase Impact

Play #32: Always Stay in the Forefront

Play #33: The Truth About Competition (It Is Good for Everyone)

Play #34: Be Prepared for Every Scenario . . . and Have Fun

Play #35: Seize Unlikely Opportunities to Stay Relevant

Play #36: Stay Scrappy . . . but Not Too Scrappy

PART 4 - The Sales Playbook

How to Energize Your Customers into a Million-Member Sales Team

Play #37: Give It Away

Play #38: Win First Customers by Treating Them Like Partners

Play #39: Let Your Web Site Be a Sales Rep

Play #40: Make Every Customer a Member of Your Sales Team

Play #41: Telesales Works (Even Though Everyone Thinks It Doesn’t)

Play #42: Don’t Dis Your First Product with a Discount

Play #43: Sales Is a Numbers Game

Play #44: Segment the Markets

Play #45: Leverage Times of Change

Play #46: Your Seeds Are Sown, so Grow, Grow, Grow

Play #47: Land and Expand

Play #48: Abandon Strategies That No Longer Serve You

Play #49: Old Customers Need Love

Play #50: Add It On and Add It Up

Play #51: Success Is the Number One Selling Feature

PART 5 - The Technology Playbook

How to Develop Products Users Love

Play #52: Have the Courage to Pursue Your Innovation—Before It Is Obvious to ...

Play #53: Invest in the Long Term with a Prototype That Sets a Strong Foundation

Play #54: Follow the Lead of Companies That Are Loved by Their Customers

Play #55: Don’t Do It All Yourself; Reuse, Don’t Rebuild

Play #56: Embrace Transparency and Build Trust

Play #57: Let Your Customers Drive Innovation

Play #58: Make It Easy for Customers to Adopt

Play #59: Transcend Technical Paradigms

Play #60: Provide a Marketplace for Solutions

Play #61: Harness Customers’ Ideas

Play #62: Develop Communities of Collaboration (aka Love Everybody)

Play #63: Evolve by Intelligent Reaction

PART 6 - The Corporate Philanthropy Playbook

How to Make Your Company About More Than Just the Bottom Line

Play #64: The Business of Business Is More Than Business

Play #65: Integrate Philanthropy from the Beginning

Play #66: Make Your Foundation Part of Your Business Model

Play #67: Choose a Cause That Makes Sense and Get Experts on Board

Play #68: Share the Model

Play #69: Build a Great Program by Listening to the Constituents

Play #70: Create a Self-Sustaining Model

Play #71: Share Your Most Valuable Resources—Your Product and Your People

Play #72: Involve Your Partners, Your Vendors, Your Network

Play #73: Let Employees Inspire the Foundation

Play #74: Have Your Foundation Mimic Your Business

PART 7 - The Global Playbook

How to Launch Your Product and Introduce Your Model to New Markets

Play #75: Build Global Capabilities into Your Product

Play #76: Inject Local Leaders with Your Corporate DNA

Play #77: Choose Your Headquarters and Territories Wisely

Play #78: Box Above Your Weight

Play #79: Scale Without Overspending

Play #80: Understand Sequential Growth

Play #81: Uphold a One-Company Attitude Across Borders

Play #82: Follow Strategy, Not Opportunity

Play #83: Going Far? Take a Partner. Going Fast? Go Alone.

Play #84: Fine-Tune Your International Strategy

Play #85: Send Missionaries to Build New Markets

Play #86: Handle Global Disputes with Diplomacy (aka Light and Love)

Play #87: Edit an Overarching Outlook

Play #88: Bring Old Tricks to New Regions

Play #89: Don’t Use a “Seagull Approach”; the Secret to Global Success Is Commitment

PART 8 - The Finance Playbook

How to Raise Capital, Create a Return, and Never Sell Your Soul

Play #90: Don’t Underestimate Your Financial Needs

Play #91: Consider Fundraising Strategies Other Than Venture Capital

Play #92: Use Internet Models to Reduce Start-Up Costs

Play #93: Set Yourself Up Properly from the Beginning, Then Allow Your ...

