Salesforce was founded in 1999 by Marc Benioff, along with three other developers he met through an introduction from an Oracle employee. The other developers are Parker Harris, Dave Moellenhoff, and Frank Dominguez. They wrote a sales automation software and launched it to customers in 1999.
The company has a goal of reaching $10 Billion in sales by 2017. It seems to be on track with accomplishing that goal. The company reports fiscal year ending in January. For 2016, revenues grew to $6.667 Billion, which represents an increase of about 24%. The company still has negative net profits but is much less of a loss than previous years.
Salesforce started up a philanthropic arm of the company and can be seen via salesforce.org. This is the organization that helps give back to the community-at-large. The company prides itself on its volunteerism among its employees.
How the Company Started
Marc Benioff worked at Oracle. During his tenure, he felt that enterprise software should be as easy to use as the then newly website, Amazon.com. It was easy to find what you were looking for with this website and strove to create software for customer tracking and sales that would work in a similar manner.
The application he envisioned, would enable its users to log directly in via the web and start using the software. This was quite an innovative approach as most solutions of that day required installation on each workstation and heavy integration, which drove up the costs significantly. A web-based solution would also reduce the cost of maintenance, which would be handled by Salesforce.
The company targeted small to mid-sized businesses and allowed them free access for a limited time, to test drive the software. Due to this, the concept took off, and a new class of software was solidified, i.e., Software as a Service (SAAS). The company charged based on use, which considerably brought down the cost.
During his days at Oracle, Benioff kept abreast of the news and changes that went on in the software industry. He saw that Siebel Systems was onto something, and he invested in the company. By 1999, his investment rose to $25 Million of which he used $6 Million to fund his new venture Salesforce. Larry Ellison, his former boss at Oracle, pitched in $2 Million into the venture.
In 2004, Salesforce set up for its Initial Public Offering (IPO). It was discovered that Marc Benioff agreed to an interview with The New York Times during the company’s quiet time. The quiet time is part of The Securities Act of 1933, where companies are not allowed to disclose any pertinent information that may not be included in the prospectus.
The New York Times article had lengthy coverage of the company and clearly contained information not presented in the prospectus. The SEC then strongly encouraged the company to postpone its IPO, which the company agreed. Had they violated the quiet time, they would have been required to repurchase shares for up to a year after the violation. They would need to do so at the initial price offered, which could introduce significant risk if the price dropped anytime during that period.
Why it Works
Benioff takes his relationship with clients very seriously. He will visit each multiple times throughout the year. He listens to what those business owners are saying and incorporates the necessary changes to help them grow their business. He believes in partnering with businesses rather than simply trying to sell something to them and forgetting about them.
Because Salesforce’s solutions are web-based, it makes it easy for the company to add additional features. It is also cloud-based which means customers do not have to have huge IT infrastructures to work with the solution. The customer still owns its data, but it is completely managed by Salesforce.
Salesforce also has the advantage that once a customer has integrated, the cost of switching to other solutions will become prohibited. This keeps customers for longer periods of time and gives the company a huge competitive advantage.
The company started out by offering free access to sales teams. Due to its web-based interface, it was easy to give this kind of access as no software setup was needed.
The company also makes available high-quality tips on how to grow your business. They do this without any expectation of obtaining sales from such efforts. However, as potential customers continue to warm up to this tactic, they seek further guidance and advice from the company.
Previous customers’ successes lend for easy storytelling by the company. When the company boasts that their software has led to increasing sales of these other customers, selling becomes almost second nature.
As mentioned, presenting solutions that don’t pump up IT infrastructure costs is another big seller. Before the SaaS model, CRM solutions were clunky and required heavy internal maintenance and support.
As the business matures, they may find saturation in sales of its core product. This often prompts companies to concentrate on peripheral products and services and spend less time on the maintenance of its core products. In the software business, it is quite easy for software products to become stale in a short amount of time. Leaner competitors often wait for this moment to pounce and scoop up market share.
The company started the Software as a Service model and continues to lead the pack in this area. When customers subscribe, the more services they depend on, the harder it will be for them to leave. This is a huge tactical advantage for the company.
Lessons Learned by The Business
- Multi-Stakeholder Framework – Benioff holds the belief that companies should be concerned more about stakeholders rather than shareholders. Stakeholders include customers, partners, employees, and the community around you.
- Become advocates of your stakeholders, especially employees. They are key to the growth of the company, and their needs have to be met.
- Customer concerns and needs are those of Salesforce. Benioff continually visits customers to find out their pains and challenges.
- Benioff feels it’s important to integrate social media into any product line. This needs to be done in a tasteful way so as not to alienate but to garner a sense of community and connectedness. The idea is to let customers and potential customers become part of the Salesforce family.
- When Benioff was at Oracle, Larry Ellison saw potential and took Benioff under his wing. Ellison taught him always to think about the future. It’s important to take care of the things in the present, but never lose sight of where you need to be down the line.
How Other Businesses Can Learn from This
Benioff believes that all business should consider all the stakeholders that are affected by a business. He believes that by catering to each of them, they will be on board with the business concepts. It’s interesting that this is the original idea behind a corporation. It (the corporation) should be treated as if it were an individual transacting business. This means it should be conscious of its environment, surroundings, players, etc.
Customer success should be the focus above all else. There are too many companies who get subscribers to their products and services and simply forget about those customers. They are left wondering why the attrition rate among those customers is so high. Salesforce takes great strides in learning about how its customers’ businesses work and adapts its product to help those customers succeed.