Marc Benioff learned about software from one of the best: Oracle
The result was Salesforce.com
If you ask Benioff about the traditional software industry, he will give you an earful: There are large up-front licensing fees, useful features that are not used, expensive and time-consuming installations and training requirements, and expensive maintenance. There is also the complexity, which often means that many users do not even use software products.
Benioff's solution is on-demand application services. Because the software services are delivered over the Net, there is very little installation. Moreover, updates are automatic, with no need to install new software. And payment is based on subscriptions.
Even though Salesforce.com is profitable, an infusion of capital from the IPO -- and having stock as currency -- will be hugely beneficial. The reason: Just like Amazon.com
At first, the Salesforce.com product offering was narrow, with mostly sales-force automation applications. Then a few years later, marketing and customer support was added. Recently, the company has added file and document management capabilities.
More important, Salesforce.com has introduced a development kit called sforce that allows third-party developers to create applications for the Salesforce.com platform, and the applications are proliferating.
The software industry is in the midst of tidal change. For example, to compete in enterprise software, Microsoft
Salesforce.com offers a new vision for software and has been gaining incredible traction. But this does not necessarily mean the stock is a good investment. Right now, it is in the clutches of day traders, and the stock price is likely to be volatile. For long-term investors who like the Salesforce.com model, this is probably the wrong time to jump in.
Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the companies mentioned.