Salesforce vs. SAP & Co .: Salesforce’s 50 billion dream

Düsseldorf How can the vaccines against the coronavirus be best distributed? In view of the rapidly increasing number of infections everywhere, this question is currently one of the most pressing in the world. And so it is not surprising that too Salesforce busy: The SAP rival from San Francisco has developed a digital command center to support healthcare organizations with logistics.

The non-commercial global alliance Gavi, which organizes vaccinations for children in developing countries, now plans to use the solution to distribute two billion doses.

Salesforce has made a name for itself with software for sales control, marketing and customer management, but the ambitions of CEO Marc Benioff and his management are far greater. The 56-year-old, who turned the company founded in 1999 into one of the figureheads of Silicon Valley, wants to be the most important helper in digital transformation for his customers.

The goal is clear: SAP, Microsoft and other software manufacturers compete for business. The Dax group, which is a leader in supply chain management, has a system for vaccine logistics on offer.

Gavin Patterson, who heads sales as Chief Revenue Officer at Salesforce and is one of Benioff’s confidants, is correspondingly self-confident. “There is no company that is better positioned than Salesforce to help customers of all sizes and from all areas to make their business more digital,” said the manager in an interview with Handelsblatt. “What we offer today is even more important than it was twelve months ago.”

Takeovers play a central role in this strategy, as the example of Slack shows – Salesforce plans to pay just under $ 28 billion for the communications specialist. However, this entails risks: In addition to the financial burden, there are organizational challenges, for example when integrating the many new business areas. At SAP, too, one of the greatest challenges and most important tasks for CEO Christian Klein is the integration of the various products into a uniform program package.

“Salesforce is currently changing its DNA,” observes Holger Müller, an analyst at Constellation Research. The company has radically changed its value for customers, solutions for customer service and the platform business are now more important than sales software, and there are also individual solutions for personnel management.

In these markets, however, the speed is significantly higher. In addition, the group has to cope with a large technical project: the change from its own 20-year-old platform to a modern infrastructure. The management must manage all of this in parallel with the integration of Slack.

Salesforce isn’t particularly profitable

After initial difficulties, Salesforce is one of the beneficiaries of the corona crisis. When the pandemic broke out, the companies initially wanted to stabilize business, Patterson says. “When customers looked back to the future, it became clear to most that digital transformation was the most important topic.” Numerous CEOs wanted to meet him for video talks, says the former boss of British Telecom.

Salesforce-Manager Gavin Patterson

The manager was formerly the head of British Telecom (BT), today he is responsible for global sales at Salesforce.

(Foto: Bloomberg)

In the first nine months of fiscal year ended October, Salesforce revenue rose 26 percent to $ 15.4 billion. The company is not particularly profitable, due to high investments – especially in marketing and sales – the operating profit fell by 21 percent to 262 million dollars.

On the one hand, the group owed an investment in Snowflake to the fact that the net profit grew by a factor of ten to 3.8 billion dollars. The US provider of cloud-based data services achieved a bombastic IPO in September. On the other hand, a lush tax effect.

But boss and founder Benioff has one thing in mind above all: sales. He ordered Salesforce to fulfill its “$ 50 billion dream”. Neither bet that much at the moment Oracle nor SAP – only Microsoft is bigger in the software industry.

A plus of at least 20 percent per year is the goal, according to Salesforce manager Patterson. “The assessment of the business is based not least on growth,” he emphasizes. To do this, however, the group has to grow beyond its original business.

The name shows it: When setting up Salesforce, Benioff was concerned with supporting the sales of companies – with a system that documents all data from the first contact to the sale. The manager turned out to be visionary: he relied on the cloud from the start, so the customers accessed the applications via the Internet. What is the standard in corporate IT today was considered a risky bet in 1999.

Around this Customer Relationship Management, CRM for short, Salesforce has developed numerous other programs over the years that are supposed to facilitate customer relationships – from marketing to service, from pricing to performance measurement. Since the summer there has also been a platform with Customer 360 on which companies can summarize the data of their customers in order to obtain a uniform picture.