Play #94: Measure a Fast-Growing Company on Revenue, Not Profitability

Play #95: Build a First-Class Financial Team

Play #96: Be Innovative and Edgy in Everything You Do—Except When It Comes to ...

Play #97: When It Comes to Compliance, Always Play by the Rules

Play #98: Focus on the Future

Play #99: Allow for Change as Your Company Grows

PART 9 - The Leadership Playbook

How to Create Alignment—the Key to Organizational Success

Play #100: Use V2MOM to Focus Your Goals and Align Your Organization

Play #101: Use a Top-Down and Bottom-Up Approach

Play #102: Build a Recruiting Culture

Play #103: Recruiting Is Sales

Play #104: Keep Your Standards High as You Grow

Play #105: How to Retain Top Talent

Play #106: The Importance of Mahalo

Play #107: Foster Loyalty by Doing the Right Thing

Play #108: Challenge Your Best People with New Opportunities

Play #109: Solicit Employee Feedback—and Act On It

Play #110: Leverage Everything

The Final Play

Play #111: Make Everyone Successful

Notes

Acknowledgments

About the Authors

Index

Copyright © 2009 by Marc R. Benioff. All rights reserved.

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Library of Congress Cataloging-in-Publication Data

Benioff, Marc R., 1964-Behind the cloud : the untold story of how Salesforce.com went from idea to billion-dollar company—and revolutionized an industry / Marc R. Benioff, Carlye Adler. -1st ed. p. cm.

Includes bibliographical references and index.

ISBN 978-0-470-52116-8 (cloth)

1. Salesforce.com (Firm) 2. Customer relations—Management. 3. Sales management. I. Adler, Carlye. II. Title.

HF5415.5.B443 2010 658.8-dc22

2009021671

FIRST EDITION

HB Printing 10 9 8 7 6 5 4 3 2 1

For Lynne and the salesforce.com employees, customers,and investors—without whose unconditional supportwe would not be successful

Foreword

In 2001, in the midst of our previous economic meltdown, Marc Benioff came to me worried. Internet companies had evaporated overnight, and salesforce.com, a two-year-old company with a high proportion of dot-com customers, was ailing. “I’m scared about the future of my company,” Marc said. “We can’t get venture capital. I’m worried about survival.”

It was a precarious time, but I knew then, as I know now, that economic shakeouts need not bode misfortune for technology companies. Not, at least, for innovative ones. Technology does not recognize economic recessions or depressions; it always continues. And, as all visionaries know, in chaos there is opportunity. I assured Marc that salesforce.com would last. “This is your time,” I said. “You can do this.”

I was bullish on salesforce.com and Marc, not because I have a crystal ball (though that certainly would be convenient), but because there was a need for change in the software industry and an audience ripening for salesforce.com’s “End of Software” revolution. I had seen similar issues with affordability and accessibility plague the hardware industry when I started Dell.

Computers have long been a personal passion; growing up, I was fascinated with the machines but also struck by the inefficiencies in the industry, which required that we purchase computers from dealers, who bought them from distributors or manufacturers. Not only did that system yield a computer that cost four times the value of the parts inside, but it took so long that the machines were obsolete by the time customers got them. Buying direct from the source was an unprecedented idea in the industry, but it made common sense—even to a college student. The drive to implement simple new ideas and defy traditional ones has been the foundation of Dell—and the biggest reason our company has reaped huge rewards.

Salesforce.com sought to solve similar inefficiencies in the software industry. Enterprise software was exorbitantly expensive and onerous to implement, and, in the end, it didn’t work very well. This was what enterprise customers came to expect. (Forget smaller customers; they couldn’t even afford it.) Marc changed that reality when he used the Internet as a platform to deliver business software and reduce the risks and costs long associated with the client-server model. Salesforce.com made its service available to the masses, and it attentively and creatively engaged with its entire audience. It worked for the people who used the service (not only the folks paying for it), and it built what they requested. This earned salesforce.com an army of enthusiasts. And the company’s focus on customer success forced all companies in the software industry—and far beyond—to rethink their models.

