Outside the Lines

MOUNTAIN VIEW, Calif.--Two titans in the enterprise software business faced off Thursday at a Churchill Club event at the Computer History Museum here, and a bit of history was made.

The sage, 64-year-old Hasso Plattner, co-founder and Chairman of SAP, and the upstart, 43-year-old Marc Benioff, co-founder and Chairman of salesforce.com, debated the future of enterprise software, fielding questions from Quentin Hardy of Forbes and the audience.

The history footnote of the evening came from Benioff, who challenged Plattner to build SAP applications on the Salesforce.com platform. "I want to figure out how to get SAP to build on our platform," Benioff said. "SAP needs to write its new apps on our platform, and I need to help him do that because there is no way he can figure that out...we will be in a war to get more developers on our platform."

Plattner, who was writing software when Benioff was in grade school, wasn't biting, and became a bit exercised. He questioned whether Salesforce.com could keep thousands of on-demand service interfaces consistent as its platform grows and as customers write code to integrate with the platform.

"All 41,000 Salesforce customers are on the same version. When we release the new version in June, we don't break the links. In some cases they have to re-implement, but you still have a managed environment," Benioff countered.

"I would be scared at what you just said. If you extend that to whole enterprise system, I would be scared to death," Plattner responded.

Benioff, who I declare the debate winner by nontechnical knockout (no references to in-memory database systems), stuck to his vision of the future. "You have to buy into the fundamental premise that the world has to change, and because we have a global network and a new architecture with massively parallel servers, we can build technology with a level of automation previously unimaginable.

The evening started off more calmly, with Benioff describing the new generation of enterprise software companies, which he said will look more like consumer companies, such as Google, Yahoo, and eBay on the back end, but serve up traditional business functionality.

Plattner rambled on about betting on modification-free software with SAP R/3 in 1993, only to find that customers wanted to customize it. SAP's plan today is to provide 2,100 service interfaces in Business ByDesign, its forthcoming hosted suite of applications for the mid-market. Those interfaces will mesh with each other but will not be customizable. He differentiated Business ByDesign from Salesforce.com by virtue of the completeness of the SAP suite. SAP has been working on Business ByDesign for four years with 2,500 developers on the project, and it won't be generally available until later this year or 2009.

"We have many things in common. Let me give you some advice, but you might not take it because you are younger: don't overestimate your platform."

--Hasso Plattner to Marc Benioff

For SAP, software is about serving larger businesses with a complete, integrated suite of applications with "wall-to-wall functionality," Plattner said.

Benioff claimed that the Salesforce.com platform could run any kind of enterprise application. He asked Plattner why Salesforce.com beat out SAP for the Dupont business. "We had a shitty CRM system," Plattner said. He then said that the new SAP CRM 7.0 is the best product in the field. "You had a good time and now we are. If you are really successful how much are you worth?" Plattner said.

Benioff said Salesforce.com is aimed at all sizes of companies and across industries. "We have been passionate about moving obstacles out of the way of the old enterprise software companies," Benioff said. "We are at the verge of a breakthrough, and it is as big as the software-as-a-service business has been. We see platforms emerging where we can accept customers and ISV code and run it natively, just as R/3 ran natively on Oracle. This means you can run the business processes of any company in the world. We are moving now to platform-as-a-service, and it's biggest the threat to SAP, MS, Oracle, and BEA architectures."

As salesforce.com evolved from CRM to application platform, Benioff has been making that claim the client/server model is doomed. Plattner touted SAP's developer community. "We have 1.2 million software developers on our platform, 2,000 partners developing addition software," he said. "We have the largest software development project in our history, with 2,500 developers developing on demand," Plattner added.

"You have 2,500 developers and 2,100 interfaces. All that and no customer success," Benioff taunted.

In a moment of calm, Plattner said, "We have many things in common. Let me give you some advice, but you might not take it because you are younger: don't overestimate your platform." Sage advice.

Plattner was asked if he would consider buying Salesforce.com. "It always makes sense to look into something. If the Apex platform (the Salesforce.com platform) is really as good a he thinks it is, we should look even more," he said. Plattner also said that he thinks Oracle, where Benioff worked for 13 years, will end up acquiring Salesforce.com

To put this debate in historical context, Benioff has been known to disparage SAP, which generated $15 billion in revenue for 2007 with a 26 percent margin, as a company that doesn't innovate. In an interview with News.com's Charlie Cooper and myself a few weeks ago, Benioff said:

With SAP, you really have not seen innovation in the last 10 years. If you think about what is the one thing that SAP has ever innovated, what have they created that's unique to the industry or value-added technology? I have a hard time thinking about what SAP is going to be known for at the end of the day.

In August 2007, Plattner's proxy, SAP CEO Henning Kagermann, characterized Salesforce.com as follows:

Salesforce is like best of breed in the old days. It's always an advantage, but you cannot be best at everything worldwide. That's our advantage--we can run an entire business.

Speaking of old, SAP was founded in 1972 and Salesforce.com in 1999. Salesforce.com is approaching $1 billion in annual revenue, and a much smaller margin than SAP, with its software-as-a-service platform and subscription business model. SAP has been slow to adopt the software-as-a-service model, but is prepping to launch Business ByDesign. It will be more directly competitive with NetSuite than Salesforce.com, which is built primarily around CRM applications.

Benioff summarized the future of enterprise software during the debate in this statement: Software-as-a-service will not happen without Microsoft, Oracle, or SAP. But they are holding on to the past. The new Internet companies--Amazon, Google and ebay--what they have done and the new young internet companies is really the next generation."

Fundamentally, companies will find it more practical and cost effective to deploy enterprise software from the cloud over the next decade. As I said earlier, Benioff won the debate, but he has a long way to go to unseat Plattner's company.