Statt „Always Selling“ gilt nun „Always Helping“

“The market has developed very strongly over time,” says Joachim Schreiner, who has been with Salesforce since 2007 and heads the German business. “In the past it was about controlling the sales process, today it is about making the customer loyal.” Instead of “Always Selling” the motto is now “Always Helping”.

In the “age of customer capitalism”, as management magazine “Harvard Business Review” calls it, this is a gigantic business. According to the analysis company IDC, sales in the CRM market will grow from around 62 billion dollars in the past year to 85 billion dollars in 2024, making it the largest software market.

Here Salesforce is by far the number one with a market share of almost 20 percent. Oracle, SAP, Adobe and Microsoft are each around five percent and together do not generate as much as Salesforce.

Salesforce management has expanded the business model bit by bit over the past few years. In 2016 it bought Quip, a provider of word processing on Microsoft’s collaboration platform Teams, in 2018 a provider of integration software, Mulesoft, and finally, in 2019, Tableau, a data analysis specialist for 15.7 billion dollars. In the meantime, the group was also interested in Twitter and LinkedIn.

And in the spring, Salesforce presented Work.com, a program package designed to help companies reopen offices, shops and factories in compliance with hygiene and safety requirements, for example with solutions for controlling shift work, tracking contacts or administration of government grants. The vaccination initiative is also one of them. At most it has to do with sales indirectly.

Salesforce is gearing up for the “new normal,” says sales director Patterson. “Customers want to run their business from anywhere, even remotely. You want to get a comprehensive picture of the customer. And they want to be ready for collaboration across company boundaries, ”he observes.

Slack has a special role to play here: It is “the next operating system for collaboration in companies,” says Patterson. Slack founder Stewart Butterfield has a sense of how to make software user-friendly. “That will be enormously valuable when we try to democratize business software in the future.”

Growth through acquisitions keeps investors happy

“Salesforce is trying to increase its corporate footprint,” says Kate Leggett, who works in the CRM market at Forrester. More and more it is about gaining relevance, for example with software for data analysis and collaboration or solutions for dealing with the corona crisis, beyond sales. “The strategic importance of Salesforce for customers is increasing.”

This is important so that the company can continue to dream of cracking the 50 billion dollar sales mark: In its core business with CRM solutions, it can only maintain the high growth rates to a limited extent. The largest business area is now “Platform & Other” with Tableau and Mulesoft. “With the acquisitions, Salesforce is maintaining the growth that justifies the high stock price,” said Leggett. That is important for investors.

The strategy is well received in the financial markets. When the rumors about the Slack takeover became public, the share price fell significantly, however, currently it is listed a good 30 percent below the historic high of around $ 240. Many analysts consider the purchase price to be overpriced, but still recommend Salesforce as a buy.

Salesforce poster

The cloud specialist wants to help customers with digitization.


(Photo: Reuters)

The company is working on a huge market with great potential, say the analysts of Swiss credit. The median target price is 275 dollars – there is still room for improvement.

The abstract numbers are one thing, but the concrete implementation is another. In order to move from a specialist supplier to a full-range supplier, Salesforce has to do a lot. So it is important to integrate the many new products – this is especially true for Slack, which is to serve as a surface for other solutions of the group.

Slack takeover as a red herring?

This has to happen in parallel to a project that is as large as it is ambitious: With Hyperforce, Salesforce is currently developing a new platform for its cloud applications. The old infrastructure still comes from the founding days and is not suitable for modern requirements, emphasizes the expert Müller from Constellation Research: “This is currently preventing Salesforce from developing really innovative innovations.” How long the conversion will take and what it actually means the group has not yet made it public.

At the same time, the competition is growing. Oracle and SAP have recently invested heavily in the CRM business again. The German software manufacturer recruited veteran Bob Stutz – Twitter alias: “Guru of CRM” – from Salesforce and recently took over a specialist in online marketing. SAP boss Klein sees great opportunities in online trading in particular: his company can score points here with end-to-end business processes from ordering to storage.

The acquisition of Slack is an opportunity for Salesforce to reinvent itself. But it is also a “great diversionary maneuver”, as analyst Müller judges.

More: Clicking instead of coding: How SAP wants to make programming easier.

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