Will Salesforce.com's vision outlast Siebel's?

When people talk about Silicon Valley's new crop of software executives cut from the mold of Oracle leader Larry Ellison, Salesforce.com founder and Chief Executive Officer Marc Benioff is always at the top of the list. Like Ellison, his one-time boss and current rival, Benioff is brash, aggressively competitive, and always ready with an inflammatory quote. Also like Ellison, he likes to make grandiose projections about how his company will reshape and dominate its industry. He's taken seriously because many of those projections have come true.

Since its founding six years ago, Salesforce.com has amassed a sizable customer base and forced every applications vendor in the industry to take seriously its hosted, "on demand" delivery model. So it was fitting that on Monday, as Salesforce.com prepared for its biggest strategy announcement of the year, Benioff once again found himself in Ellison's shadow.

While Salesforce.com executives whispered behind the scenes about the provocative timing of Oracle's bombshell acquisition of Siebel Systems, which came hours before the opening of Salesforce.com's Dreamforce conference in San Francisco, Benioff appeared delighted by the news. "This is truly the end of software," he proclaimed at the start of his keynote address, echoing a line Salesforce.com has used for years to advertise its "no software" hosted CRM (customer relationship management) service strategy.

"When I was at Oracle, we watched Computer Associates buy all those mainframe software companies and milk them for their license revenue. I never thought that's what Oracle would be doing one day, and yet, here it is," Benioff said before an audience of 3,000 Salesforce.com customers and partners.

In a later discussion session with press and analysts, he used a question about the Oracle/Siebel union as a launching point for an extended comic riff on "Oracle Cold Fusion," as he termed Oracle's plans to integrate its growing collection of applications on one architecture, codenamed Fusion. "An Oracle sales rep shows up to sell you CRM -- which CRM?" Benioff quipped. "J.D. Edwards? PeopleSoft? Oracle Classic? YouCentric? Siebel, OnDemand or on-premise? They'll say, 'Salesforce? They only have one CRM! How can they possibly compete?'"

Benioff's bombast makes for great theater, but he has grounds for his confidence. As Oracle continues rolling up its former rivals in the top tier of the enterprise software market, Salesforce.com stands at the vanguard of the market's future. Its hosted software model has been a hit with midmarket customers and begun making inroads into larger enterprises. Its customer base of 300,000 remains a fraction of Siebel's 3 million, but its business is growing much faster: Salesforce.com is on track to soon pass Siebel in quarterly software sales.

Forrester Research Inc. analyst Ray Wang views Oracle's deal as yet another indication that the high end of the applications market, where Siebel made its fortune, is tapped out. "The reason [Oracle and its rivals] are fighting in the midmarket is there's nothing left in the Global 2000," he said, referring to a list of the world's biggest companies as ranked by Forbes.

"I think the packaged applications market as we know it continues to be in deep trouble," said AMR Research Chief Research Officer Bruce Richardson.