By Luanne Teoh on 10-03-2011

Are software giants like Oracle, Microsoft and SAP doomed with the rise in popularity of cheaper and on-demand cloud-based solutions?

According to serial entrepreneur and funding partner of Andreessen Horowitz, Marc Andreessen, the answer is yes.

“Ten years ago, it was a joke: You’d raise $20 million in venture capital and write a $4 or $5 million check to Oracle, Sun, BEA, and EMC. When it started, Salesforce looked like a toy compared with Siebel. Look ahead five years later, it’s obviously better. Not a single one of our startups uses Oracle” said Andreessen at the recent BoxWorks customer conference hosted by cloud collaboration provider, Box.net.

Also, according to Andreessen, the proof is in the pudding — not a single one of his startup investments use Oracle software. They all use cloud-based alternatives instead.

For Q1 2011, Salesforce posted record quarterly revenue of $504 million — a 34 percent gain year-over-year. It also acquired 5,400 new customers bringing its total to 97,700 customers, a boost of 26 percent year-over-year. According to Salesforce, it is on track to earning $2 billion for FY2012. Incidentally, Salesforce was founded by former Oracle executive, Marc Benioff.

Below shows the trend of the share prices for Salesforce in the last 5 years from 2007 to 2011 on the NYSE. Salesforce shares have been trading above $100 in the last two years.

In contrast, shares for Microsoft  in the last 5 years, have not shown an upward growth trend and has presented a more volatile graph on NASDAQ.  Shares for Microsoft have been trading for less than $35 in the last two years.

In the meantime, companies like Citrix, Rackspace, Acer and Adobe have been acquiring cloud-based companies like it was going out of style. So far, 2011 has seen over $3 billion in acquisitions of companies within the cloud space and over $76 million in funding of cloud-based start ups.

Cloud-based Box.net’s founder Adam Levie is going for $100 million in funding to take on giants like Microsoft. On the company’s website, Box.net claims that 73% of Fortune 500 companies manage their content on Box.net. Levie believes that “companies that keep customers captive because of contracts aren’t always the hardest to disrupt.

Ultimately, it doesn’t create a great customer-vendor relationship. It’s kind of a crazy industry because there’s this asymmetry where you’ll sell software to an enterprise, and they will pay you regardless of whether that’s successful or not. That’s entirely unlike SaaS where customers will only pay us if we’re successful” said Levie.

Is this the beginning of the end for the software-based giants?

About Luanne Teoh

Luanne is a senior correspondent for BizTechDay focused on Small Business Tech, Mobile and China based in San Francisco. In the last 17 years, she has helped launch start-ups and turned around failing operations. Her international work experience include both public and private corporations in Southeast Asia, Australia and North America. She has previously worked for Oracle Corporation, SonyBMG Music, Universal Music, Catcha Media and SOH Inc. Apart from a keen interest in technology, Luanne is also and avid explorer of the globe, cultures and people.

One Response to “Salesforce Kisses Oracle and Microsoft Goodbye? Say No to On-Premise Software”

1. Luanne Teoh Says:
   October 5th, 2011 at 1:30 pm

   Interesting Update October 5th 2011: Larry Ellison (Oracle) Cancels Marc Benioff’s (Salesforce) Keynote at Oracle’s OpenWorld.

   http://techcrunch.com/2011/10/04/larry-ellison-cancels-marc-benioffs-keynote-at-oracles-openworld/

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