Salesforce.com breaks the $5bn run rate as Benioff builds a five legged stool

Profile picture for user slauchlan By Stuart Lauchlan August 21, 2014
Summary:
International expansion has been top of mind for Salesforce.com over the past few months, with Europe outperforming the rest of the world in terms of revenue growth for the firm.

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Five was the number to look out for as Salesforce.com reported its numbers yesterday. Firstly there was the long promised busting of the $5 billion run rate figure - $5.37 billion to be precise - then the unexpected spoiler of what CEO Marc Benioff called “the fifth leg of the stool” in the form of a new service offering to come at Dreamforce in October.

Elsewhere it was pretty much a business as usual quarter for the firm, something that seemed to leave Wall Street curiously indifferent, with no post results fall in the share price, but not jump either.

There was a net loss of $61.1 million, but a revenue rise year-on-year of 38%. Europe did even better on 42% year-on-year, justifying the planned investment in three in-region data centers over the next 18 months or so. Europe was certainly on Benioff’s mind:

I spent almost a third of the quarter leaving in Europe and it was an amazing experience. We did very, very large customer programs in Paris, thousands of our customers there, as well as in Munich. We opened our new Paris Headquarters. We opened our new Salesforce Tower in London and it was just an incredible time.

We profiled our work with amazing companies in Europe, including a huge deal that we launch with Philips, where they are beginning a software company and building their next generation health applications right on the Salesforce platform, and I was thrilled to have incredible press conference with the Philips CEO while I was in Paris. And then we profiled some amazing work that we're doing for Louis Vuitton.

And then moved on to Germany and we did the same thing. It was an incredible announcement and launch of what we’re doing with Roche. You may have seen some incredible demonstrations of technology at Roche’s next generation equipment built right onto our Service Cloud. It was just awesome.


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International expansion is clearly a major strategic push for Salesforce.com right now, even though Benioff still categorises Europe as traditionally a laggard when it comes to new tech compared to the US. But it’s all about the timing:

It is a huge, huge part of our information technology market and it’s a huge part of our CRM market and they are now deeply committed and I believe earnestly adopting cloud in a whole new level.

There’s no doubt that we are adopting our model to be more successful in Europe. You probably know we now have a UK datacenter and while I was in Europe, we also announced a French and German datacenter that will extremely important for each of these countries to have their own clouds. Germany wants the German Cloud, France wants the France Cloud and UK wants the UK Cloud.

Our infrastructure investments and ability to deliver infrastructure, the costs for us were extremely minimal. It’s very easy for us to deliver that model to those countries. We’ve already done that for example in the US, our dominant market but we have also already done that in Japan where we have a Japan cloud. And I believe we’ll have a US Cloud, a Japan Cloud, a UK Cloud, a France Cloud and a German Cloud and in all major markets.

Cloud is going mainstream and these countries want to make sure that these clouds are part of their national infrastructure and are part of their national assets. We saw that first in Japan and we delivered that. We’ll now deliver that in our major markets. It has given our distribution organization the ability to talk about this incredible commitment to our local markets.

Love for Microsoft

While there was no mention made (at all) of Oracle despite last year’s celebrated outbreak of detente, Benioff did talk up the new-found love between Salesforce.com and Microsoft:

We have an incredible situation with Microsoft, who has become I believe our largest customer of our Marketing Cloud. They've built an incredible new product that they have, called Office 365 right onto the Marketing Cloud. They use Journey Builder to guide their customers through their journeys and it’s brought Microsoft and Salesforce closer together.

We’ve got more involved with SQL Server than ever before and we’re looking to unite our products more closely than ever before. You’re going to see some incredible things at Dreamforce with Salesforce and Microsoft Office.

It’s not all about the love though. In terms of customer wins and implementation, Salesforce.com President Keith Block flagged up a deal with a large global manufacturer based in Europe and one of SAPs largest customers, where Salesforce.com will be replacing Microsoft.

Elsewhere he cited the likes of 3M and Safeway to illustrate that the push for more major enterprise customers is succeeding:

Salesforce will now be powering 3M global transformation with Sales Cloud and Service Cloud as their global customer platform across 27,000 employees. Salesforce will be the social and mobile front end to 3M's SAP back office and it will provide their sales, service and marketing teams with a 360 degree view of the customers. We’re very, very excited about this. This is a terrific example of one of many eight figure transactions in the quarter and a great example of how customers are returning to Salesforce to unlock the value from their legacy systems.

We also closed another deal with Safeway. They selected the Salesforce1 platform to build next generation applications that will drive greater productivity across their store operations. Store managers and associates will be able to complete all their tasks right from their mobile phones, very, very exciting and leveraging Salesforce communities, Safeway will bring all their stores and associates into a single communications platform, again a very, very powerful story that we’re very, very excited about.

My take

The analyst call before Dreamforce is always a tricky one, inevitably resulting in a lot of ‘just you wait until you see’ foreshadowing and Benioff having to be careful not to spoil his own keynote by saying too much.

But it was the usual confident performance and the fifth consecutive quarter of accelerating revenue growth, so even if Wall Street seemed a tad underwhelmed, there was nothing to give it concerns either.

When we met up in London recently, Benioff told me that Dreamforce would have an increased European flavor to it this year, so it was interesting to hear the emphasis being placed on international markets and growth yesterday with the Wall Street analysts.

Anyway, onwards to Dreamforce and that promised  five legged stool!

Disclosure: at time of writing, Oracle, Salesforce.com and SAP are premium partners of diginomica.