HEAD IN THE CLOUDS: Zendesk Wants More Enterprise Customers and Google Cloud Restructures Sales Organization

This week, I take a look at what Zendesk is doing to grab more enterprises and Google Cloud’s recent sales restructuring, putting channel partners under their sales organization.

Zendesk Leaning on Partners to Get into More Enterprises

There is no question that Zendesk has done an incredible job of building a loyal and deep customer base.  That customer base does not include many enterprise customers, though. Of Zendesk’s current 145,000 customers, 130,500 are small businesses.  That means (after doing some complicated math), that Zendesk has roughly 14,500 enterprise customers (or at least non-small business customers).  Considering we also know that enterprise customers drive about 40% of Zendesk’s current revenue and their current run rate is approximately $800M (expected to reach $1B by 2020), that means $320M of their current run rate comes from this relatively small group of enterprise customers.

Based on some recent announcements, in order to get more enterprise customers, Zendesk plans to increase its efforts to get the partner ecosystem to promote and push their cloud solutions into enterprises where these partners already have a presence.  Zendesk understands that these partners have a significant amount of influence on decisions being made regarding the cloud solutions that should be used as part of the overarching digital transformation the partners are structuring.

This strategy has worked well with many other enterprise cloud vendors and specifically one of Zendesk’s biggest competitors and enterprise cloud leader, Salesforce.  It’s not always smart to simply follow the leader, but in this case, it certainly is.  Of course, following is easy but executing to the plan is not.  Following does not mean Zendesk will end up at the same place as Salesforce.  A lot of other things need to fall into place and be effectively navigated throughout the journey.  This includes developing new cloud products that are going to get the attention of enterprise customers — cloud products that not only provide a better solution than those already available but also address the challenges enterprises specifically have versus those that small businesses have.  Zendesk is certainly off to a good start with their recently released cloud products: Sell (salesforce automation tool), Explore (analytics solution) and Sunshine (CRM platform).

In order to put themselves in a better position to grab more enterprise customers, Zendesk probably also needs to make more strategic acquisitions that will strengthen the portfolio of cloud offerings they can pitch and ultimately sell to enterprises.  As mentioned in the past, Zendesk Sell came from their acquisition of Base in September of 2018.  Zendesk also acquired Smooch earlier this year, an omnichannel messaging platform.  I do expect more acquisitions like these over the next couple of years.

Lastly, in order to become a true enterprise cloud vendor and accelerate revenue growth along the way, Zendesk should consider strengthening partnerships with other cloud vendors that also want more enterprise customers (i.e., those that have similar goals). How about Slack and Zoom?

Google Cloud Moves Channel Partners Under Sales Organization

According to a recent report, Google Cloud and CEO, Thomas Kurian, is once again making changes to their overarching go-to-market strategy and restructuring its sales organization to better position themselves and better compete with Microsoft and AWS.  The latest change will have channel partners (including partner engineering, partner sales management and partner development management) directly reporting to Google Cloud sales organization leaders.

Previously, channel partners were managed separately and were not essentially an extension of the Google Cloud sales organization.  If executed effectively, with buy-in from both Google Cloud sales and the channel partners, I could see this change as a great way to remove inefficiencies and any possible friction of closing a deal with an enterprise that was created through the prior model.

It is very clear and as I have covered before, Google Cloud and Kurian are extremely focused on doing anything and everything it takes to win enterprise business and beat Microsoft (Azure) and Amazon (AWS) to grab coveted and highly valuable market share at an accelerated pace.  In addition to the restructuring of the sales organization, Google Cloud has been making significant investments in growing the sales team tasked with penetrating more enterprise and ultimately converting them to enterprise customers.

Google has also been bringing in seasoned enterprise sales executives from enterprise vendors like SAP and Oracle.  It was also recently announced that Google Cloud was planning to spend $3.3B on a data center expansion in Europe in order to ultimately expand their cloud capacity.  Google Cloud realizes that they have to continue to make investments geared towards capacity capabilities if they are going to not only keep up with Microsoft and AWS but have any chance to surpass them.

I fully expect Google Cloud to continue to spend vast amounts of its available dollars on:

• Further data center expansion;
• Product development and capability enhancement geared towards meeting the requirements of enterprises;
• Sales organization restructuring and growth with the hiring of seasoned enterprise sales executives, and
• Key acquisitions along the way.