CEO Marc Benioff started the company in 1999. Before then, he was an executive at Oracle (ORCL). Benioff soaked up the Oracle experience, but also realized there were many problems with enterprise software. The costs were too high and the applications were extremely complicated. It was not uncommon for companies to spend millions on software that only a few employees would use.
Benioff's idea was to deliver his software via the Internet, which would be become known as cloud computing. What's more, the design would look like Amazon.com (AMZN) or eBay (EBAY). And Benioff started to sell his software using subscriptions. Gone were the high upfront fees.
It represented a megatrend in the software business, although there were still many skeptics. Would companies really allow their data to be stored in the cloud? Well, it looks like the answer is "yes."
So looking to find ways to grow, Salesforce.com is targeting another big market: databases. Its new offering is called Database.com and it looks like a direct challenge to Oracle.
A New War in the Cloud
Since its founding in 1977, Oracle has grown at a staggering pace. Along the way, the company was able to fend off tough competitors, like Sybase. Now, the company is the clear leader in the database management business, with a market value of $146 billion.
In order to bolster its position, Oracle has also spent billions on acquisitions, with a focus on areas like enterprise resource planning and middleware. The company is even moving into hardware (with the Sun deal this spring). Oracle is also a big beneficiary of cloud computing, as it requires large databases to store transactions.
Time for Oracle to Get Serious About Cloud Computing?
As the largest cloud-computing platform, Salesforce.com has the opportunity to provide infrastructure for cloud-computing application developers. No doubt, this will take away some business from Oracle.
In fact, Salesforce.com calls its new offering the "first enterprise database build for the cloud." It's actually the database that powers its own applications. So it is a proven technology that is highly scalable.
Database.com will no doubt pose a serious threat to Oracle. After all, cloud-computing is expected to grow at a hefty clip and Oracle does not want to be left out. Actually, it's a good bet that the company will try to come up with its own offering or purchase one.
True, there is little near-term threat to Oracle's core database business. But given the size of the database market -- which is $21.2 billion -- there is much at stake. In other words, it is definitely important for Oracle to finally get serious about cloud computing.