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Salesforce CEO: Deal is a thumbs-up for on-demand

By Alorie Gilbert, CNET News.com on September 13, 2005

Summary

Marc Benioff also takes a shot at the database giant. But an industry watcher sees the buyout as a challenge for Salesforce.

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SAN FRANCISCO--Salesforce.com chief Marc Benioff on Monday touted Oracle's planned buyout of archrival Siebel Systems as a victory for his company and the on-demand software industry he helped spawn.

Some analysts, though, say the deal could mean new challenges for Salesforce.

Benioff, who spoke about the Siebel deal at a Salesforce convention here, has long predicted Siebel's demise. On Monday, he said the buyout is proof that businesses want to consume software over the Internet, or "on demand," rather than install and maintain it themselves.

"When we heard the news this morning, it was clear to me we're moving up to the next level," Benioff said during a keynote speech. "Consolidation in the client-server computing industry is opening the door for software on demand."

Marc Benioff
Marc Benioff, CEO,
Salesforce.com

Benioff also got a shot in at Oracle, where he once worked. He recalled that in those days, Computer Associates International was on a big buying spree. The company acquired software companies with aging technology in order to "milk" their customers for support fees, he said.

"I never thought that's what Oracle would be doing today," said Benioff, who used to report to Oracle boss Larry Ellison.

Benioff has been an outspoken critic of Siebel, Oracle and the business software industry generally for charging customers big licensing and consulting fees before installing any software. Salesforce is a big proponent of the on-demand model, in which software makers deliver their wares over the Internet for a monthly fee. Benioff claims that model is bringing about the "end of software" as most companies know it and supplanting client-server software.

Though the Siebel buyout could be viewed as a validation for Salesforce, it's also a threat, said Bruce Daley, editor of the Siebel Observer newsletter.

For one thing, it makes Oracle, which has competed with Salesforce.com only marginally, a more direct competitor. It also highlights Salesforce's small size relative to other competitors, which include SAP and Microsoft.

"This is going to make it really difficult for Salesforce to push up market" into bigger accounts, Daley said.

Later, in a question-and-answer session with the media, Benioff dismissed Oracle and other competitors. He said Oracle will have a difficult time figuring out how to digest and sell Siebel's software in the wake of a megamerger with PeopleSoft earlier this year. The challenge is made all the more difficult by the fact that technology from all three companies overlaps, leaving Oracle with a half dozen or so different customer relationship management programs.

"I don't know how they'll do it," he said. "I'm a software developer, and I don't know what you do first or what you do last. It's going to be very difficult and confusing to customers."

Benioff called Microsoft a failure in customer relationship management software, the market where the company competes with Salesforce. Microsoft's product "requires every piece of Microsoft software there is," Benioff said. "I just think those days are over."

Before Benioff's speech, TV screens around the Moscone West convention center featured a mock news broadcast. The announcer quipped that upon hearing the news this morning, Benioff noted that the 800-pound gorilla just gained 1,000 pounds. Will Oracle be renamed Soracle? he asked.

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