Salesforce and the CEO - a winning combination for growth

Profile picture for user slauchlan By Stuart Lauchlan February 24, 2016
Summary:
Salesforce is selling more enterprise apps than Oracle or SAP, says CEO Marc Benioff, while COO Keith Block is locked in meetings with other CEOs as the firm marks an impressive quarter.

Marc Benioff
Benioff

We believe that we're selling more enterprise apps than Oracle or SAP.

That bold claim by Salesforce CEO Marc Benioff is based on cited revenue growth of 27%  for both the firm’s fourth quarter and full year 2016. He says:

The growth rates of Microsoft, Oracle, SAP are shrinking; negative growth rates in many cases, and here we are at a 27% growth rate in this enterprise applications market.

Benioff adds:

Our growth strategy is really built on having a full portfolio of products.… in Sales, in Service, in Marketing, Community and Analytics, in Apps, in IoT, and as well as a full portfolio of geographies as well, doing business around the world like in the United States, in Japan, Europe, Australia, Canada and in addition to doing business with enterprises and as well as Small and Medium Businesses (SMB).

When that full portfolio accelerates, that is they all come in in the quarter, which we really never expect, every product and every geography in both enterprise and SMB to come in, then you get this kind of accelerated revenue growth, which is what you see at this 27% number on both the year and the quarter.

Breaking down the growth rates across the various Salesforce clouds, they come in year-on-year at: 

  • Sales Cloud 12%
  • Service Cloud 35%.
  • Marketing Cloud 31%.
  • Apps Cloud and Others 43%.

And that’s opening up enterprise CEO doors like never before, Benioff says:

When I look at the largest transactions ... every transaction was done with the CEO. I think it's really unusual, and that's why we're really selling more enterprise software than Oracle or SAP.

This CEO-transaction aspect is something that never happened in Benioff’s 13 years at Oracle, he states:

I never made a sales call on a CEO, while I was at Oracle. I mean, there were some business development things, but never a CEO buying products and being that kind of Chief Digital Officer himself or herself.

Talking CEOs

Despite the scuttlebutt of a few weeks past that Salesforce had lost a major customer name, the reality according to President and Chief Operating Officer Keith Block is very different, as he points to Q4 signings of north of 600 seven figure deals:

We signed two of the largest deals that I've seen in my career. I mean absolutely fantastic. First we signed an exciting new nine-figure transaction with one of the world's most respected companies. Second, we signed the largest renewal in the history of the company; and, listen, they didn't just renew - they also significantly expanded their nine-figure relationship with us.

Block also picks up on the ‘access to the CEO’ meme mentioned by Benioff when discussing those two deals:

They are CEO-level sales. We are in the boardroom. We find ourselves in a position where customers are looking for our help bring them into the age of the customer. They're looking to embrace the concept and notion of digital transformation. They view us as the market leader, and really the only company that is uniquely positioned to provide them with that level of transformation.

This is what's happening in these very large deals, it's happening in every deal, where these customers are viewing us as a trusted advisor. And that is becoming the norm. This is something that has been happening for some period of time, and we continue to see it as we move forward.

He adds:

In the last three weeks, I've had more conversations with CEOs around transformation than in my entire career over 30-plus years.

Arguing that CEOs are now effectively - or should be - Chief Transformation Officers, Block notes there is now a norm for C-level conversations:

In the boardroom, number one is you can always ask these companies, ‘Why aren't you thinking about yourself as a cloud company? Why aren't you thinking about changing your business model?’. And you can see the expression on their faces, because they're embracing that notion of transformation.

If you think about what's going on with the marketplace about this perfect storm of convergence of cloud and mobile and social and data science and the Internet of Things all coming together, that creates incredible opportunities. It's a different world. And no CEO wants to be Uber-ized just like 15 years, 20 years ago, nobody wanted to be Amazon-ed, if you were in the retail space.

Not that the CIO has gone away from these conversations, adds Block:

You always have to talk about, and with, IT, but these are transformational sales. These are conversations around growth, which is the top of mind for all senior executives and CEOs for sure. But, listen, in these large enterprises, the CIO is important. We are a great platform - and CIOs and technologists are always interested in great platforms.

But that boardroom level of access also provides access to deeper pockets:

IT organizations always have budgets. They typically range between 1% and 2% of the company revenues. But what we've been able to tap into beyond those budgets are the line of business executive's budgets and the CEO agenda. It's an amazing phenomenon when you see the CEO, who has the growth priority, re-align the budgets in a corporation to take on these growth initiatives, and that's what we're seeing. So, it goes well beyond IT. Certainly IT budgets are a particular component, but when the priority of a company is all about growth, you find the money to make that happen.

My take

Business Insider warned yesterday that we should:

Get ready for turmoil if Salesforce fails to deliver in its earnings today.

Not much chance of that as it turns out.

Revenue growth was impressive in its own right, of course, but of additional note was the narrowing of losses, both for the quarter - down to $23 million from $65.8 million - and the full year - from $262 million to $47 million - which should calm a few of the more skittish nerves on Wall Street.

As for the CEO access angle, that seems further validation of Block’s enterprise clout and credentials and of the Benioff-Block double-act.

Onwards.