UPDATE: Video of this interview is now at the bottom.

By now you’ve probably seen a lot of the pundits give their say on the Marc Benioff vs. Hasso Plattner debate. Although this post is a little overdue, we’ve decided to summarize the debate for those who don’t have an hour and a half to spare.

The debate started with an introduction of SaaS and how it’s changing our industry. We don’t need to go into the pros/cons of SaaS and on-premise. If you’ve seen Marc speak before, you’ve probably heard much of it already. He rambled about SaaS using buzzwords such as Paradigm Shift and Multi-Tenancy. In fact, Hasso even said at one point “Are you done with the commercial?”.

It got more interesting when Hasso mentions SAP’s on-demand CRM with, “Forget about our early on-demand CRM that we released earlier to compete with Salesforce.com, that failed miserably”. To which Marc replied “Don’t worry your customers have already forgotten about it”.

Hasso explained that enterprise software is not for the mom and pop shops with 1 or 2 users. SAP’s software is designed for larger companies that have at least a hundred users. He says, “10 users is nothing we’re looking for”. The point he’s trying to make is when an organization exceeds a certain threshold in size, they will need a much more complex system than any on-demand application can offer.

Marc followed that comment with, “Traditionally enterprise software (and Hasso has sort of eluded to this) is only for the rich, only for the big companies and if you don’t have a lot of money we’re not going to talk to you. We are for only complex situations and if you have a serious company then you should talk to us.” What he goes on to explain is that Salesforce.com allows small customers to buy enterprise-grade software. CRM is no longer just for the large companies.

Later Marc fired a torpedo at Hasso by saying, “I want to figure out how I’m going to get SAP to build on our platform. Because I’m going to every company, large and small and showing them how SAP has not had any success with on-demand. When I look at that, I say to myself ‘how can I help SAP?’. They should build on our platform”.

After that Hasso replied with “Why did he win Dupont? Because we had a shitty CRM system and he had a much better one … You had a good life and a good time and now we have a comeback player. We should not compare Salesforce.com and SAP. We’re discussing software as a service.” And then Hasso went on a tangent about large memory sticks.

Marc started to explain how other big players are sticking to on-premise because it’s their cash cow. To which Hasso fired back with, “Marc, I didn’t understand your last comment but, will that all change when Oracle acquires you?”

The debate went back and forth. But here’s a summary of each person’s viewpoint.

Marc Benioff still believes that the real value in SaaS is that it will eliminate all of the commodity IT work. Much of what we discussed in an earlier post, SaaS will eliminate the mundane work of installing and maintaining network and server equipment. The value proposition is that SaaS is easier to maintain, manage and the total cost of ownership is lower in the long run. “We’ll still have the integration services and consulting services to implement and deploy business processes. But the real value in SaaS is the lower total cost of ownership and manageability and usability are all dramatically different. You know you have a paradigm shift if it’s an order of magnitude of lower cost than the past model.”

Hasso Plattner agrees that SaaS is a very compelling business model. However there are caveats that we cannot neglect. The first is that a multi-tenant application needs to support the business processes of many companies all on one system. Due to the nature of such a system, it would be difficult to satisfy 100% of the requirements for each and every customer. Today with services, we are limited to how we can configure the application. You cannot change the guts, you can only build on top. Even custom code running natively on Salesforce’s servers presents a couple of problems. One problem is that, if Salesforce releases a new version they might break somebody’s code. Therefore companies like Accenture would have to come back and re-implment everything. “If you think you can provide software as a service where you have all your customers each with their individual code running on your platform … That’s the problem, you upgrade and everybody has individual code written on top of it … I would you be scared for what you just said.”

Other memorable quotes and replies:

• Hasso: “I only give you this advice, but you might not take it because you are younger. Don’t overestimate your platform. We have done so many platforms but they were too weak and they went away taking with them whole computer companies.”
• Moderator: “Tell one thing that you admire about the other person or company”

  Marc: “Honestly I respect the tenure. I think that anyone in this room that has been in this industry has got to give this gentleman tremendous accolades for sticking with it for 37 years.”
  Hasso: “That he solved something that nobody has solved before. That is fantastic. Start with a single user and go up to 100,000 users. This is what I admire him for that they worked this out. People liked his software, shit yeah it was better than our CRM on demand and so he has every right to beat us. Watch out for 7.0″

• Question: “Does it make sense for SAP to acquire an on-demand company like Salesforce?”

  Hasso: “It always makes sense to look into something. If the Apex Platform is really as good as he thinks it is. We should look even more … no you’re still too good of friend of Larry … And I don’t go into a bidding war. But SAP management may see that completely differently and then they inform the supervisory board and then I have to vote. “

UPDATE:
Here is the replay on YouTube