Q1 FY2019 was another strong quarter for Salesforce. Beyond the impressive revenue growth across all of their cloud offerings, they boasted an increased share of the highly coveted CRM market; a sign they continue to lead the pack. In 2017, Salesforce’s market share increased by more percentage points than the rest of the top 20 CRM vendors combined. Unsurprisingly, the buzzworthy $6.5B acquisition of MuleSoft was a primary point of discussion in their announcement and is expected to pay off.
- Total overall revenue for the quarter was $3.01B, up 25% y-o-y
- Reached a $12B revenue run rate
- $20.4B of future revenues under contract, up 36% from last year
- Sales Cloud revenue (which represents 34% of their total) grew 16%
- Service Cloud revenue grew 29%
- Marketing and Commerce Cloud revenue grew 41%
- Salesforce Platform revenue grew 36%
- Full year revenue guidance was raised to $13.125B (with the help of MuleSoft)
Accelerating Digital Transformations with MuleSoft
Like fellow tech titans SAP, Microsoft, and Oracle, as well as other cloud vendors like ServiceNow and Workday, Salesforce is clearly trying to latch onto the digital transformation movement that is being driven at the CEO level. They are doing everything they can to position themselves as the vendor of choice to bring these companies to the proverbial promised land.
As Salesforce CEO Marc Benioff discussed during the Q1 earnings call, CEOs are most focused on customer relationships and how to drive those customer relationships forward via digital transformation. In today’s world, where consumers and businesses expect rapid and highly personalized service, Artificial Intelligence (AI) and Big Data will play a large role in enabling a digital transformation that can provide this level of service. That’s where the recently acquired MuleSoft, Salesforce Einstein, and the integration of the two, comes in.
Currently, most organizations’ valuable data is locked in their legacy systems and scattered across on-premise, private cloud, and public cloud systems. MuleSoft’s integration platform enables organizations to connect all of their data and provides the means to “unlock” that data so it becomes available and valuable. As organizations continue to adopt AI technologies like Einstein, clean and centralized data becomes increasingly important. As Bret Taylor, Salesforce President and CPO, pointed out on the call, AI is only as good as the data it has access to.
MuleSoft + Einstein = 360-Degree View of the Customer
With MuleSoft’s integration capabilities and ability to unlock data, Einstein will be able to tap into an organization’s entire dataset to provide more powerful insights than ever before. Salesforce customers can expect an aggressive sales organization pushing Salesforce’s ability (through this integration of MuleSoft and Einstein) to provide the best way for your organization to truly gain the critical and coveted 360-degree customer view. In fact, Keith Block, President and COO, called the 360-degree view of the customer the “holy-grail” during the Q1 earnings call and went on to say Salesforce is “the only one that can provide the 360-degree view of the customer and the insights associated with that.”
Now more than ever, customer experience is how companies differentiate themselves, so this promised ability to provide a 360-degree view of the customer represents an opportunity for tremendous value — the type of value CEOs are desperately looking for. For example, through the data accessed by Einstein, an organization would have the opportunity to boost online sales by automatically suggesting items to online shoppers based on their history and what is already in their cart. Benioff mentioned during the recent earnings call that Commerce Cloud customers who turned on Einstein have seen around a 15-20% increase in revenue.
With this type of value-add and resulting dependency (how likely is it that a company getting this much value will walk away?), Salesforce can become a strategic partner to these companies – one that is ingrained in the business and viewed as critical to the company’s go-forward success. On top of this, Salesforce’s lock-in power will only increase as companies adopt more Salesforce cloud solutions and make them part of their go-forward overall strategic plan.
Focus on B2C and B2B Commerce
In the shadow of the MuleSoft hype, CloudCraze was a much smaller but still important acquisition that Salesforce made earlier this year. While the previous Demandware acquisition enabled Salesforce’s Commerce Cloud capabilities, CloudCraze extended Salesforce in not just B2C commerce but B2B commerce as well. Salesforce made several acquisitions in 2016 and they seem to be back from their 2017 acquisition hiatus. Even if competitor Adobe hadn’t recently acquired Magento, a market-leading commerce platform, we fully expect Salesforce to make tactical acquisitions to further expand and enhance its Commerce Cloud offering.
No Sign of Slowing Down
Salesforce raised its full 2019 fiscal year guidance and is clearly optimistic about their ability to push themselves deeper and wider into their current customer base while grabbing more valuable market share along the way. Current and potential Salesforce customers need to ensure they are adequately preparing themselves for the expected aggressive sales efforts and tactics.
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