It certainly has inspired new thinking at Dell. Over the past few years, we committed to making some fundamental changes. We needed to refocus on providing the best customer experience, and we wanted to scale far beyond the commodity game and rapidly increase innovation. I went to Marc, who always seemed to be a machine for new ideas, and asked him, “How can we innovate faster?”

Marc told me about an internal networking technology they were using at salesforce.com to work with customers and create a “feedback loop.” This discussion led to IdeaStorm, an online community forum that we now use to engage our customers, elicit their ideas, and help determine which ones to put into practice. The site, which is like a live 24/7 focus group, has helped field ideas from more than ten thousand customers and allowed us to offer better products, such as notebooks with Linux OS preinstalled, backlit keyboards, and computers with more USB ports. At the time I am writing this, our customers have contributed 11,289 ideas, which have been promoted by other customers more than 651,394 times, with over 84,908 comments. IdeaStorm enables us to listen as never before, and it was a turning point in restoring our reputation as a customer-centric company.

At Dell, we’ve seen the benefits of having Marc and salesforce.com on our side. It has helped us align twenty thousand members of our global sales team, integrate thousands of our global channel partners, and rapidly evolve ideas. That’s why we’re now deploying the service across Dell and putting it at the center of every customer interaction.

Eight years ago, Marc had concerns about salesforce.com’s survival, but of course it didn’t just survive—it thrived. It has earned the distinction as the first dot-com listed on the New York Stock Exchange, and today it generates more than $1 billion in annual revenue. Salesforce.com changed corporate philanthropy by integrating giving into its business model—and sharing that model so that myriad companies have collectively flooded talent, products, services, and billions of dollars into their communities. Because salesforce.com offers employees an opportunity to make a difference, not just earn a paycheck, it’s known as one of the best places to work. Its original application has become the number-one hosted CRM service, and the company has established itself as the leader in the Software-as-a-Service (SaaS) industry it pioneered. And, through relentless focus, creativity, and passion, salesforce.com inspired an enterprise cloud computing industry. In short, the new and unconventional ideas that salesforce.com has evangelized have changed the way we do business and changed the world.

There has been a profound shift toward cloud computing in the past few years. Nearly every major public and private cloud is powered by Dell, and we are ecstatic to be running today’s most exciting companies, including salesforce.com, Facebook, Microsoft, and many others. What motivates me most about this new way of computing is its potential for mass innovation. Now, for the first time, developers across the globe can access unlimited computing power. It’s extraordinary that with a simple Web connection, anyone can build applications and deploy them to users everywhere.

By igniting the SaaS industry and then offering its Platform-as-a-Service, salesforce.com has spawned an ecosystem of countless new companies. It has offered large companies (such as Dell) and smaller companies just starting out valuable insights on how to innovate and succeed in the future.

In Behind the Cloud, Marc Benioff shares his unconventional advice in a clear and entertaining way. The lessons in this book are not exclusive to technology companies. They are applicable to all companies and all leaders who want to change the status quo and make a difference. Marc tells the inspiring story of how they did it at salesforce.com, and reveals how anyone else can, too. This is a great guide for any aspiring entrepreneur or CEO navigating the landscape of the future. It’s the playbook for Enterprise 2.0.

We are in unprecedented economic times, but we are also in a new era of innovation. I tell anyone running a business today exactly what I told Marc when he was weathering a challenging climate: this is your time. You can do this. And, with the tools in this book, it will be easier and more rewarding than ever before.

Michael Dell Founder, Chairman, and CEO of Dell

Introduction

This book is the story of how salesforce.com created a new industry, made our customers successful, and established itself as the market leader, all while making the world a better place. In this playbook, I’ll share the strategies that I’ve developed during my thirty years in the technology business, the last ten as the cofounder and CEO of one of the fastest-growing software companies in the world.

