By the end of this year, Europe is likely to account for around $4 billion of Salesforce’s total revenues. That’s up from $270 million when Miguel Milano joined the firm as President of Europe, Middle East and Africa back in 2011. Since then Salesforce has upped its commitment to the region with heavy investments in the UK, France, the Netherlands and Germany in particular.
I caught up with Milano, now International President, at the recent Salesforce World Tour gathering in London, the biggest such user and developer event outside of the flagship Dreamforce conference in San Francisco. He has a clear idea of what has acted as the catalyst for growth in EMEA:
The first thing was the product, obviously. The second thing was the focus. The way that we were able to surgically focus so much into countries and cities. Of course we sell into Spain. We sell into Belgium. We sell into Italy. But we don't focus on those countries. We focus on the UK and France and the Netherlands and Germany.
This is something that’s grown out of early analysis of potential markets by Salesforce co-CEO Marc Benioff, adds Milano:
When he started [Salesforce] 20 years ago, he looked at the TAM - total available market - for CRM in the world. He pretty much realized that 80% of the time is in 10 countries and he said, 'OK, that's where we're gonna spend 90% of our energy'. What that means is this is where we're going to do the World Tour events. This is where executives should go and visit, those core countries....Marc looked at the TAM and then he looked at the Top 25 cities in the world from a CRM perspective. And that's where we are putting a disproportionate amount of our investments.
An example of such investments, apart from a growing network of Salesforce Towers - “Marc likes his towers!” - is the recent announcement of a new $125 million Trailblazer Fund aimed at European start-ups. Milano says that this corporate venture fund works very closely the management team in Europe and with some clear objectives:
One is obviously the return. It has to be something that will return. And then there is other thing which is values alignment. We take those for granted when we make an investment. The other things that for us are very important - and the reason we invest - is that we are investing in a solution that complements [our products] and meets a need that we see in our customer base that we cannot fulfill with our platform. So [by investing] we are close to that function, to that solution, to get it more connected with the Salesforce platform or eventually to buy them later.
The second reason we do a number of investments is to accelerate the ecosystem. I think probably half of the investments are smaller size...those businesses, they require cash to grow fast. Otherwise they can grow very slow. If you give them a couple of million, to get them started, you can go from 50, 70 people to 500 people much more easily. We're growing so fast that we need the ecosystem to grow at the same speed. And if we don't do these kind of things and artificially accelerate, the gap starts widening and that's not good for customers. It's not good for us. It puts a lot of stress in the system. We don't want to be the ones doing the implementations ourselves. We are not in the business of selling services. We're in the business of selling innovation and products.
Salesforce is also in the business of skilling up people to populate what it refers to as the Salesforce Economy. One way to do this is via its Trailhead training initiative. It’s something close to Milano’s heart - two of his three daughters have been through Trailhead themselves:
Now you go into Trailhead and you can build your trails and you can learn very fast and you don't have to be a developer to really get up to speed. I mean the career path to be an admin is actually pretty straightforward. You don't need to have even high school [qualifications] to understand certain concepts, like drag and clicks, and you can manage a Salesforce platform. I think there is a big opportunity to bring those kids to the market.
The next evolution for Trailhead is an intriguing one. Milano explains:
We have a big initiative that we are piloting in the company. We are creating what I call a Trailhead Academy. This academy is going to be a physical set of universities where we are going to use that as a platform for the ecosystem to enable themselves, for customers to enable themselves, for Salesforce employees, but also for the young community developers, the graduates. We have this crisis - I would say catastrophe - in Europe which is that, 30+ percent of the young population are unemployed. If you go to countries like Portugal, Spain, Greece, Italy, that number is probably 50% of the 20 to 30 year old population and many of them have university degrees. So I would love to push all those people into Trailhead Academy and train them, then allow them a platform to connect with the world. We'll have here customers and partners looking for talent. The Trailhead Academy will surface that talent in an organized way.
Such initiatives are welcome of course, although there remains the question of how much more governments - both nationally and across the European Union as a whole - ought to be doing to tackle the catastrophe rather than leaving it to private sector firms. Milano’s position is clear:
I would love to see that. The fact is that there is not enough collaboration between public and private to bridge the gap that exists and continues to widen.There's a lot of private initiatives like Supermums, many non-profit organizations, but also there are a number of private for profit organizations that are seeing the opportunity here, but they cannot scale that much. Governments don't want to affiliate themselves with a specific technology. And by not wanting to affiliate themselves with any technology, then they're not helping. In some countries in Europe, they provide subsidies for training to companies. But it's like an indirect way. I'm not seeing the momentum at all. I see that workforce development is a huge focus of companies, like Salesforce.
The elephant in the room at any European business or tech gathering at present is of course Brexit and its impact - or otherwise - on sales and prospects. Milano states:
From a commitment to the market, we've said it several times - we are fully committed to the UK market. Last year we announced that we're going to invest $2.5 billion in the UK. That continues, absolutely no change. We've made our contingency plans obviously, depending on what kind of scenario we will end up. We plan for the worst case scenario and I think we have everything under control. We continue to have a very successful, business in the UK...it's getting to be bigger than a billion dollars by the end of the year and growing very healthily, We haven't seen any downturn on any dimension. The business continues to grow and the speed continues to be the same even though the size is much bigger.
There is a degree more caution being exercised by some customers when it comes to decision-making, he concedes, but categorises this as “nothing major”. In fact, he says, some customers are stepping up their stake:
At the end of the day, even in times of Brexit in terms of uncertainty, companies more than ever need to connect with their consumers, the customers, in different ways because competition continues to be in many of the industries very aggressive. Barclays has been a customer of ours for 12 years, but its big commitment to Salesforce was made last year.
More and more companies today in Europe need to connect with the customers in different ways. And today when a customer wants to transform around the customers, there's only one place for them to go, which is Salesforce. Yes, they can go to Microsoft [where] 1% of what they do has to do with Customer Relationship Management and they have like 20% of the puzzle. They can go to Adobe and you know they have a few things on the marketing side now and on the commerce side, but they don't have the sales and the services and the community.
We are really the only company that can go and say, 'Our 42,000 employees are every day thinking about how we help other companies to transform their business model to connect better with their customers and to provide customers with a better experience and to get more revenue out of the customers'. I think we have an unfair advantage and we're going to continue to grow and the ecosystem is gonna continue to grow.
It’s an “unfair advantage” that I suspect isn’t causing Milano any sleepless nights. He now has wider international responsibilites, but the Spanish exec’s interest in the growth of the European footprint for Salesforce is clearly undiminished. The company reports its quarterly numbers later this week. It will be interesting to hear the view from the top of the Salesforce Tower HQ on EMEA’s performance and prospects.
Meanwhile the Trailhead Academy idea sounds like a good initiative and one that I’d be keen to hear more about once there’s some more meat on the bones. Whatever happens with Brexit, the skills "catastrophe" is a problem that unites Europe.