Benioff: Tech can weather a slowdown

"Blue Horseshoe likes software as a service"

(Credit: Dan Farber/CNET News.com)

Along with my colleague Dan Farber, I sat down with Salesforce.com's Marc Benioff this week for a wide-ranging Q&A. You'll be able to read the entire interview Monday morning, but what with Bear Stearns' Friday meltdown and the ensuing panic in the stock market, it was apropos to get Benioff's take on how Wall Street's tribulations might impact the tech business and, more specifically, Salesforce.

It is interesting to note that the last time Wall Street and the economy headed south, market forces took the model for ASPs, or application service providers, with it--for a time, at least.

ASP's were all the rage in the late 1990s, and a clutch of start-ups took advantage of easy access to capital and an infrastructure buildup. But when the dot-com bubble burst, so did most of their hopes, and bankruptcy became the byword.

Benioff plays down the potential impact on Salesforce of any prolonged macroeconomic slowdown. But he's dealing from a position of relative strength. Salesforce recently announced a spectacular fourth quarter. What's more, Benioff has built the company into more than a ASP.

In our interview, Benioff talks, among other things, about his ambitions to turn Salesforce into an application development platform. He also discusses the nascent competition from Microsoft.

Here are some excerpts:

If there's a protracted slowdown or recession, what will it mean for the tech business?
Benioff: We haven't really had any technology companies report numbers or make statements to the effect that this was affecting them yet. Maybe we will see it at some point, but you get where you read about it, and you see it on CNN, and, of course, the stock market has a 200 point bear sell-off. I think that's why it's on everybody's mind. But so far, tech companies haven't reported that it's an issue.

Does this kind of economic climate, where there's lots of uncertainty, make it tougher for someone selling software as a service?
Benioff: With software as a service, you pay as you go, so the risk is mitigated over time. If it's not right for you, for whatever reason, you're not as far into it as the old model. The old model was, you bought everything--the software, the hardware, the implementation--and then you had to make the determination: is this the right product for me?

Does the sales pitch change a lot because of what's going on in the economy?
Benioff: I don't think it does today, but maybe over time, it will. I don't think we're far enough in this. Technically, at least, we're not yet in a recession.