Will Marc-eting Factor Help Salesforce Reach $60B Revenue?
Salesforce, founded in 1998, blazed the trail for the subscription model and has built up a big lead in the internet-based enterprise software space. The CRM giant has aggressively been acquiring technologies and talents in an attempt to fiercely entrench itself in areas that could give the company an edge over the cut-throat competition with Microsoft and Oracle in the business management segment.
There was an infamous, fierce battle between Oracle and Salesforce to become the first enterprise company to reach $10 billion in sales from the SaaS (Software as a Service) segment. Finally, in August 2017, Marc Benioff, chairman and CEO of Salesforce, announced a huge milestone for the company, becoming the first enterprise cloud software company to break the $10 billion revenue run rate according to results for its fiscal second quarter 2018. Since then, we have seen Salesforce setting out even more ambitious revenue goals. After announcing the $20 billion goal by 2022 in November, Parker Harris, CTO and co-founder, unveiled the company’s further intentions to double their revenue again to $40 billion by 2028, from there, reach $60 billion by 2034.
Just because Salesforce is a leader in internet-based software, for the time being, doesn’t mean the huge legacy software companies like Oracle, SAP, and Microsoft, are willing to lose the fast-growing cloud market to their younger rival. Oracle and Microsoft, especially, have lately been successful at retaining their positions in the market while passionately inventing business processes at a rapid pace.
The story between Salesforce and Oracle, for instance, has been evolving with many more twists and turns for many years now, while the war of words between their founders, Marc Benioff and Larry Ellison, respectively, keeps bystanders entertained. Despite the fierce battle between Oracle and Salesforce to become the first enterprise company to reach $10 billion in sales from the SaaS (Software as a Service) segment, both vendors have had a somewhat different agenda. While Salesforce is dominating the cloud-based customer relationship management space, Oracle has poised itself to be more of a horizontal player in the business management software segment with its focus on customer relationship management, human capital management, enterprise resource planning and supply chain management.
Oracle was simply a late entrant to the “cloud wars” and still generates most of its revenue through the database, financial, and other software that runs on companies' own data centers. Today, due to the emerging demand for a Salesforce-like delivery model, the legacy software companies like Oracle are trying to make up for lost time. Forrester analyst John Rymer had once noted: "They (Oracle) desperately need more cloud expertise at the top to craft the company Oracle is becoming."
As you may easily recall, Salesforce went head-to-head with Microsoft in bidding wars over LinkedIn. Salesforce lost as Microsoft acquired the social network in an all-cash transaction for a jaw-dropping price of $26.2 billion. Since then, Microsoft has been building and acquiring more products to compete with Salesforce on the CRM and cloud computing front. All those efforts have paid off so far as Microsoft has been enjoying one after another significant milestones in the enterprise cloud including the IaaS, PaaS and SaaS markets. Additionally, the company has been orchestrating a successful integration of the most popular professional social network with its cloud-based product line, including Office 365 and Dynamics 365. In fact, its Dynamics 365 SaaS revenue has seen a continuous growth; 81% in FY17 Q3, 74% in FY17 Q4, and 69% in FY18 Q1. It is important to note that the SaaS category is the smallest portion of Microsoft's cloud business.
The Marc-eting Effect
Although I wish it had been me coining this nickname, people close to Marc Benioff call his impact on the company “marc-eting”, and I thought it was brilliant not only because of the word play but also because it is a perfect definition of Benioff’s influence on the company’s extraordinary growth. Let’s dig into this a little more as I believe many leaders may take a page from his book.
Besides being a tremendously successful CEO who has reached $10 billion in annual revenue faster than any other enterprise-software counterpart, Marc Benioff has gone beyond that and become a very influential public figure in the tech industry. Sometimes he paints himself as a political activist who protests and tweets about the serious real-world issues such as gender equity and the LGBT community’s rights, sometimes he becomes a CEO-as-a-scrappy-showman who publicly gets into the war of words with his other Silicon Valley counterparts. In other times, though, we see him as a leader who injects philanthropy into Salesforce's corporate culture.
Although this situation seems to be driven by his colourful personality, from a marketing standpoint, I also believe there is a deep strategy behind every single hat he puts on so all those little acts, accumulatively, serve Salesforce to grow aggressively at a very rapid pace.
Let’s put his style when he delivers a keynote under the spotlight, for instance. He often delivers promises focused on future more than anything and also outlines some facts and figures about his rivals in the areas that Salesforce is clearly dominating at.
Two things we can retrieve from there. First, commenting on the future excites people and shifts the attention from the current situation which works perfectly especially in the case that the status quo hasn’t turned out as expected. As an example of the concept, he announced that Salesforce and its ecosystem of customers and partners would drive the creation of 3.3 million new jobs and more than $859 billion in new business revenues worldwide by 2022. Now, I am not trying to diminish the current success of the company as obviously, Benioff and his team have mostly lived up to their promises so far, but it is a brilliant method that every leader should know about. Second, he picks the field of his battle very wisely before laying out the facts about the rivals. For instance, Benioff often takes aim at Microsoft’s cloud business and announces some figures that cast Salesforce in a more positive light. However, the part that Microsoft currently competes with Salesforce on spans a minor fraction of Microsoft’s whole cloud business. Doesn’t Benioff know this? Oh, he knows but, from a tactical perspective, he takes his company to the next league in the target audience’s eyes.
When it comes to transforming a traditional corporate culture into Salesforce’s company culture under the influence of philanthropy, besides the moral reasons, Benioff advocates this type of company culture to maintain existing talents as well as to entice new ones. On top of it all, as far as marketing goes, the story of Benioff cultivating a philanthropical culture and putting himself forward as a political activist motivates some sort of modern digital social savvy audience to become Salesforce ambassadors as it reinforces their own identities and social status.
Benioff is also very well-known for his expensive taste in terms of acquisitions. The strategy behind that is to acquire fast-growing companies which can help to improve its growth rate as well as provide a new business line and talents. Developing new business lines and acquiring talents specialized in artificial intelligence and data are extremely critical to the company’s future because Salesforce may be the leader in cloud-based CRM space but in other areas such as commerce, AI, and marketing as well as in the vertical industries, the company desperately needs to close the gap with its rivals which don’t show any sign of slowing down.
He has often been criticized for generating the low operating profit but Benioff has always prioritized growth over providing margin. Therefore, he heavily pours money into acquisitions and marketing activities. As a case in point, Salesforce spends around $30 million on its annual Dreamforce conference in San Francisco, which includes everything from a rapper to the 25 Buddhist monks leading "on-demand meditation" at two mindfulness zone.
Salesforce’s somewhat ambitious goals are not shooting for the stars, in my opinion. Although there are so many moving parts to meeting these big expectations, under the leadership of Benioff, if the company keeps innovating and acquiring, that aggressive set of goals can be materialized in the time frame promised. To do so, not only should Salesforce maintain its supremacy in the CRM market; but also it needs to expand its footprint into new enterprise markets and vertical industries. As also indicated in my thorough review and comparison of Salesforce and SAP, Salesforce’s competitors, such as SAP and Microsoft, offer a lot of industry-related components and solutions, along with CRM solutions, while Salesforce merely targets CRM-based solutions.
Aside from Salesforce’s unstoppable growth, I, for one, will continue to closely watch where Benioff’s brilliant leadership techniques will take the organizations in the upcoming years, and I am excited to share here as the story evolves.
Related Salesforce News: