(Fortune Magazine) -- A decade ago Marc Benioff declared that software was dead. In 1999, while on leave from his job at Oracle, he convened a group of developers in his downtown San Francisco apartment building to build Salesforce.com. Soon thereafter he paid the quirky rockers the B-52's $250,000 to perform at a bash where he distributed buttons with the word "software" crossed out, Ghostbusters-style. And that was all before he had signed up a single customer.Benioff's audacious goal: to take down enterprise software's stalwarts (including Benioff's employer) with a new business that let companies rent the software they use instead of buying it.
It was outrageous! It was brazen! And it worked. Salesforce (CRM), now a public company with a market capitalization of about $3.5 billion, generates revenue of more than $1 billion a year - a 60% five-year annual growth rate - all from providing software subscriptions to businesses. "We've always believed everything's going into the cloud," Benioff says triumphantly. The future, or 'gibberish'?Benioff, 44, is the original evangelist of what's now known in tech circles as "cloud computing." That's shorthand for centralized computing services that are delivered over the Internet (a.k.a. the "cloud"). He sold companies - from small businesses to Merrill Lynch - on the notion that they should stop investing in expensive servers, elaborate software systems, and regular maintenance fees to handle their customer-management databases. Instead he persuaded them to pay Salesforce a monthly fee and log on to their software programs over the web. No more PC updates. No more computer crashes when the traffic spikes. Salesforce would manage it all.
The biggest purveyors of software, companies such as Oracle (ORCL, Fortune 500), SAP (SAP), and Microsoft (MSFT, Fortune 500), initially scoffed at Benioff's idea. Centralized computing was fine for small businesses and consumers. (Web-based e-mail such as Google's (GOOG, Fortune 500) Gmail is a good example of simple cloud computing.)
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