RealTime IT News

Salesforce's Benioff Takes on Wall Street

NEW YORK -- Salesforce.com co-founder and CEO Marc Benioff arrived here to bring his insurgent message to the press and to Wall Street.

Speaking yesterday in a room at the Sheraton New York Hotel & Towers packed with clients, prospective customers, partners, analysts, bloggers (there was a Jeff Jarvis sighting), and press, Benioff mapped out the company's efforts to financial analysts while -- perhaps more importantly -- seeking to make a case for large enterprises to shell out for his company's services amid one of the worst economic downturns in recent memory.

As usual, there were also shots at the expense of those who compete with Salesforce in CRM, customer service automation and cloud services. One Salesforce customer told Benioff she'd used Siebel before switching to Salesforce. "I'm not familiar with it," he quipped.

When another business owner said he had previously worked for SAP, Benioff asked, "Is that a tech company?"

And when describing companies with offerings that could rival Salesforce's Force.com cloud platform, he said that Microsoft merely "might have something that will work," referring to its Microsoft Azure product.

Benioff did not have harsh words for all. Describing the rollout of an app called Salesforce Genuis that helps users search the archived slide decks of their colleagues by incrementally adding search criteria, Benioff said, "we stole that idea out of iTunes."

The aggressive performance came just a month since the departure of several key executives raised questions as to whether the company might be cutting costs in anticipation of slower future growth. In the case of Salesforce, cutting costs in earnest could mean cutting marketing.

Money where his mouth is

That's because the competition isn't only getting hit with sharp words -- Benioff has committed cash to growth through sales and marketing. Sales and marketing expenses for Salesforce for its 2008 fiscal year totaled $534 million, according to the company's annual report, which was released on March 9.

That's roughly equal to half of the company's revenues, which were $1.07 billion. There was little cash left for profit: The company reported a net income of $43 million for the year.

Subscription revenue has grown at an explosive rate, a rate that likely justifies spending heavily on marketing, and on publicity such as the day's event. Subscription revenue reached $985 million in 2008, up from $681 million in 2007, and from $452 million in 2006. Marketing spending has grown at a similar pace, however. Still, the company has plenty of firepower in the bank, claiming $883 million in liquid assets at year's end.

Architecture

With marketing spending still sizable and the prospect of slowing growth on the horizon, it's no surprise that Benioff found himself here, making a pitch to companies who, despite the downturn, remain some of the biggest spenders on datacenter software.

[cob:Special_Report]In particular, talking up Salesforce's architecture was a key focus during yesterday's event, which Benioff said marked the first time he had discussed the topic.

For Benioff's prospective customers, the talk aimed to illustrate the security and resiliency of Salesforce's cloud-based architecture, but also the cost savings it offers cash-strapped firms -- who can outsource expenses associated with datacenter management, security and infrastructure.

Page 2: Making the case