March 27, 2013
By Lucy Birmingham
Marc Benioff’s winning bet on Japan helped elevate salesforce.com, the global software company, to the top of the cloud after a journey across the Pacific from its San Francisco headquarters
Trust, modern technology, timing and a local merger and acquisition specialist – or rainmaker – helped sow the seeds of success. Japan accounts for 8-10 per cent of the company’s $27bn market capitalisation and is its second-biggest territory after the US.
“I have always had great confidence in Japan because it is so technologically advanced,” says Mr Benioff, founder, chairman and chief executive.
“It has one of the most reliable communications infrastructures in the world. [But] like any global market, [it] requires patience. We have been in Japan for more than 10 years. The key is to hire the best people and focus on the customer.”
It also has intellectual property (IP) and privacy legislation. “Intellectual property issues are key for us. Without established IP law, foreign IT companies cannot invest in Japan’s market,” he says.The environment was right, says Eiji Uda, chief executive and president for Japan. The country had a mature broadband infrastructure, a strategy for small and medium businesses and international competency.
From the start, salesforce.com avoided exclusive reseller relationships with local companies, an approach taken by others.
Chikara Sano, former Japan chief executive at Oracle, warned Mr Benioff that such a move could limit future growth. Mr Sano instead suggested a joint venture partnership with local expert Allen Miner, chief executive of SunBridge Corp, which provides venture capital and globalisation support.
“Normally it takes a long time to penetrate the Japan market,” says Mr Uda. “Microsoft and Oracle have been in Japan for more than 20 years and are heavily dependent on partners for a majority of their business,” he says.
Gaining references from large “brand” clients has been crucial. Success in Japan requires a top-down approach, normally out of reach to new foreign companies. “One of the factors that makes the Japanese IT market difficult to navigate is that, unlike the US where many companies like to try new technologies, most of the companies in Japan prefer to follow a successful example, typically from a big company,” wrote Mr Benioff for Japan’s external trade organisation.
Gaining access to those potential clients was half the battle. Mr Benioff found his M&A guru in Mr Uda. Before joining salesforce.com, Mr Uda had had 20 years at IBM and had been president and chief executive of SoftBank Commerce. Relationships he had developed at companies such as Canon, Hitachi, Ricoh, NTT, Nippon Steel and Mizuho Bank opened doors.
This led to the group’s big catch, Japan Post, that was being privatised. From there, a domino effect saw the company gain accounts with large financial institutions, including banks and insurance companies, as well as small and medium-sized businesses. Japan Post is now the largest customer of salesforce.com.
The company started with customer relationship management (CRM) but customers began asking if they could build other applications on “the cloud”, so the company opened up its platform, called force.com, enabling customers to build their own applications. “Customers can use our platform to develop any kind of application they want.”
The company’s many accolades have been great for sales. Forbes named salesforce.com the most innovative company in the world for 2011 and 2012. Fortune ranked it 27 on the “100 Best Companies to Work For” list.
Salesforce.com Japan is known for its acquisitions. Last year it spent $835m. In early March, the company announced a $1bn, five-year cash budget that would raise cash levels to $2.8bn, a signal that it might be on the lookout for more purchases.
“We will continue to invest in Japan,” says Mr Uda.
“We may also do some SME equity participation and technological support because many lack advanced technology.
“That would be the best way to help stimulate the economy,” he says. “We’ve invested in 11 companies in Japan. We’re not aiming at capital gain. We want to support Japanese IT companies and help them transform from legacy to a new innovative era – the cloud computing era.”