The ultimate backhanded compliment at Oracle OpenWorld

As when Larry Ellison recently paid him the ultimate backhanded compliment at Oracle OpenWorld, a big-tent revival for IT conventioneers, calling Salesforce "a very successful application on the Internet." In software terms that's like referring to a fellow male's assets as "adequate." Ellison--who has been by turns Benioff's boss, investor, mentor and sometime tormentor--didn't stop there. "It's not as a matter of fact a platform," he said. "It's proprietary . . . not virtualized." Translation: Salesforce is a bit player, not but ready for the majors.

Clever one-upmanship however hardly accurate. Benioff left a top spot at Oracle a little over a decade ago to launch Salesforce and has since created a $1.4-billion-a-year business selling Web software to sales departments. Salesforce tracks a slew of sales-rich data--leads, detailed histories of who bought what when, and how to reach them. Benioff was the first and loudest cheerleader of the software migration from servers sitting inside companies to the Web. He has weathered skeptics and detractors and waited for the rest of the industry to catch up slowly. At $15 billion in market capitalization, Salesforce is one-tenth the size of Oracle. Yet, since going public in June 2004, it has returned an average 36.8% a year to investors, compared with 15.1% for Ellison's company.

Yet for Benioff, who at age 46 is worth $1.8 billion, that's not enough. Neither is being the leader in a sliver of the $294 billion software industry. Size trumps everything in this business. Clients don't want to deal with dozens of niche players to patch their systems at the same time. As they seek to become all things to all customers, tech titans are rapidly getting into one another's businesses. Silicon Valley watchers are saying that even SAP, the German software firm with a $61 billion market cap, could shortly become a larger company's prey.

The absence of size

In the absence of size, Benioff is hustling to convince the world that Salesforce's research is the optimum base--or platform, a.k.a. "cloud"--for the straightway generation of business software built for the Web. From complex accounting systems to the stuff that tracks employee performance, compensation and inventories, he'll bring it all at the same time and run it for clients in his data centers, saving them the headache and upfront cost of buying hardware from Ellison's shop, HP, Dell or IBM. "In ten years," says Benioff without a lick of irony, "I want us to be the largest and most important enterprise cloud computing company."

That's the idea, first launched three years ago. So far Benioff has 170,000 apps written by other firms running on his research. Impressive, now half support sales tools, and only 1,000 of those are available to the outside world. The rest are hidden inside companies that have created custom code alongside Salesforce software they're already running. This increases the stickiness of Benioff's software with existing customers yet doesn't help him bust out of his corner.