Salesforce's CEO double act splits as Block exits and Benioff builds out his top team
- Co-CEO Keith Block steps down, a $1.33 billion buy out of Vlocity and quarterly numbers that deliver a shock loss - a busy day at Salesforce as its 21st birthday looms.
On an ordinary day, Salesforce splashing out $1.33 billion to buy one of its major ecosystem partners would probably have been the main talking point. But the announcement of the takeover of Vlocity yesterday was overshadowed by the unexpected stepping down of Keith Block from his role as co-CEO of the CRM firm.
Block, who joined Salesforce from Oracle in 2013, was hailed at that time by co-CEO and founder Marc Benioff as the best enterprise salesperson in the industry. In his initial role at Salesforce, Block set about bringing more focus and structure to the sales teams and accelerating growth at the firm. Latterly as co-CEO, he and Benioff split the management of the company, with Block focusing on the operational aspects.
But now Benioff will reclaim his title as sole CEO of the company he founded 21 years ago as Block sets out on what he called “my next chapter”. He will remain an advisor to Benioff until next February.
The news of Block’s departure came as a shock internally and externally. He and Benioff had formed a strong double-act over the years, as diginomica first noted back in 2014.
While Block is certain to be missed, Salesforce has been building out a strong senior executive team in recent years. In light of the news of Block’s exit, the recent promotion of Bret Taylor from Chief Product Officer to Chief Operating Officer - a title Block held at one point - can be read with a new significance. And yesterday also saw the formal confirmation of the promotion a couple of weeks ago of Gavin Patterson, former CEO of BT, from his role as Chairman of Salesforce EMEA to CEO of International - basically, he’s going to be running the world outside of the US.
The message to customers going forward is clearly going to be one of missing Block, but pointing to continuity of operations and executive leadership. On the quarterly results conference call last night, Benioff made a point of talking up his team:
When I look around this management table here in this room, I'll tell you that I'm also very inspired by our team. Of course, Parker [Harris] who has been by my side for 21 years, could not have done it this without him. We also have our Chief Operating Officer Bret Taylor who many of you know with his tremendous lineage at including Facebook and Google and his own private companies. Our Chief Legal Officer, Amy Weaver who is probably one of the finest executives who I've had the opportunity to work with. And our CFO, Mark Hawkins who just hit me on the side of my shoulder make sure I don't forget about him.
But I also going to mention that there's two people around the management table who are public company CEOs as well who aren't currently with us because they're traveling. One is Adam Selipsky, he is the CEO of Tableau, who is an incredible part of our management team and has provided an unbelievable value in the short time he's been here.
And a new addition who's been with us as our Chairman of Europe but who has now become our President and CEO of International, I could not be more excited to welcome Gavin Patterson who was the Chief Executive Officer of BT, headquartered in London. When you look at our total management team that Keith and I have built together that you have to be awfully proud of this group and I think it is the finest management team in the software technology industry maybe any industry.
Another significant comment came when Benioff addressed the question of how the transition would be managed. While Block has (rightly) been credited as the ‘super sales guy’ that Salesforce usefully needed, in his role as co-CEO, he’d been lessening the firm’s dependence there. As Benioff noted:
I think that Keith would be the first to say that he has built a world-class distribution team that goes across the world. When we promoted Keith to Co-CEO, one of the things that he said to me was he wanted to get out of the business of running the sales force. That's been something that we've worked to do. Through that, we have built an incredible distribution management team with some of the best executives in the world who are go-to-market. And I don't think you're going to find a better team who can execute on that in the same way that we have a great technology team. The other half of any software company is the distribution team. I would give both teams A-plus, and I couldn't be more excited about their capability to go forward and execute our business plan.
Oh, and the numbers...
As for the quarterly numbers - the real business of the day! - they were a mixed bag. For Q4, overall revenue increased 35% year-on-year to $4.85 billion, while full year was up 29% to $17.1 billion. For the full year, the firm turned in a profit of $126 million, but startled Wall Street by turning in a loss of $248 million for the fourth quarter.
Other stats of note:
- Constant currency growth in Q4 by region - Americas 32%, EMEA 47%, Asia Pacific 28%.
- Number of customers spending $20 million annually up 34% year-on-year.
- Sales Cloud Q4 revenue up 17% to $1.23 billion.
- Service Cloud Q4 revenue up 26% to $1.22 billion. (Excludes ClickSoftware).
- Platform and Other revenue up 74% to $1.43 billion.
- Marketing and Commerce Cloud up 28% to $0.69 billion.
For one last time, Block highlighted some significant wins during the quarter:
Volkswagen Group, the number one manufacturer of cars in the world is partnering with Salesforce to transform how they deliver personalized experiences to their dealers, employees and end consumers. Leveraging Salesforce, Volkswagen will have a 360-degree view across their 12 brands. It's pretty incredible. A single source of truth for customer engagement.
Transformation is also one of 3M's top strategic business priorities and over the last several years we've been partnering to transform how they serve their customers. Part of that strategy 3M significantly invested in our Customer 360 solutions in the fourth quarter to increase productivity, drive business growth and enhance the customer experience.
St. James's Place, the UK's largest wealth manager also expands its relationship with Salesforce significantly. SJP is going wall-to-wall with Salesforce leveraging financial services cloud, Einstein Analytics, MuleSoft and more, all to transform how their advisors engage with clients. And many of our existing relationships in Europe deepened as well including with Enel and adidas.
He picked out some successes from key sectors:
In healthcare, Cerner chose Health Cloud to power their client 360 project and they're also partnering with us to sell Salesforce to their healthcare clients.
Financial Services also showed strong momentum in the quarter, longtime customer Farmers Insurance added financial services cloud and Einstein Analytics to empower their agents to deliver even more responsive and personalized experiences to their 15 million policyholders across the United States. We began a new relationship with Canadian Imperial Bank of Commerce, CIBC and expanded with many of the top banks in the US and around the world including Goldman Sachs, Banco Bradesco, Banco Santander and ANZ Bank. Deluxe went wall-to-wall with Salesforce to improve customer insight, ignite innovation and drive toward its goal of selling all products and services to all customers. Deluxe is also partnering with Salesforce to offer Salesforce Essentials.
With Block credited with building out Salesforce’s vertical go-to-market strategy, that’s as good a note to end on as any other.
It's not just one person.
That comment from Block last night is undoubtedly correct. But what’s equally in no doubt is that he is going to be missed. From my own standpoint, I’ve had a lot of interaction with the man over the past few years and always emerged from our meetings with much to think about. What his next chapter will be, I don't know, but will be keen to find out.
The one person who will receive a lot of attention is Benioff himself, now firmly back at the helm. As co-CEO, he'd been freed up to engage with other interests important to him, such as the welfare of the oceans and the recent initiative to plant a trillion trees. How he strikes a balance comfortable to him and to the company will be interesting to see.
The tone of the analyst call last night was very much about emphasising stability and executive strength. It was interesting to have co-founder Parker Harris on the call, for example, providing continuity dating back over two decades to Telegraph Hill Boulevard and the founding of the firm. Keep calm and carry on, as the cliche goes.
With the firm’s 21st birthday coming up in early March, the company has raised full year 2021 revenue guidance to $21 billion - 21 for 21 in 21. Achieving that goal will be the task of a revised management team, soon to be joined by David Schmaier of Vlocity. Check out Phil Wainewright’s analysis of the importance of the Vlocity acquisition.