A 'victory for Stakeholder Capitalism' as Salesforce turns in strong Q2 on the back of operational pivot to COVID realities
- "The pandemic has changed us." Salesforce CEO Benioff on how the firm has pivoted to keep its numbers up during the COVID-19 crisis.
A “victory for Stakeholder Capitalism” is how CEO Marc Benioff characterises a strong quarter for Salesforce as the firm turned in profit and revenue growth despite a backdrop of the COVID crisis. It’s also been a quarter of enforced change, he noted:
The pandemic has changed us. We're not the same that we were.
That said, the firm has ridden out the changes well to date. Profit for the second quarter 2021 rose to $2.63 billion, up from $91 million a year ago, while revenue was $5.15 billion, up 29% from a year ago. By cloud offering, that broke down to:
- Sales Cloud - $1.28 billion, up from $1.13 billion a year ago.
- Service Cloud - $1.3 billion, up from $1.09 billion.
- Salesforce Platform and Other - $1.51 billion, up from $912 million
- Marketing and Commerce Cloud - $746 million, up from $616 million.
It hasn’t been a case of business as usual, said Benioff, as COVID has inevitably had an impact on how Salesforce has operated:
We started this quarter with 54,000 remote employees working at home. We knew that we had to make a number of changes. We knew that it was going to be critical for us to re-shape our company, that this was a moment in time [when] you basically had to make a decision - are you going to keep things the way they were or are you going to change, are you going to shift? We made a decision that we were going to change and we were going to shift. We shifted our operational values very aggressively and as we changed those operational values, we started to see momentum build.
It really was that as we piled in and doubled down on these core operational values, we got much closer to our customers. We understood that if we were going to succeed at a moment like this, we were going to have to be closer to our customer than ever before, that we were going to have to change a lot of aspects of the company. And as we made those adjustments, we saw the speed increase right up to the end of the quarter and it is just really powerful.
We are in the new world. We're in an all digital world with the work digitally, we're living digitally, we're educated digitally, and that means we're going to have to make these adjustments.
Benioff picked out customer examples to illustrate his oft-repeated maxim that “values bring value”, citing AT&T as a particular case in point:
The thing that's interesting about AT&T is that they have a huge vision and that vision is that every single customer touch point, whether it is at their stores, whether it is their e-commerce, their app, whether it is getting a message from them, each and single customer touch point, they want to know you as a customer. They want to single source the truth. That's a deal that we signed in February…This quarter we've deployed now hundreds of stores and the first 35,000 users. I'll tell you, at this moment in time there has never been a time when we've had to go faster. We've had to deliver customer success faster and we've had to be there for our customers.
That need for speed against the backdrop of COVID-19 can also be seen in Salesforce’s Work.com offering, its solution to deliver a safe return to the workplace, which has seen a lot of traction, said Benioff:
I don’t think there is a product that we've ever built faster, but never been more successful more rapidly. And you look at so many success stories, public sector organizations and enterprises. Today in the middle of this pandemic, everyone needs contact tracing, they need shift scheduling, everybody needs workforce command center, to bring everyone back safely…I looked at so many other customers and so many other success stories during the quarter, whether it was TWC or VF Corp or great public sector wins like the Veterans Administration or the State of Rhode Island.
Wall Street understandably liked what it saw yesterday. For its part, Salesforce had the confidence to up its revenue outlook for the rest of the year despite the ongoing COVID uncertainties. With that in mind, Chief Revenue Officer Gavin Patterson did strike a suitably pragmatic note when he observed:
We saw confidence build as we went through the quarter…We were able to pivot very quickly. It’s a very agile performance from the company. And we were there to help our customers through these difficult periods where they have [had] to make decisions that would typically take weeks and months, sometimes [in] days. I think it demonstrates what a powerful proposition we have for customers that we can spin things up quickly, like Work.com.
We had a great quarter, there is no question about that. I think it’s tinged with the context in which it’s been achieved in, but there’s real confidence in the business. We’re not getting carried away. There’s no question about that. There’s still a lot of uncertainty as we look into the second half of the year. But undoubtedly what we offer is something that's increasingly our customers really want.
One last point of note. In any normal year, this would be the start of the ramp up to the Dreamforce jamboree in San Francisco, the biggest lead-generation event in the Salesforce calendar. But this year there is, of course, no Dreamforce, something that’s going to be a big change for the firm to get its corporate head around. Or as Chief Operating Office Bret Taylor put it amusingly bluntly:
I'm totally bummed out.
He won't be alone. Having attended every Dreamforce to date, it’s a notable gap in my calendar, never mind the tens of thousands of users from all around the world who usually descend on the city for a week. For Benioff, who ought to be in the final stages of ‘road-testing’ his flagship keynote around now, it’s bound to be a bittersweet time. Cancelling was absolutely the right thing to do, but a tough call to make. What comes next? For now, he can only say:
Will we all be back together again? I hope so. Am I sure? I don’t really know.