Last year I wrote a SWOT analysis on Salesforce’s Success platform in early 2018. I knew a few things were out of date in that analysis and having attended Dreamforce 2019 this last week I thought it was time to update the findings. This is not a formal research note on this topic, and hopefully there will be one in due course but here are my preliminary thoughts from San Francisco airport BA lounge, on the way back to the UK.
Note everything at Dreamforce is discussed under Safe Harbour and Salesforce have a habit of announcing things at this event that move in to beta test at next year’s Dreamforce! Working out what is GA, beta, pre-beta etc is a challenge especially with renaming of SKUs on a regular basis. So some of what is discussed here maybe some time away from delivery.
Multiple architectures & integration – Along the way Salesforce has acquired many companies to build out its CRM suite, and in fact redefine the definition of CRM. Acquiring companies allows you to build out your offering quickly but incurs technical debt and Salesforce has plenty of this. In the meantime the acquisition spree continues and in the last year or so has taken on significant vendors Mulesoft (integration) and recently Tableau (Analytics) and ClickSoftware (field service). So whilst the challenges persist interestingly the Mulesoft acquisition does address some of the integration issues.
Mulesoft will be used to help with integrate intra-cloud ( sales to service, service to marketing ) type integrations and also is of course a huge help with external integration (to ERP and other apps) with the API management approach that Mulesoft takes.
Salesforce continues to confuse and again re-brands its entire suite as “Customer 360”. However, within “C360” there is also “Customer 360 Truth”. C360T is the single view of the customer ( some would say CDP but Salesforce is aiming broader than that). C360T contains 4 components but one main function will be to act as a single source of customer data for any Salesforce function or process. So the integration problem does not disappear but by providing the whole suite and the C360T then Salesforce has made major moves to address this issue.
However, it may be sometime before all this is fully sorted. However, this is major progress on what was a complex challenge.
Talking common data – as a sideline, or diversionary tactic, Salesforce announced in conjunction with the Linux Foundation a common information model. This will directly compete with ODI announced less than 2 years ago by Adobe, Microsoft and SAP.
Trailhead and ISV partnering and the AppExchange and the platform – I was impressed with what Salesforce is doing here. Trailhead has become a large weapon to drive change through education. Other vendors have similar functionality but make nothing of it in the broader competitive CRM and digital transformation pitch. AppExchange continues to grow and the Salesforce “platform” is attractive for ISVs and GSIs.
Industry Verticals – in order to achieve the growth to $20b one of the key opportunities I thought, other than geographic expansion, was to double down on vertical industry solutions. To be fair, Salesforce has had industry solutions since 2014 but my own view was it was a fairly half-hearted approach. However in the last year Salesforce has announced several more industry clouds and is doubling down on their depth. In addition Salesforce suggests 45% of its sales force is now vertically aligned around the world.
Existing vertical industry solution vendors typified by Vlocity and Veeva do not see this as a problem at this stage as they are still offering significant value add. However, this direction by Salesforce is to be welcomed.
Competition – at one level its hard to see where this is coming from in the CRM market. Speculation occurs occasionally whether a mega vendor like Google, Apple or Microsoft would come in from left field and snap them up. But they would need a huge wallet given the stratospheric valuation of Salesforce. So if we just consider existing competitive CRM vendors ( of which Microsoft is already one)….
Whilst there are other good products in the CRM market the size and growth of these competitors is dwarfed by Salesforce. Salesforce has over $9.4b in CRM “software” revenue alone. The longevity of Salesforce’s 20% growth rates over many years and now continuing with revenue well above $10b annual revenue level is truly impressive. It continues to gain market share on most of its competitors.
The next largest players in cloud CRM software would be Microsoft, SAP and Oracle who I estimate have less than $3.4b revenue combined. The analysis is somewhat fraught as whilst Salesforce’s CRM revenue is clear cut in their 10-K; Oracle, Microsoft and SAP do not split out their revenue quite so clearly. However, whilst these vendors may have higher cloud growth rates, their overall figures show modest growth due to decline in on-premise software licence and maintenance revenues. It will still take many years, if ever for them to overhaul Salesforce at present rates.
However, there are big and small players out there who potentially will cause a threat, gradually/eventually this may eat way at Salesforce’s growth:
Microsoft – have finally built a full CRM suite with additional of e-commerce ( late 2019) and marketing ( early 2018) to complement their sales and service components. Dynamics 365 has nice workflow, RPA and App and BI solutions well integrated as well of course as Office 365.
Oracle – broad and deep suite and fully committed to cloud for many years now.
SAP – re-branded and focused eventually on CRM cloud and showing strong growth – but from a small revenue base in a large base of existing customers.
Industry solutions – there are quite a few CRM specialist industry solutions vendors. It will be interesting to see what happens now Salesforce is moving into their territory. One key route to differentiation was verticals, this avenue may become restricted.
Mavericks – players like SugarCRM have now put together a nice broad offering ( sales, market and sell) and have an attractive offer with a much lower TCO. But even with PE backed investment, a fleshed out out offering and good growth rates is hard to see how they pose a significant threat.
SMB Players – these vendors focus mostly on the SMB space and include Freshworks, Zoho and even niche vendors in marketing /mail like Mailchimp and Constant Contact. Whilst not usually mentioned in the same sentence as Salesforce, these vendors gain tens of thousands of new customers each year, from SMB prospects. Salesforce has relaunched its small business offering – Essentials – but it remains to be seen whether the combination of all these SMB focussed vendors can make a dent in Salesforce’s growth?
Suite vendors – a number of CRM vendors have built multiple cloud offerings to offer sales marketing and service functionality including Zendesk, Hubspot and Insightly.
Non CRM vendors – this could be an interesting space to watch. Two vendors come to mind. ServiceNow having moved strongly into customer service and Amazon into contacts center.
Salesforce has moved remarkably quickly with its acquisitions and to address some of the challenges outlined in 2018. The complexity and sophistication of Salesforce continues to increase and challenges remain, but good progress has been made on some major concerns.
For more about my Dreamforce impressions try here.