"Let's look at [Salesforce.com's] technology," he said. "They buy computers. They rent a room. Uh, they put the computers in the room. They buy electricity and plug it in. They then buy an Oracle database to run on those computers and then they buy Oracle middleware to build their applications. Oh, excuse me, and then they build this little itty-bitty application for salesforce automation. ... Most of the technology at Salesforce.com is ours."Stripping away the hyperbole, let's break down Ellison's analysis. He thinks that the value of Salesforce.com is in its IT infrastructure, most of which is provided by Oracle. The CRM application is just a small part of the total solution and therefore a small part of the value that Salesforce.com's customers receive.
What's wrong with this picture
Let's stipulate that in terms of lines of code, the application layer is a small part of the overall technology running at Salesforce.com. I don't know what the percentage is, but let's assume it's 5%. Does that mean that the application only contributes 5% of the value that customers derive from Salesforce.com? I don't think so. Strip away the application, and Salesforce.com customers get nothing. Furthermore, it would imply that all a software vendor needs to do is build its application on Oracle technology and it will deliver value. That argument, of course, is ludicrous.
Of course, Oracle technology can be used to build on-premise solutions as well as software-as-a-service (SaaS) solutions, such as Salesforce.com. Is there anything special about SaaS in terms of delivering customer value?
Cloud computing delivers innovation
Yesterday, to answer these questions, and also to have a little fun, I took my Flip video camera and set out with my fellow Enterprise Advocate, Vinnie Mirchandani, to see how cloud computing was represented at Oracle Open World.
There are a lot of vendors on the exhibit floor offering cloud computing and SaaS solutions. But finding one willing to go on camera to talk about this subject wasn't easy. So, I was happy when Kendall Collins, Chief Marketing Officer at Salesforce.com, agreed to an interview. I'll let Kendall speak for Salesforce.com in this four-minute clip:
What is striking to me in this short clip is the single example of how cloud computing delivers value in a way that's just not possible with an on-premise system. The salesforce-to-salesforce functionality that Kendall describes above is only possible when multiple organizations are resident on a multi-tenant system. To achieve this sort of functionality with an on-premise system would either require extensive EDI links, or custom systems using Web APIs. In any event, it would most likely take an organization years to develop such a system using on-premise deployment.
This doesn't mean that cloud computing is the best solution to every problem. Many SaaS providers do not yet have the out-of-the-box functionality to match an Oracle E-Business Suite, for example. But that may be changing. As SaaS becomes a more accepted means of software delivery, these solutions will become more mature, displacing on-premise systems in more organizations.
And this might prove to be the real threat to Oracle, which might explain Ellison's hyperbole on this subject. It's possible that years from now, Oracle will be mainly known as an infrastructure provider to the Salesforce.coms of the world, who deliver the real value.
Update, Oct. 14. Bruce Richardson reports on the presentation by Marc Beniof, CEO of Salesforce.com at Oracle Open World.