When Salesforce.com CEO Marc Benioff was reminded that Oracle CEO Larry Ellison continues to play down the importance of cloud computing, he assessed Ellison's position by quoting from ancient Chinese philosoper Sun Tzu.
"When weak, feign strength," Benioff said, while on a panel at the Web 2.0 conference in San Francisco.
He later referred to Oracle's business as "a mature, dying model." Of another huge rival, SAP, he said, "they may already be dead."
It was more of the same kind of chutzpah that Benioff, a former Ellison lieutenant, has expressed since he founded Salesforce.com a decade ago.
The irony is that Oracle continues to crank out billions in profits while Salesforce.com, for all its revenue growth, has found consistent profitability growth hard to come by. Its marketing and and related costs have always taken up huge amounts of its capital since Day 1.
The company just launched a major push in cloud computing, an extension of its primary business of software as a service.
But the business Benioff helped to pioneer -- storing software on servers instead of selling it directly to corporate customers -- is expanding and getting crowded, with Amazon and Google pushing their hosted app services.
And it just got more crowded, with Microsoft announcing that it will have an offering sometime down the road.
True to form, Benioff thinks Microsoft's entry into the market is good for Salesforce.com
"We think it's great they're telling people they'll finally have something."
Small businesses have embraced Salesforce.com because the company gives them a way to track customers while paying for only as much software as they need.
Happy customers don't always translate into happy shareholders, however. With a key metric for the company -- deferred revenue -- beginning to stagnate, Benioff is going to have to find a lot more new customers. The company's stock has dropped by more than 50% in the last six months, underperforming the broader market even amid the turmoil.
The company has been considered a future takeover target for a number of companies, including Oracle, SAP and Microsoft.
If Benioff wants to keep challenging those companies in public, rather than ending up a part of them or roadkill in their wake, he's going to have to find a way to generate more profit.
I have not looked closely at Salesforce as a company or financials, but my company, WDX, is a user. I have to think that with their CRM features well developed and substantial market share, that according to the Laws of SaaS, profitability should not be far behind. But I'm not sure what will give them the edge in their foray into cloud computing, other than for hosted apps that hang off Salesforce. I would think that cloud investment has to be a major expense drain.