salesforce.com: How Japan Came to Be the Second Largest Market for this Billion-Dollar Company

October 2010 -- Japan is the second largest market for salesforce.com, the billion-dollar enterprise cloud computing company that provides 82,400 customers with a "software-less" CRM system, a platform for creating new apps (Force.com), and an enterprise social collaboration service (Chatter). Fortune recently named the company the fourth fastest-growing in the world. (In the world!) So how does a company grow so quickly even in a market like Japan's, where sales cycles are notorious for being long? To find out, JETRO asked CEO Marc Benioff and also gleaned some advice for you companies out there looking to follow a similar path.

Why Japan?
First of all, why Japan? What is so special about it, and why even go there? Mr. Benioff wrote via email, "We've been focused on building our business in Japan since the earliest days of salesforce.com (we released a Japanese version for trial use at the same time the product was commercially launched in the U.S.). And now, Japan has become salesforce.com's second largest market. We've found that Japanese customers appreciate what Cloud Computing is all about: it is eco-friendly, democratic for all businesses -- and there is no hardware or software to buy, maintain or upgrade."

As some of you may know, Marc Benioff is a Japan super fan. Upon returning from a recent trip, he penned the article, Why Japan Matters. And Microsoft Doesn't. In it, he writes:

When asked what inspired the article, Mr. Benioff responded, "I wrote the article because Japan is such a pivotal market for us, and I am inspired by what other innovative companies are doing there....Japan gets it. Japan matters. Anyone who ignores Japan is forfeiting a huge opportunity."

And while some companies see Japan has a launch pad to the rest of Asia, salesforce.com sees it as a unique market. "Japan is the number 2 IT market in the world. There is huge opportunity in Japan and it must be treated as special," wrote Mr. Benioff. "Japan also has a unique culture. What we found worked in other markets does not necessarily work in Japan. Additionally, Japan is ahead in many ways when it comes to technology and innovation."

How they started
salesforce.com considered and tried some of the more common ways of getting started in Japan but in the end used a strategy that would serve its primary goal of growing quickly. Early on, a large Japanese company offered to resell salesforce.com's service in Japan, but Chikara Sano, the CEO of Oracle Japan, warned Mr. Benioff that creating a close alliance with such a large and established company at the beginning could limit future growth. He instead suggested Mr. Benioff consider working as a joint venture partner with local expert Allen Miner, CEO of SunBridge Corporation, advice Mr. Benioff took. "We felt that we needed to make a significant investment in Japan in order to be successful in this market," wrote Mr. Benioff. "That's why we set up our business as a joint venture with a local partner who was able to help us truly focus on this market." SunBridge helped recruit Akira Kitamura, who had more than 25 years of experience in the technology industry. Mr. Kitamura served as the first president of salesforce.com in Japan and helped gain initial customers. But after some time, this method of using partners to sell the service--one that Oracle had used to build its success in Japan--was not as effective as Mr. Benioff needed it to be. As a result, the company decided to return to methods it had used to build its business in the U.S. and Europe: aggressive marketing and direct sales.

How they grew
To implement this marketing and direct sales strategy, salesforce.com recruited as president Eiji Uda, who had 20 years of experience at IBM and was the president and CEO of SoftBank Commerce. Mr. Uda helped salesforce.com gain consistent media coverage by positioning it as a global company and associating it with companies like Google, Amazon and eBay. He also set out to generate the powerful customer references and testimonies important for spurring any business by targeting the accounts that would have the most influence in Japan: very large global customers and government organizations. Mr. Uda did this by engaging managers at large companies with whom he had relationships, such as Canon, Hitachi, Mizuho, Nippon Steel, NTT, and Ricoh. "Uda-san is responsible for winning our biggest customer, Japan Post," wrote Mr. Benioff. "That changed everything for our company." Getting the Japan Post deal helped salesforce.com gain subsequent accounts in a "domino effect," including banks, insurance companies, other large financial institutions, and small and medium-sized businesses throughout Japan. Starting with smaller companies worked in the U.S. and Europe, Mr. Benioff wrote, but in Japan starting with the largest companies is the way to succeed, as they provide the strongest references.

