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Welcome to the Cloud

Marc Benioff perfectly positioned Salesforce.com to take advantage of the move to cloud computing.

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For Marc Benioff, 2009 was the year the crowd came to the cloud.

The brash and loquacious founder and CEO of Salesforce.com has been an extraordinarily effective evangelist for “cloud computing”—the now superhot technology trend of providing applications and services over the Internet rather than stored on a server. That approach has played straight into the “software-as-a-service” business model that Benioff and Salesforce pioneered a decade ago, and they’ve been perfectly positioned to reap the benefits.

Despite a global recession that trashed many tech companies’ sales figures, San Francisco-based Salesforce blew past $1 billion for the year ending January 31, 2009, and it is projecting another big jump to $1.3 billion in the fiscal year that ends next month.

For defying the fierce business downdraft—and taking the lead role in the creation of an industry—the San Francisco Business Times has named Benioff the Executive of the Year.

By nearly any metric, Salesforce has been on a multiyear growth tear. Revenue has more than doubled from less than $500 million four years ago. From February 1 to October 31, the company added the largest number of customers and subscribers in its history, picking up 12,500 new customers with approximately 500,000 new “seats” (employees at customer companies who are licensed to use its software). The number of Salesforce employees has also mushroomed, rising from roughly 2,000 four years ago to the current 3,800-plus, 300 of them added in the last year.

Meanwhile, the cloud shows no sign of descending. Gartner Group predicts that cloud computing will continue to be the top strategic opportunity in technology for 2010, and it has forecast that cloud revenue could grow from $56.3 billion in 2009 to $150.1 billion in 2013.

That opportunity means Salesforce is about to get a lot of company. Experts say it will likely face stiffer competition in the future as computing giants like Amazon, Google, IBM, Microsoft and SAP ramp up their cloud-computing efforts.

“In 2010, it’s very clear that some very big competitors have got Salesforce right in the middle of their radar screen,” said Frank Gens, a senior vice president and chief analyst at IDC. “Salesforce has got a nice lead, but as they look in the mirror, there are absolutely titans racing down the highway coming after them.”

The Wisdom of Clouds

Benioff says he welcomes the competition, which he told the Business Times validates the model he has championed since he launched Salesforce from a rented apartment in 1999.

“No one doubts now that cloud computing can help companies reduce cost and complexity. That’s a huge change from 10, even five years ago,” Benioff said. “When you create a market, you never want to be alone. Competition equals validation. Competition brings energy and attention to markets.”

Even so, Benioff—equal parts adroit business tactician and publicity-savvy showman—is quick to talk smack about competitors.

“Microsoft’s lips may say ‘cloud computing,’ but its contracts say ‘buy more software,’” Benioff said. “Microsoft has built its entire cloud-computing strategy around keeping its traditional software products relevant in this new world.”

Benioff also had harsh words for Oracle, where he worked in sales, marketing, and product development from 1986 to 1999, much of it closely with CEO Larry Ellison. Oracle has taken a “scavenger” approach, gobbling up companies with lucrative maintenance streams.

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