October 2005

The Customer Is Sometimes Wrong

Salesforce.com is making software-as-a-service a popular idea.

By Wade Roush

The Case: In 1999, when former Oracle executive Marc Benioff founded Salesforce.com, companies bought software and ran it on their  computers. The idea of handing  customer data to another company and then renting access to software running on its servers sounded insane. But today, "software as a service" is a viable business led by Salesforce, whose best early decision disappointed many customers.

You may have noticed that you're spending less time lately using the software you purchased for your PC and more time using websites that offer the functionality of traditional software. For instance, if you manage your e-mail using Gmail, Yahoo Mail, or Microsoft's Hotmail, or you've used Google Maps (see "Killer Maps" in this issue), then you're part of a trend roiling the software industry: "software as a service."

Software-as-a-service is a boon for consumers: it usually costs less than store-bought software and requires users to install and boot up nothing more complicated than a browser. Corporations see the same benefit, but multiplied across dozens of business units and hundreds or thousands of employees. Many of those companies have suffered through years of dependence on complex, expensive, and temperamental "enterprise" software, which manages everything from sales and customer support to inventory, shipping, payroll, and planning. So software-as-a-service can represent a welcome alternative to purchasing software packages from traditional vendors like IBM, Oracle, or Siebel Systems.

One company that was recently looking for alternatives is ClearCube, an Austin, TX-based maker of specialized hardware and software for the federal government and the health-care and financial sectors. Since 2001, ClearCube had been using customer relationship management (CRM) software from Siebel. CRM helps organizations keep track of current and prospective customers. It tracks customer contacts, logs sales visits, generates forecasts, and generally helps to convert sales leads into deals. But at ClearCube, only 35 percent of the sales staff was willing to use the Siebel software, says Dean Dresser, the company's controller.

"It was a very painful, broken system," Dresser says. "It was difficult and unwieldy to manage. Every time we went through an upgrade, all the customization we had done on the previous version would disappear." And because people weren't using it consistently, Dresser adds, the software couldn't produce consolidated forecasts. "People would send me their weekly reports in Word or Outlook or Excel or on the back of a pizza box. As a result, we had no way of knowing the probability of closing deals."

In 2003, Dresser's boss gave him permission to do something about it. After looking at various makers of CRM systems, he settled on up-and-comer Salesforce.com. Beginning in April 2004, ClearCube gradually moved from the Siebel system over to Salesforce's Web-based system. As we'll see later, the decision to switch paid off for ClearCube. But just to push it through, Dresser had to overcome a lot of resistance within his own company, especially from its IT department, which complained about losing control over the company's data.

As Dresser learned, that was a concern executives at Salesforce had encountered many times before -- indeed, since the founding of the company. And it was one they had decided to ignore.