I started salesforce.com in a rented apartment in 1999 with the goal of making enterprise software as easy to use as a Web site like Amazon.com. That idea—to deliver business applications as a service over the Internet—would change the way businesses use sophisticated software applications and, ultimately, change the way the software industry works. In less than a decade, our business has grown from a simple idea to a public company with more than a billion dollars in revenue.

We have achieved success by approaching business in a new way. The new models we have created—for marketing, sales, technology, finance, philanthropy, global expansion, and leadership—have been effectively employed by other companies, and we believe that any company can succeed with our strategies.

At a time when more entrepreneurs are starting companies faster and cheaper than ever before, the simple, accessible, and unconventional advice offered here will help you stand out, innovate better, and grow faster in any economic climate. The book follows the same easy-to-use and easy-to-implement mantras as our service. Divided into 111 “plays” (a fitting number, as our 1-1-1 model is so responsible for our success), it tells you how we developed award-winning breakthrough products, toppled much larger competitors, won customers of all sizes—and reveals how you can do all this too. As we promise customers who use our service, expect to see immediate results. That’s not all, though. I’ll show you how to build a business that’s not just profitable but inspiring: good for your employees, good for your customers, and good for your community.

Perhaps like you, I have always wanted to be an entrepreneur. I grew up watching my father run a chain of women’s clothing stores, and my grandfather, an innovative and unusual attorney, run his own practice and create BART, the San Francisco Bay Area Rapid Transit system. My obsession with software began when I wandered into a computer lab in high school. I would beg my grandmother to drive me to the local RadioShack so I could use the TRS 80 model 1. Later, I used the income I made at my after-school job (cleaning cases at a jewelry store) to buy my own computer. I wrote my first piece of software (How to Juggle) and sold it for $75.

What I really loved was the ways we could use computers to share information. When I was fifteen years old, I started my first company, Liberty Software, with some friends. We wrote adventure games for the Atari 800. My grandmother wrote the music for the games, and my parents were supportive of my entrepreneurial endeavors, even permitting me to travel to Europe on my own to research a castle I was going to replicate in a game. (The sense of independence that trip initially fostered was quelled when I forgot to phone home and my panicked mother called Scotland Yard. Embarrassing, but true.)

It was incredible to sell something that I had created from nothing. I took the reviews very seriously; even back then I knew that to be successful I needed to listen to the users. Luckily, the games did well. I was sixteen years old and earning royalties of about $1,500 a month. It was enough to buy a car and cover college.

I focused my studies at the University of Southern California on building companies and creating new technologies, and ran Liberty Software out of my dorm room. The lessons I learned as an entrepreneur were pivotal, as were those I learned working for somebody else. In 1984, I had a summer job at Apple writing some of the first native assembly language for the Macintosh. I had the opportunity to work on the most exciting and important project at Apple, and it was like getting paid to go to Disneyland. There were fruit smoothies in the refrigerators, a motorcycle in the lobby, and shiatsu massages.

The very best part was being able to witness Steve Jobs walking around, motivating the developers. Steve’s leadership created the energy and spirit in the office. Apple encouraged the “think different” mind-set throughout its entire organization. We even had a pirate flag on the roof. That summer, I discovered that it was possible for an entrepreneur to encourage revolutionary ideas and foster a distinctive culture.

That lesson became even more obvious when I returned to Apple for a second summer internship as a technical sales support person with an Apple partner. Although only one year had passed, Apple was an extraordinarily different place. Steve Jobs had been fired, and everything I enjoyed about Apple’s visionary culture had evaporated.

While the environment was not as invigorating, I learned another critical lesson that would guide the rest of my career: the power of each customer exchange. If the exchange was executed as well as possible—if we made the customer truly successful—we had the opportunity to transform him or her into an Apple loyalist and evangelist. This opened my eyes to the importance of customer success.