Major partnerships
Not only did salesforce.com gain large companies as customers, but it also formed partnerships with major companies. Some of these major partners in Japan include HitachiSoft and Fujitsu, NEC, Mizuho IR, NTT Communications, CTC, Canon Marketing Japan, and CSK Systems. For Japan Post's customer information management solution--which is based on the salesforce Platform--HitachiSoft developed a custom, on-demand application for reporting customer inquiries and compliance-related issues. And after seeing success from alliances built with Fujitsu in various countries, salesforce.com recently signed a global partnership with the Japanese giant to work together more closely around the world. "One of the factors that makes the Japanese IT market difficult to navigate is that unlike the U.S., 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. "Companies should focus on building partners that matter, that can help them reach the big customer."

Customers - Japan vs. U.S.
A group of big customers salesforce.com won recently consisted of the Ministry of the Environment, METI and the Ministry of Internal Affairs and Communications. They jointly developed an Eco-Point program to help consumers get credit for buying "Green" home electronics. The program uses a system built on the Force.com platform. "Salesforce.com was asked by one of the members of the ministry if we could deliver the system in a short time period," wrote Mr. Benioff. "Because of our cloud computing model, we were able to develop it in about 3 weeks."

Describing this customer win and others, below is an excerpt from the transcript of salesforce.com's Q2 fiscal year 2010 financial results conference call given by David Havlek, salesforce.com's vice president of investor relations:

Comparing customers in Japan to those in the U.S. in their adoption of salesforce.com products and services, Mr. Benioff wrote, "The biggest difference we find in Japan is that users tend to leverage the Force.com platform more -- whether to customize CRM, or to build completely new apps to solve a specific business problem. Traditionally, Japan has a culture of building things -- and the combination of Japan's superb networks with break-neck Internet speed along with a desire for flexibility, made the Force.com cloud computing platform a perfect fit.

He continued, "Now, with the emergence of social networks, real-time communications and mobility -- what we call Cloud 2 -- Japan is perfectly poised to lead the world in the creation and adoption of these technologies. I was in Tokyo when the iPad launched and I can tell you the energy around that device proved to me that Japan is ready for Cloud 2--the next transformation in computing that I think will be more significant than anything we've seen before. I have traveled the country in the U.S. and there are so many CIOs here who haven't even moved to Cloud 1 and I worry they are being left behind as we evolve to Cloud 2. I don't worry about that for Japanese companies. Japan is ready for this evolution. In Japan there is an incredible openness for these new mobile and social technologies. I spent a lot of time demonstrating salesforce Chatter, salesforce.com's new enterprise social collaboration service, and I was amazed to find that Japanese customers made unusually quick decisions to pursue it. In Japan there was an innate understanding of our app to be a Twitter or Mixi for the enterprise."

Advice and insight for other companies
For getting started in Japan, Mr. Benioff offered a few tips:

• "Anyone trying to establish a business in Japan must hire people who know the market," wrote Mr. Benioff. Companies need to leverage local experts to navigate through Japan's culture, communication and business practices. Partners can serve as a sounding board, help attract and recruit talent and bring in additional partners vendors, he wrote. Partners can also help you get started, operate more smoothly, and avoid many of the growing pains that many companies experience.
   
• "Generally speaking one of the mistakes companies make when they enter a new market like Japan is entering with the same company--at the same point in its lifecycle--that it has at home. That doesn't work," Mr. Benioff wrote. You must remember how you acquired your first customers, how you approached early challenges, and even consider using the original messaging. You can't expect to be able to simply replicate what you are currently doing at home.
   
• It is necessary to have both international and global leaders, he wrote. The CEO of a global company has the responsibility to place highly qualified people in international outposts and trust their decisions. International leaders are specialists in their local markets; know best how to serve their country and region; and are advisers who are aware of the area's history, culture, laws, buying behaviors, and customs. Global leaders ensure that international offices integrate well with the rest of the company. A combination of each of these leaders is essential for success.

Where they are going
As for the future in Japan, salesforce.com is planning to start operating a datacenter in Japan in 2011, something Mr. Benioff says the company's customers are very excited for, since it makes them feel more comfortable using its services. But "personally, I am excited about the opportunity in Japan with Chatter. Cloud 2 changes everything in how we run our business. Japan gets that and is ready to move to Cloud 2."