"SAP customers have to be seeing some of these developments in cloud computing and wondering, 'What am I paying 22% maintenance fees for?' All that money goes to cover the huge cost of human capital they're carrying with all those programmers and developers trying to debug and maintain and sustain those giant and complex applications," Benioff said.
"SAP has probably done the worst job of all in terms of innovation and increased value to customers, and they shouldn't be able to simply exist and keep charging these enormous fees without launching anything new or innovative or valuable.
"SAP is the anti-cloud: they stop innovation, they stop new ideas, and they try to keep everything under their control." Benioff chuckled and shook his head in mild disbelief before underscoring his point with this anecdote:
"In the U.K., I just hired a terrific guy from SAP and he said that one of the great things about SAP is that you can leave the company in 1999, and return to the company 10 years later in 2009, and you wouldn't have to learn anything new because absolutely nothing would have changed because they don't pursue any innovation!" For all of its size and technical knowledge, Benioff said, the company is caught in a vicious pincher trap between a culture that venerates its existing technology and approach, and a business model driven by 22% support and maintenance fees that doesn't tolerate deviation from that norm.
"SAP completely de-emphasized its cloud approach because the new business model that cloud computing demands would have disabled their revenue stream, which is built largely around annual maintenance fees," Benioff said.
"That's why they started their own cloud project—Business ByDesign or whatever it was called—before they pulled it back and then started it again and now aren't sure when it'll be out. They're not interested in innovation because that conflicts with their existing revenue stream that requires maintenance fees to remain at 22%. So they can't handle innovation.
"I don't know--maybe they don't feel they need to do a lot of new things because nobody really cares about SAP—they only have about 30,000 customers," Benioff said. "We have 70,000 and that number is growing very rapidly—and the reason it's growing rapidly is that we're delivering innovation and value and helping our customers move faster and make the changes they need to make."
Stay tuned: Coming up on Monday, Jan. 25, in Part 2 of this 2-part discussion with Salesforce.com's founder and CEO, we'll move from this external analysis of the competitive set's philosophies and take an inside look through the eyes of Benioff at Salesforce.com's position in the marketplace, the rapidly expanding role that the Force.com platform is playing among Salesforce.com's customers, and Benioff's unbridled excitement over his new Chatter social-media collaboration tool that will go live next month.
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