At heart I was still a shy computer programming geek addicted to building technology, but right before graduation, two of my entrepreneurship professors, Tom O’Malia and Mac Davis, offered some direct advice that significantly altered my path. They told me that the most successful business executives would be the ones who got real-world experience before starting their own companies. In their opinion, “real-world experience” was a sales position focused on building relationships with customers. They called it “carrying a bag.”

Their advice led me to accept a job at Oracle, answering customer service calls that came into the software company’s 800 number. I wasn’t convinced that I wanted to dedicate myself to sales, and I didn’t want to be an 800-number operator, but I soon discovered that working with customers was much more fun than writing code, and it turned out that I was pretty good at it.

Oracle had about two hundred people when I started, and the fast-growing company prized the efforts of young people and rewarded them. Founder and CEO Larry Ellison regularly walked the halls to chat with employees. (I usually took these opportunities to share my enthusiasm for Macs.) Soon after I sent Larry a note asking when Oracle would be on the Macintosh and included a business plan about how to make us successful in the Apple market, Larry made me the director of Oracle’s Macintosh division.

Being responsible for the division that created software for personal computers was an amazing opportunity. Then, after Tom Siebel, the executive who ran direct marketing, resigned and recommended me as his replacement, I inherited an even more exciting and formative role.

It was Larry’s vision that inspired me. He wanted me to create an “electronic village” and the next generation of sales and marketing using state-of-the-art electronic conferencing technology, software systems, and multimedia. Larry envisioned a world of interconnected computers that could easily share information across the planet at the touch of a button. The Internet seemed to offer a path to reach small and disaggregated customers, and I believed it could ultimately transform the industry.

By the mid-1990s, such companies as Amazon and Yahoo! were introducing a new way of life for consumers. Many of my colleagues were leaving Oracle to lead their own companies, most of which were traditional software plays. In many ways, Oracle served as an incubator where you got your legs, built a network of friends, and learned what you needed to go off on your own—and ultimately compete with Oracle. Although I had invested in several of these companies, I wasn’t quite ready to leave Oracle University. I felt tethered to the growing corporation by the excitement of a powerful job and the security of a lucrative salary and addictive stock options. In addition, there was the relationship I had with Larry, my mentor and friend, one of the greatest software entrepreneurs in the industry’s history. I was learning from the best.

During my tenure at Oracle, the company exploded into the second-largest software company in the world, right after Microsoft. Although its culture prized innovation, the company could no longer respond quickly or easily to new directions or opportunities. I found that limitation extremely challenging, and it eventually drove me to seek opportunities outside Oracle.

Maybe you are thinking about leaving a secure job to start your own company, or perhaps you are already running your own business. For me, launching salesforce.com was a way to respond to new directions and new opportunities that I could not pursue from inside an established corporation. It was a license to do things differently. From the very beginning, salesforce.com set out to build a new technology model (on-demand, or delivered over the Internet—now called cloud computing), a new sales model (subscription based), and a new philanthropic model (integrated into the corporation). Ten years later, we had succeeded on all of these fronts. We also had surpassed my expectations by creating the first $1 billion cloud computing company and spawning a new $46 billion industry, of which we are the market leader.

Read on to learn how we became one of the world’s fastest-growing software companies and about the tremendous fun we’ve had along the way. You’ll travel with us as we have our big entrepreneurial epiphany, as we turn a simple idea into a start-up company, and as we develop innovative technology and sell it through unconventional strategies. You’ll witness our struggles, including coming close to bankruptcy during the dot-com disaster. Finally, you’ll see how our unconventional ideas were validated through our listing on the New York Stock Exchange and how, through it all, we’ve found a way to give back.

The tactics and strategies that define our story can help any company succeed, and even become the next salesforce.com. So turn the page and envision your success. This is the first step in making it happen.

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 future,” I said. “Besides, people are frustrated with the current systems. This will be better: we’ll deliver the applications as a Web site with easy-to-use tabs. It will be as simple as Amazon or Yahoo! Unlike our competitors, we’re not asking for a big investment up front. The concept is a simple subscription model of $50 per user per month. It’s 10 percent of what people are paying for Siebel—and, unlike Siebel, we’ll have our customers forever.”

