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Salesforce.com’s Q1 FY20 Earnings Demonstrate Platform Power
Salesforce continues to defy the odds by bringing home another massive quarter of 24% year-over-year revenue growth and about $2 billion in operating cash flow – more than all of 2016. Salesforce customers need not fear that the innovation ship is running out of steam, as this quarter brings another bevy of new products, new customers, and a laser focus on the customer via the Customer 360 initiative.
Salesforce Is the 800-Pound Gorilla
The updated annual revenue guidance from Salesforce approximates $16 billion for its fiscal year 2020. This puts the company well on its way toward meeting its audacious growth plans, as we previously discussed here: from $10 billion in 2018 to $20 billion in 2022 – and it is halfway there.
A slide shown at the 2018 Salesforce Analyst Summit. Image from Twitter.
Salesforce continues to hold the number one position in overall CRM market share and claims to have increased that market share by more than the next fifteen competitors combined in 2018.It is clear that there is Salesforce in CRM – and everyone else is vying for second place.
Source: Salesforce.com
Growth rates for individual product lines are noted below and are year-over-year:
- Sales Cloud: 11%
- Service Cloud: 20%, first quarter to break $1 billion in revenue
- Marketing and Commerce Clouds: 33%
- Platform and Other: 46%
Product and Strategy Developments
In the technology world, complacency is a killer, so it’s no surprise to see Salesforce keeping the pedal to the metal with an array of announcements during the recent earnings call. Chairman and co-CEO Marc Benioff stated that Salesforce is also number one in the areas of service, model-driven applications platforms, and integration (MuleSoft) and a leader in the highly competitive marketing and commerce segments.
Regarding product announcements, Salesforce mentioned the release of additional Einstein services, such as Einstein Voice and Vision (now available with all applications) and Einstein Platform Services, which enable the self-serve building of customer AI-powered applications by click, not code.Imagine Einstein Vision can accurately measure your inventory levels on store shelves or vending machines and feed this data in real time to a planning function that then optimizes replenishment orders. This type of refinement provides a real opportunity to materially move the needle across the process paths of route efficiency and inventory accuracy.
Salesforce Blockchain announced “the world’s first declarative blockchain service solution, integrated into the platform, apps and built natively…” Salesforce is currently working a major customer (unnamed) in Minnesota to embed Salesforce Blockchain throughout the customer’s supply chain.
Tying it all together is Trailhead, Salesforce’s self-guided training and learning solution.Trailhead currently has 1.4 million users learning Salesforce skills. Benioff stated on CNBC’s Cramer that 25% of Trailhead users claimed to have obtained upgraded jobs as a direct result of their training on the platform.
Customer 360: “The Holy Grail”
The driving force expected to carry Salesforce ahead into the coming years is the Salesforce Customer 360 service, connecting via B2B and B2C across all multiple channels – sales, service, marketing, commerce, and community. Benioff stated the following on Salesforce’s earnings call:
“Customer 360 is heavily supported and enabled by the MuleSoft Anypoint Platform. It is a hard pivot for Salesforce to integrate between sales, service, marketing, commerce, customer engagement, applications, and API’s, layered with analytics, customer applications, industry-specific applications, and the learning systems now available.”
Chief Product Officer Brett Taylor further emphasized, “We launched this product called MuleSoft Community Manager which enable companies to create ecosystems around their APIs. APIs are becoming the Lego of freight how companies communicate with each other, and you can see growing the convergence of our technologies and our Community Cloud and the API prioritization of MuleSoft I think really transform the way companies are thinking about the data and thinking about innovations strategically.”
At its core, Customer 360 takes a platform focus more so than the individual components that comprise the Salesforce ecosystem. Salesforce strongly desires customer penetration based on this theme and piggybacking on the astounding synergies it realizes from the MuleSoft acquisition. Customer 360 now provides a legitimate capability to tie together data sources from legacy systems and applications, on-premises or cloud, unlocking data pockets across the enterprise. Salesforce sees this as THE vision for digital transformation.
Fueling this initiative further is feedback from Salesforce’s largest consulting partners that states that only 20% of its customers are deeply engaged in digital transformation initiatives, despite the constant headlines, hype, and hoopla around this term.
Recommendations
- Salesforce customers must look at Salesforce’s vision of digital transformation via Customer 360 and decide if this meshes with their own future plans.
- Salesforce will now be selling to your CEO; the CIO and CDO are enablers of the technology, but the vision is seen as moving up the leadership stack. To respond effectively, IT leaders must forge authentic, collaborative relationships with their CEO or risk falling into a state of irrelevance.
- Clients should be aware that Salesforce contracts contain stringent restrictions on license use rights, including indirect access, and will eventually seek to enforce these contractual provisions.
- Clients choosing to take an incremental approach to their Salesforce environment should prepare for steep price hikes to retain their existing functionality; only growth and expansion are rewarded in the Salesforce ecosystem. The incremental approach to adding capabilities will not resonate with Salesforce and will dilute negotiation efforts. Customers must align on the partnership and vision with Salesforce as well as the contractual nature of the agreement.
Bottom Line
The Salesforce ecosystem continues to roll over the competition and expand its product lines as it seeks to be the platform of choice for customers of all sizes and across all industries. Customers may find Salesforce willing to offer advantageous discounts and terms while it continues to push through this growth phase on the road to $60 billion in revenue. However, clients should be aware that Salesforce contracts contain stringent restrictions on license use rights, and eventually Salesforce will seek to enforce these contractual provisions.
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