A decade since Salesforce's IPO and emergence of cloud software

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It's been a decade since's initial public offering, the event that introduced much of the world to the concept of cloud software. Now Salesforce is approaching $4 billion in annual revenue, and is valued at more than $36 billion. The cloud is no longer a niche—it's how companies do business.

Gordon Ritter, one of Salesforce's first financial backers, is using the milestone anniversary of the IPO to reflect on the past 10 years of software innovation and set the stage for the next decade of software as a service, sometimes referred to as "SaaS" for short.

Ritter is a founding partner of Emergence Capital, a Silicon Valley venture firm that got its start around the time Salesforce hit the New York Stock Exchange. Two years earlier, he and his soon-to-be co-founders at Emergence cobbled together $1 million for a stake in Salesforce. The stock has since multiplied by more than 100-fold, and Ritter remains a shareholder.

Emergence is coming off a banner year, having parlayed a $4 million investment in health-care software maker Veeva Systems into a stake worth over $1 billion at the time of its IPO in October. That was a bet on what Ritter calls "industry cloud," or companies that are providing Web-based systems, mobile products and data analysis tools to specific markets. Other examples include PlanGrid for architects and builders, Doximity for doctors, and Plex Systems for manufacturers. Emergence is an investor in Doximity.

Salesforce's platforms are used across industries. Now narrower, more sector-specific software solutions are staking claim on the next phase of growth. "Salesforce led the first 10 years of the cloud—industry focused applications are going to lead the next," venture capitalist Ritter said. They're all "riding the mobile wave," he said.

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With the excitement around cloud comes a whole lot of volatility as investors wrestle with how to value unprofitable but fast-growing companies. Salesforce, Workday and ServiceNow, all among the most valuable SaaS companies, have taken shareholders on a roller coaster ride this year, plunging in the first quarter before rallying in the second. And Veeva, which is profitable, is trading at about half its record price, reached shortly after the IPO.

As a venture capitalist, Ritter is less concerned with stock moves and more focused on long-term trends. His firm recently put together a SaaS timeline (see below) noting significant developments like the introduction of Amazon Web Services in 2006 and the IPO of SuccessFactors (later acquired by SAP) in 2007. In 2012, tech research firm Gartner predicted SaaS revenue that year would reach $14.5 billion.

That's a long way from the early 2000s, when Salesforce founder Marc Benioff was pitching salespeople on a new way to find and manage leads with software that would take on Siebel Systems, the industry Goliath later acquired by Oracle. In customer relationship management software, Salesforce is now bigger than Oracle and SAP, according to Gartner.

"His vision was way ahead of reality in those early days," Ritter said.

By CNBC's Ari Levy.