“What about Siebel? Don’t you find its dominance frightening?” asked Dave. “Is there room for someone else?”

“Siebel is unable to satisfy most companies out there. The Internet will allow us to give all companies an alternative solution for which they don’t have to pay a fortune and that they will enjoy using. The Internet, with all this power and capability, will destroy the client-server companies that stand today. Technology is always becoming lower in cost and easier to use. It’s a continuum. Let’s ride it.”

Dave tried to provoke me with negative comments about the products we built at Oracle (where I was still working). “Frankly, Oracle hasn’t created anything great other than its database,” he said.

I knew better than to take offense, and I simply disagreed politely. Later, Dave told me that he had planned to grill me to see how I would convince people of the concept and was also testing to see how I would react to negativity. He assumed that I must have had a temper to survive and thrive at Oracle—a Machiavellian environment perpetuated by Larry’s well-known “management by ridicule” style. (It was no secret that insiders described the culture with the phrase “We eat our young.”) That wasn’t how I liked to operate, though. The time I’d spent in India and my commitment to practicing yoga and meditation served me well, as did reading Sun Tzu’s The Art of War, which advocates keeping one’s cool at all times.

How to Stay Calm in the Eye of the Storm

“He who is quick tempered can be insulted,” Sun Tzu explained in the Art of War. These four checkpoints can help you stay cool—and retain your power—even in the most heated situations:

• Stay in the present moment.

• Observe your feelings. Do not become your feelings. Be aware of your reactions.

• Do not take on others’ feelings, but listen to others—and yourself.

• Ask yourself, “How should I handle this? Should I react at all?”

Play #7: Define Your Values and Culture Up Front

On March 8, 1999, Parker Harris, Frank Dominguez, and Dave Moellenhoff began working in a one-bedroom apartment I’d rented at 1449 Montgomery, next door to my house. We didn’t have office furniture, so we used card tables and folding chairs. What we lacked in furnishings, we made up for with an amazing view of the San Francisco Bay Bridge. I hung a picture of the Dalai Lama over the fireplace and another of Albert Einstein on the wall. Both were part of Apple’s new ad campaign, and each said, “Think Different.”

My summers at Apple had taught me that the secret to encouraging creativity and producing the best possible product was to keep people fulfilled and happy. I wanted the people who built salesforce.com to be inspired and to feel valued.

That wasn’t to say there was anything glamorous about those early days. (The original server room was the bedroom closet, which also held Frank’s clothes because he was flying down from Portland for the workweek and sleeping on a futon under his desk.) We built a culture simply by doing what we enjoyed. We wore Hawaiian shirts to instill the aloha spirit in the company. We ate late breakfasts at one of my favorite restaurants, Mama’s, just down the street on Washington Square. Dave brought his dog to work. I got a dog too, a golden retriever named Koa, who also joined us in the office and soon got promoted to CLO (chief love officer).

Play #8: Work Only on What Is Important

We built the first prototype within a month. It didn’t take very long because the developers knew sales force automation from their previous experiences. Further, it was a lot easier to build a Web site than to create complicated enterprise software. Our overarching goal was, as the developers said, to “do it fast, simple, and right the first time.” The user interface was bare bones almost to a fault, but we wanted the service to be extremely easy to use. It had only the necessary information fields, such as contacts, accounts, and opportunities, which were initially organized by green tabs at the top of the screen. “No fluff,” one of our first developers, Paul Nakada, used to say. Exactly like Amazon, I thought.

Our focus was directed at developing the best possible and easiest to use product, and this is where we invested our time. Realize that you won’t be able to bring the same focus to everything in the beginning. There won’t be enough people or enough hours in the day. So focus on the 20 percent that makes 80 percent of the difference.

Play #9: Listen to Your Prospective Customers