Some of us may not have had the outcome that we want. Some of us have the outcome we did want. In my view, it’s in the past.
With Salesforce releasing its third quarter numbers yesterday - see here for the basic facts - I had wondered whether and how CEO Marc Benioff would tackle the recent US election result.
After all, he had been an open supporter of Hillary Clinton, citing her stance on public education as a major reason for this. At the Dreamforce conference this year, he jokingly asked panelists in one session what they would say if they had one minute with the then still unknown new President, whoever she was. So, safe to assume then that election night didn't go the way he'd hoped.
Benioff has also previously been engaged in a highly public battle with Mike Pence, now Vice-President Elect, but formerly governor of Indiana and the prime mover in that state of the anti-gay Religious Freedom Restoration Act. Salesforce’s stand against this led to a Pence climbdown in Indiana, but during the election campaign itself Benioff warned that the threat was not over, telling the Disrupt conference in San Francisco:
The people need to take a stand. If you don't take a stand, then I will tell you, there are a lot of people in this country, Mike Pence and others, who are going to do some very bad things to the people that we love.
So on the morning after the election, Salesforce found itself in a position where the incoming Vice-President of the United States might just be assumed to be not entirely in its camp. After the good relations Salesforce enjoyed with the Obama administration, watching how this plays out over the next four years will be interesting to say the least.
For his part, Benioff’s been magnanimous. Via Twitter, he publicly congratulated President Elect Donald Trump on his victory the day after the election:
He has since spoken of the need to keep an open mind and that was his response yesterday as well when he said:
We’re moving forward and we have, at Salesforce, an open heart, we have an open mind and we also expect the best. That’s why we’re positive. And we talk about that in everything we do. We’ve talked about how we cultivated beginners mind…Yes, everything is changing, but we have a beginners mind and we have a sense of optimism for the future and we’re going to cultivate that optimism and we're going to manifest it into our business because that is how we operate here. We are positive people…Now that this election is also behind us, I hope absolutely for the best now for everything going forward.
Given that the Trump/Pence positions on LGBTQ rights and how they will roll out in practice are still not clear, that may indeed be an optimistic position to take, but that's all to come.
But then, politics aside, there’s a lot to be optimistic about for Benioff and Salesforce, not least the push towards the $10 billion run rate goal - and getting there before arch-rival Oracle!
With third quarter revenue up 25% year-on-year to $2.14 billion, full year 2017 guidance is now $8.365 billion - $8.375 billion, so $10 billion in fiscal 2018 looks like a formality at this stage. Benioff’s certainly thinking beyond that:
Now we are setting our sights on our next goal, $20 billion. Look, no enterprise software company’s delivering this kind of growth at this scale, size, and we are already off to a great start…I don’t know exactly when we’re going to double the company by, but my dream certainly is to double this. My dream is to double this company within the next three to four years for sure. That’s really important to me.
Breaking down the individual clouds, there’s growth all round:
- Sales Cloud grew 13% year-on-year.
- Service Cloud grew 26%
- App Cloud and other grew 38%.
- Marketing Cloud grew 21%. If revenue associated with the Demandware acquisition is bundled in, that goes up to 46% growth.
Not included in there yet is any contribution from the Artificial Intelligence (AI) Einstein cloud offering introduced at Dreamforce in September. It’s been the year of AI announcements across the tech industry, but Benioff inevitably claims a differentiator amid the hype:
I’ve met with all the tech CEOs of course, the cloud CEOs, and they all have AI. It’s table stakes AI. AI is table stakes -everybody has got it programmatically. [It’s] ‘We’ve got the best AI’, ‘No, we’ve got the best AI’.
We’re much bigger than that. We have to bring this to people who don’t code or low coders or citizen developers, who need to have the power of our Artificial Intelligence, [who] need the power of mobility. That’s why the Salesforce platform is exciting and that our core apps, clouds like Sales and Service, are built on it. That is a huge differentiator for us. Our competitive position has never been stronger.
