Now that Salesforce.com has proved that SaaS (software-as-a-service) is a successful business model, the company hopes to lead the way in cloud computing.
Many in the software industry consider cloud computing -- offering a development infrastructure as a service -- to be the next step in the move away from packaged software.
Salesforce.com Chairman and CEO Marc Benioff stopped in New York this week to proselytize about why customers should use his company's Force.com platform, which offers application development in the cloud, over traditional application-development infrastructure.
Benioff is well-known for promoting his company's service-oriented strategy as the wave of the future, and he has positioned Force.com as the greatest thing to happen to application development since Visual Basic. However, given the emerging trend toward platform-as-a-service, Benioff and company appear to be on to something.
Salesforce.com's hosted development platform is gaining traction among companies that don't want to spend time and money investing in on-premise software infrastructure or for those that can't afford to because of budget constraints, said business customers who have used Force.com.
And as business customers become more comfortable with hosting and developing applications in the cloud, Force.com could displace traditional on-premise development infrastructure offered by the likes of Microsoft, Oracle, and IBM for some customers, especially those in the SMB market.
Platform-as-a-service got a big boost last week when Google introduced App Engine, joining Salesforce.com and Amazon.com, with its Elastic Compute Cloud (EC2), as early entrants in the space. However, neither Amazon.com nor Google is particularly focused on business customers, which is what differentiates Salesforce.com and could give it a better chance of competing with Microsoft and IBM for corporate developers.
Still, customers and analysts cite a few key challenges for persuading businesses to build applications on a hosted platform like Salesforce.com's or Google's. Among them, according to RedMonk analyst Michael Cote, is that a traditional IT department will feel displaced when managers inform them their coding skills and abilities to integrate complex development infrastructure are no longer needed.
"If you're an IT department in a big enterprise, it makes you wonder what your job is going to be," he said.
Jeremy Roche, CEO of CODA Financials, ran into that problem when he told his IT department that the company would be building a new version of its ERP (enterprise resource planning) and accounting applications in the cloud on Force.com. But there was no other option for the company, which would have needed "50-plus developers," millions of dollars and two years to build the infrastructure to do the development that was required, he said during a presentation at Salesforce.com's New York event.
"I didn't want to have to talk to shareholders" about that, said Roche, whose company has headquarters in the U.K.
CODA repurposed some Java developers and trained them on the Force.com platform, since, according to Roche, the development model is similar to Java. It took less than a month to train them, and they completed Coda2Go in about six months. If the company hadn't used Force.com, "we'd still be building the infrastructure right now," Roche said in an interview.
Roche also addressed another chief complaint of cloud-computing critics -- vendor lock-in. Many people are not keen on the idea of turning over the management of their application code and development platform to one company when they're used to the idea of developing and maintaining applications on premise.
But whether his company built its application on Microsoft or Oracle or SAP, there would still be a certain amount of lock-in to that platform in terms of maintaining it over the years and depending on that vendor for upgrades, Roche said.
"You can't create a way of not getting locked into Oracle or SAP," agreed Narinder Singh, founder of Appirio, a Force.com customer based in San Francisco. Appirio provides consulting for companies about how to use on-demand services and offers applications that connect the dots between Google Apps and Salesforce.com.
Singh, who previously worked at SAP, said the biggest barrier to winning over chief information officers with the platform-as-a-service notion is to break through preconceived notions of how software should be built.
"I can't overemphasize that enough. You have to get to where someone will say, 'I've never seen enterprise software before' to win them over," Singh said.
Singh acknowledged that in the early adopter phase of platforms such as Force.com, new applications will inevitably be tied to Salesforce.com's salesforce automation service. But eventually, companies will start to see the value of building applications in the cloud that can stand on their own, and other traditional application-development companies like Microsoft will have to respond with their own platform-as-a-service offerings.
Another criticism of Force.com is that building applications in its Apex development language and on an intrinsically proprietary platform doesn't give developers as much flexibility in creating applications as they would have using on-premise Java or .Net infrastructure.
Jonathan Snyder, CTO of Dreambulider Investments, agreed that "there are limitations" to writing applications on Force.com. But for the 10-person mortgage investment company in New York, the time and cost savings far outweigh those limitations.
"For us, we're a small company, we don't have the resources to focus on buying servers and developing from scratch," he said. "For us, Force.com was really a jump-start."
Companies such as Snyder's, as well as those in the midmarket, are certainly in the sweet spot for Force.com, said RedMonk's Cote.
"It seems to me that the real advantage of the platform as a service is ... in the midmarket," he said. "It's something they can afford to use. That's one of the more positive, exciting aspects of it. Hopefully, it opens up these features to a wider market of people."
In his presentation this week, Salesforce.com's Benioff recognized the possibilities of a platform such as Force.com not only for smaller businesses in the U.S., but also for companies in developing countries where building software-development infrastructure is cost-prohibitive.
Software development "has been expensive, complex and risky" and "does not serve emerging countries," he said. "Cloud computing offers a different choice."
Now for Salesforce.com, Google and others in the emerging market for cloud computing infrastructure, it remains to be seen how many businesses are willing to make that choice.