Block, Keith Block - licensed to sell Salesforce (2/2)
- In the concluding part of this two part article, Salesforce's Keith Block discusses international growth, wrap-around agility and SAP sabre-rattling.
Shedding the past is a big part of the Salesforce pitch, but there are practical realities to be faced.
In the firm’s quarterly conference call the previous day, both Block and [CEO Marc] Benioff made play of enterprises wanting to move on from on premise legacy systems.
But such organizations have put billions of pounds, dollars, euros and yen into their mission-critical systems and there’s no practical appetite for ‘rip and replace’ surely?
Block concurs up to a point, but cited a case in point:
I was talking to a senior exec at one of the largest banks in the world and I asked what percentage of spend went on innovation and the answer was 10% or less, which I think is shocking. Ninety percent has to go maintenance, upgrades and just keeping the lights on. I don’t know how you stay relevant and protect yourself from being Uber-ized. Companies absolutely want to make this shift. Some have a tolerance for change that is higher or lower than others.
One of things we see a lot of is this wrap-around strategy where they have built these legacy systems for 10, 20, 30 years and it is the heart of their mission-critical systems. But it’s built on legacy technology, it’s enormously expensive to keep going. You can’t disrupt the business by completely switching it out, but you can wrap an agility layer around it and make it more customer-facing which will help you drive customer engagement and growth and all that good stuff. Then eventually, over time, you start to slice off pieces of the engine and that’s how you do the replacement.
DirecTV is a great example. They have an increadibly complex engine around customer service. They had double digit call centers and service capability. When you’re on the phone to DirecTV, at any given time the person on the other end of the phone is looking between 13 or 14 different systems. The wait times are really not great. They said, ‘We know we can’t replace those core systems straight away. It’s what we’re going to do over time. So we’re going to wrap this agility layer from Salesforce around it'. The key performance indicators have been fantastic, the customer retention has been fantastic. That’s a strategy we’re seeing customers focus on.
The enterprise language
This legacy systems issue is inevitably more acute in larger enterprises, exactly the type of organization that Block was hired to target based on his years of experience at Oracle, with Benioff calling his departure from there the biggest mistake that Oracle CEO Mark Hurd ever made. Certainly Block makes the case for a more sophisticated go-to-market enterprise pitch:
If you want to perform consistently in the enterprise, it’s very important that you speak the language of the customer. That means you need to understand the industry, the business problems. You have to have a point of view. You have to solution-sell. That’s a movement away from selling a single cloud solution into a multi-cloud solution. There are a number of things that we have put in place in terms of our go-to-market motion, our selling motion, our service motion, to be more, broadly speaking, enterprise friendly. We’ve got a lot of momentum here.
There’s also a lot of momentum in international expansion, particularly in Europe where last year’s UK data center is being joined by counterparts in France and Germany. Defining Salesforce as a global firm, not a US one, Block explained:
You have to have international expansion because you have international customers. You need to be able to serve those customers internationally. Number two, there is obviously a huge opportunity there. It’s healthy to have a balanced portfolio geographically when you’re running a business. We’ve invested over the past 23 months with data centers and resources from all over the company, all the different lines of business. At the end of the day, we’re just responding to customers. People are interested in transformation, they’re interested in change.
The move into Germany strikes me as particularly interesting given that country’s hard line on data protection and data sovereignty, a stance which has led to many cloud services providers finding it a tough nut to crack as a market. Block sees no such issue:
There’s always room for improvement, but I think we have cracked the nut in Germany. There are two very different economies and markets in Germany. There’s the Mittelstand, the middle market, the heart of the economy. Companies in the Mittelstand, they’re looking for trust - a data center in Germany increases that - and they’re looking for simplicity. They want something that’s simple and agile and flexible. Then you have the large, global corporations.
Putting a data center in Germany is a response to Germany’s customer demands. It’s a good gesture. It’s part of our international expansion. We have a very healthy business in Germany and we need the capacity.
Taking on SAP
The other interesting angle on Germanic ambition is that Salesforce is metaporically parking its tanks on SAP’s front lawn.
Given the high level of SAP sniping that took place on this week’s conference call, it’s tempting to assume that SAP is the new Big Bad for Salesforce. Block stated simply:
They’re the number one applications provider so it’s natural for us to put our guns on SAP.
OK, but what about those claims that Salesforce - run rate of around $6 billion - being set to overtake SAP - run rate in excess of $20 billion. Even with Salesforce growing so quickly, that’s a hell of a gap to close. But Block is adamant in his view:
I really don’t see SAP as much of a competitor. I’ve been very consistent about talking about we’re eventually going to pass SAP. And I really mean that. I do think that SAP lacks innovation. I think that they are in a situation where they are not creating a lot of new product. They’re not bringing a lot of innovation to their customer base. And I think it’s a matter of time before we pass SAP. We’re accelerating and they’re pretty much flat or decelerating.
Only time will tell. For now, Block’s mission is clear: to expand the Salesforce footprint, to grow international presence and licensed to kill off those legacy systems.
As for his 007 moment earlier, he chuckled:
Who wouldn’t want to be James Bond for a day?
A slick, confident one day event. The Salesforce events team are extremely good at their jobs, although some more careful localization of content might be in order. Hearing a UK exec telling the UK audience that for his recent DIY adventures, he needed to deal with Home Depot (US pronunciation of depot as well!) jarred a bit. And I’m not entirely sure that we do all “love a Tesco market” in the UK by the way. But presentations from Barclays and John Lewis went down well.
I remain convinced as I’ve previously said, that Block’s appointment as Benioff’s number two will be seen as a defining point in the history of Salesforce. My comparison to Oracle’s Larry Ellison and Ray Lane line-up is intended to be entirely complimentary.
I’m not entirely convinced that the SAP boasts will be delivered necessarily as quickly as is implied, but everyone needs a mountain to climb, so we’ll watch and wait on that one.
On one final lighter note, Block’s James Bond turn was fun enough. But if he has ambitions in that direction, then with tongue firmly in cheek, there’s surely a better piece of casting to be had for him as Blofeld?
Disclosure - at time of writing Salesforce and SAP are premier partners of diginomica.