The bottom line contribution of the AI push will only become apparent in future quarters, of course. Meanwhile, it’s the combination of the various clouds that makes Salesforce’s offering appealing, suggested Benioff, likening the firm to a portfolio manager at a big financial institution:
This is a balanced portfolio. We have really a balanced portfolio and what’s great about that is, of course, we’ve talked about having a balanced portfolio geographically, we have a balanced portfolio in regard to our small and medium business, as well as our enterprise business, we also have balanced portfolio when it comes to our products…Through that balanced portfolio, that’s how we’re achieving these high performance results.
The financial services analogy is appropriate as this is one of the vertical growth markets cited by President Keith Block, who picked out large deals with PNC Bank and Citi as examples of Salesforce’s traction in the sector:
[PNC] is a new relationship for Salesforce, and we are hoping them streamline operations across all their primary lines of businesses that they can re-imagine the banking experience for nearly 11 million customers. All their retail call centers and branches will now be powered by Salesforce and that will help them respond to customers faster. And they will also use Salesforce to mobilize their corporate and institutional banking team, giving them access to customer information on the go.
Salesforce also signed a strategic agreement with Citi in the quarter. And this is Citi’s global consumer bank that will utilize Salesforce for all client facing personnel in their US retail bank, enabling Citi to better serve clients while lowering costs and improving analytics and efficiency. It really is an incredible vision to transform the global consumer bank with a very highly differentiated customer experience.
Old Microsoft is back
Less upbeat over the past twelve months has been what can only be read as a deterioration in the one-time BFF relationship between Salesforce and Microsoft. The ‘new’ Microsoft of Satya Nadella, something that Benioff has praised in the past, appears to have turned out to be the ‘old’ Microsoft in different clothes.
The most public example to date is Salesforce’s pitch to the European Commission anti-trust officials to investigate Microsoft’s planned takeover of LinkedIn. But behind the scenes, Salesforce being dropped from a Microsoft customer conference has clearly stung as well. Benioff told the Code Enterprise conference earlier this week:
I just came to the conclusion at that point that the 'new' Microsoft is actually the 'old' Microsoft ... And little things like this started stacking up and we put it all together, I don’t feel like this is exactly the new Microsoft that we were looking for.
The winner here has been Amazon with Salesforce announcing a $400 million deal to use AWS, while Amazon is rolling out Salesforce's software company-wide. Block said:
Amazon is a great win of the quarter as well. We formed a strategic relationship in Q1…and in Q3 our relationship has expanded, and they added even more services throughout the company.
As for Microsoft, well, the party line is of course going to be a pragmatic one of ‘co-opetition’, but Benioff couldn’t help but pitch yesterday that:
When you look at Microsoft, we sold more CRM software this quarter than Microsoft has sold in last decade. It’s just empirical. That is what is really awesome about our performance against Microsoft.
This was an understandably upbeat and optimistic Benioff and Block yesterday. This week saw the opening of the Salesforce Tower in New York as well as the stellar third quarter results being released. All told, the firm heads into its fourth quarter on the front foot.
The success of the financial services vertical is encouraging, particularly as I do fear that the federal government sector under Trump/Pence might not be as happy a hunting ground in the years to come.
There’s no indication - as yet - that the new administration will back away from a cloud-first mentality, so theoretically that market is still in play and there to be won.
But the fact that Salesforce has taken such a commendably bold stand against bigoted legislation, such as that supported and promoted by now Vice-President Elect Pence, sets up possible confrontations ahead.
While President Elect Trump has held multiple positions on LGBTQ rights over the years - this week's stance is that gay marriage is law and the debate there is over - Pence’s convictions have held firm, despite the enforced Indiana climbdown. That could well spell trouble ahead.
On the day after the election, Salesforce’s Chief Equality Officer Tony Prophet posted the following tweet:
Amen to that. If that's not the case, then Salesforce will be forced to take a stand - and it's hard to find anything particularly optimistic about that scenario for anyone. But as Benioff said this week at Code Enterprise:
I’ll continue to do everything I have been doing. It’s important to me that we keep looking out for everybody and all our peoople...If this election shows anything, it shows you’d better let your voice be known.