SAP co-founder Hasso Plattner and Salesforce.com CEO Marc Benioff squared off at a debate on the future of enterprise software at The Churchill Club in Silicon Valley last week. Who came out on top of this software industry boxing match?
By Stuart Lauchlan, news and analysis editor
It was billed as a debate on the future of enterprise software, but it might well have been pitched as a software industry boxing match. In the red corner, the grandaddy of the applications market, all the way from Walldorf, Germany – SAP; in the green corner, the local lad and general enfant terrible, Salesforce.com. One, the enterprise applications market leader; the other, the software as a service (SaaS) start-up that has been setting an uncomfortable agenda for the applications old guard.
In the flesh, these corporate forces were represented by the stentorian (and on occasions, seemingly rather irritated) form of SAP co-founder Hasso Plattner and the altogether more laid-back Salesforce.com CEO Marc Benioff. The contrast between the two men could not have been greater. It was the first time the two had sat on a platform together, having previously passed like ships in the night. Now they were in a head-on collision. Let battle commence!
"The history of our industry is a continuum," argued Benioff. "It's a continuum of technology that's constantly getting lower-cost and easier to use, that the companies who have gravestones... are the companies that were not able to continue the path of innovation because as our industry grows in this continuum, you get these paradigm shifts. And that's just the reality of our industry, and you have to make these shifts. And we are witnessing, before our eyes today, the creation of a new enterprise software industry.
"There's an new era of enterprise software built around some fundamental principles that are different than the previous era and we, this new generation of enterprise software company, look to the functionality of the past, but we are looking to the values of consumer companies like Google, eBay, Amazon, Yahoo!, who have become these massive companies who serve millions of users with tremendous complexity, but they're able to do it through this new technology model."
Plattner did not attempt to dispute that the world was a different place to that of the mid-1970s when SAP was founded. "Why do we have this? We have the networks. We have the network speed," he noted. "Therefore, we can separate computers from each other and for the user, it is an integrated system, regardless where the computers are. We have seen that we can have complicated software across the Internet. For me, the breakthrough was Google Earth, to get something that complicated and everybody can use it is pretty nice. There are many applications, which can be offered on demand over the internet. For the first phase, they have to be pretty generic. So therefore, we see salesforce automation. We see analytics on demand. We see spreadsheets. We will see Office in the cloud."
But his endorsement of the SaaS concept is not unconditional. "I think the most important thing we have to learn in the software industry is when we use services we cannot really modify them," he warned. "The core parts of these services are delivered. We cannot change Google Earth inside. We can't put something on top, so we have to learn how we can use services and mesh them up with other services. Second is that we then have to either confine ourselves, restrict ourselves, or the service provider has to come up with a close-to-perfect system."
And that's the problem, he contended. Customers will insist on changing 'perfect' systems. This was a lesson that SAP had learned, he contested. The firm had moved from the mainframe era of R/2 through the client-server age of R/3. If any company understands the importance of riding technology transitions, it should be SAP.
"We thought that we have a perfect system in 1993 with R/3," said Plattner. "But we learned when we entered the market that the more popular the system became and the larger companies took the system. We were sucked up like in an upstream wind, sucked up into the large companies, and they added on and added on and added on. In 1993, I had modification-free software. We lost that battle. Our second customer in the US was Chevron. End of the story. I could not tell Chevron: 'You are not allowed to extend the software.' That has to stop in this [SaaS] model."
So what are SAP's SaaS ambitions? "What we want to do is a complete enterprise system, probably including online sales, not including design software for manufacturing and actually manufacturing," explained Plattner. "Anything ERP plus CRM plus PLM plus Company, all the buzz words, so a complete enterprise system including now significant analytics thanks to our position."
But SAP isn't chasing the small customers that so many SaaS start-ups do. "This doesn't start at the single user," insisted Plattner. "This doesn't start at this mom and pop shop and even the window manufacturer if he doesn't have 50 people to 100 people is not a candidate for that system. So we start much later. We start at least an order - an order of magnitude, factor ten later. So 10 users is nothing we are looking for. The single-user enterprise, which I appreciate that these exist, they don't need a system like this. They don't have to schedule. They don't need an availability to promise because it's all in their brain or on their spreadsheets."
This is a red rag to a bull for the likes of Benioff. SaaS is for everyone, large or small, is his mantra. "In our first decade of business, what we've been mostly focused on is defining SaaS, the aspects of multi-tenancy, the aspects of you can be a small company, the smallest in Silicon Valley, or you could be Cisco, one of the biggest in the Valley, and still use Salesforce.com for all of your employees," he said.
"SaaS will be fast. It will be easy. It will be global. It will run in multiple languages. It will meet your business process. What we've been really passionate about, is moving this obstacle of the old paradigm out of the way. Enterprise software has been - and Hasso's kind of illuminating this - only for the very rich or only for the big companies. If you don't have a lot of money, we're not going to talk to you, or we are only for complex situations. If you've got a serious company, then you should come to talk to us. Now I know this because I was at Oracle for 13 years and this is what I did for a living!
"Now we are breaking through to the platform as a service, and it's not just Salesforce. We see it with Facebook. We see it with Amazon. We see it with Rackspace. We see it with what Google is working on. We see platforms emerging where we are able to accept not only our customers' code but ISVs code and run it natively on our platforms, native. We're running it in a way that R/3 ran natively on Oracle. The big concept that we're moving now into the platform as a service, and this is a tremendous threat to not just the SAP architecture but the Microsoft architecture, the Oracle architecture, the BEA architecture. In the new analysts' reports and so forth that are coming, you're going to see that it's the platforms as a service that will be rated, not just the software companies."
This claim to enterprise platform credibility stirred something in Plattner who clearly didn't care for much of what was being said. "We have 1.2 million software developers on our platform. We have 2,000 partners developing additional software since four years. We have the largest software development project SAP has ever done in its history. When we came out with R/3, we were 200 developers. We currently have 2,500 developers developing on demand. There's no question that technically, it's possible to run large parts or a whole part of an enterprise as a service over the Internet. So let us just assume this is okay. Then, we want to take advantage of that."
But that's been tried before, hasn't it? SAP has dabbled in online CRM before and been stung. "The problem with the approach of the 2,500 developers and the 2,100 open interfaces is... all that and no customer success," chuckled Benioff. "So when they go to DuPont, which is one of their largest customers and say, here. Here's CRM on-demand, we've got it for you, like they did about a year ago. And then we go to DuPont and say, here, try this, the reason that we ended up as DuPont's CRM provider is because we made them successful and it works. And we showed them the power of on-demand and the power of the new model."
This was too much for Plattner and led to some of the most amusing exchanges of the debate. "Why did he win DuPont?" he said. "We had a shitty CRM system." Benioff couldn't believe his luck. "Can you repeat that, people at back didn't hear," he quipped. Ouch!
For part two, click here.