The Blog

  • December 5, 2019
  • Salesforce Q2 earnings


    Salesforce continues to grow albeit a little slower than in prior quarters, at least that’s my reading of a $4.0 billion quarter that’s 22 percent better than the same quarter a year ago. I am used to seeing growth percentages in the high 20’s but I am not concerned about a slowdown.

    From reading the press release and perusing the earnings report I don’t know if the spending spree on Tableau and ClickSoftware had anything to do with the numbers. My guess is the financing comes out of a different pocket since the Tableau acquisition alone was roughly equivalent to a year’s worth of revenue. At the same time, Tableau hasn’t had a chance to contribute to the bottom line in any meaningful way which should provide some amount of optimism for financial analysts.

    At this point, Salesforce has a lot of products and they’re getting involved in major corporations’ digital disruptions, so it takes longer to sell stuff and the deals are way more complicated. All of that plus the reality that despite a stellar history over the last 20 years, the company doesn’t walk on water tells me that 22 percent growth at the 4.0 billion level is just fine.

    It’s true every year but right now, we should be eagerly anticipating Dreamforce to better understand how the many acquisitions of the last few years are going to accelerate the deposition of black ink on the bottom line.

    Salesforce has always been a visionary outfit and the Customer 360 initiative distills a lot into a simple phrase. With all of its analytics, platform, and networking capabilities Salesforce isn’t simply trying to make better applications, it is presenting a different way to do business that could become something of a standard from here to the middle of this century. Think about it. Salesforce, and its competition it must be said, are putting a lot of wood behind the arrow of systems of engagement, i.e. systems that can anticipate needs and satisfy them.

    But Salesforce is also trying, through its philanthropy arm, to change capitalism enough to give it a kinder, gentler face that admits to the need to satisfy all stakeholders. A recent declaration by the Business Roundtable, articulated in Harvard Business Review, strongly suggests that CEOs understand the importance of corporate engagement and efforts beyond simply making profits for shareholders. In this, like so many other things, it appears that Salesforce has been ahead of the curve.

    Engagement, the secret sauce

    One of Salesforce’s keys to success has been its effort to disrupt the old order by promoting systems of engagement. Systems of engagement move us along a continuum from old style systems of record to those anticipatory systems. Consider the differences between systems that self-diagnose a fault and call for support without human intervention, systems that interface with retail customers, and systems that provide service and support. Finally, consider systems that assist in diagnosing disease and support practitioners who need to formulate treatment plans. They’re all systems of engagement stemming from the same technology impulse and they forecast a very interesting future.

    That’s just scratching the surface because there are a lot of other approaches in between. So the acquisitions, at least some of them, are not fully contributing yet to the bottom line and the powerful point here is that development and acquisition aren’t simply adding linearly to growth but one development builds on older ones continuously. That, I think, is the significance of this company’s growth. Advising Wall Street about the possibility of $16.9 billion for the year is nice but that will likely look small in ten years as systems of engagement continue to disperse into the economy.

    My two bits

    During earnings season we’ve witnessed a lot of good news from the IT vendors each of which has a strategy for supporting the trends in digital disruption with their own disruptive innovations. I expect we’re in the early phases of forming a true IT utility in which multiple players form an oligopoly. Some of them, like the social media mavens face tough scrutiny in the immediate future as society grapples with how to regulate them to achieve the greatest benefit from the least interference. We’re nearing the point where CRM might remain the important outpost that it is but, at the same time, Platform driven application development and deployment, which started in CRM, will become the tail wagging the dog.







    Published: 4 years ago

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