I heard someone describe Salesforce as having “lost their mojo” recently, which is probably a fair summation of the feeling across the ecosystem. After nearly 25 years of record-breaking growth, innovation, and market-defining products, is the original cloud startup starting to feel slightly stale?
Salesforce has maintained a huge amount of momentum over the years. Ever since I started my own journey into the ecosystem in 2012, Salesforce has managed to keep up the “Ohana” hype with acquisitions, innovation, and great partnerships. But recently, the news coming out of Salesforce HQ and the general ecosystem does feel slightly downbeat, even in the face of the oncoming GenAI wave that, we hope, will transform the world’s productivity.
I haven’t written this post to bash Salesforce (there’s an adage involving a hand that feeds you that comes to mind), but rather to address the facts, as well as the negative sentiment, and try to figure out what the future might hold. So before addressing some of the more negative headlines, let’s look at what makes Salesforce so great.
What Makes Salesforce Great
Since 1999, Salesforce has dominated the Cloud industry, having practically defined the category for others to follow. How have they dominated for this long? By taking huge amounts of market share away from competitors and achieving record-breaking growth. Marc Benioff has been quoted over the years for saying that Salesforce is “The Fastest Growing Enterprise Software Company Ever”.
Of course, revenue has slowed over recent quarters, but their $35B annual revenue is nearly double that of Adobe’s ($19B), higher than SAP’s ($31B), and close to Oracle’s ($50B). What makes this even more impressive is that their closest competitors were all founded in the 1970s and 80s.
Salesforce also holds huge chunks of market share, as well as top positions in the Gartner Magic Quadrant ratings for Sales, Service, Marketing, Commerce, Data, among others – not a bad achievement for a company that is 22 years Oracle’s junior.
Although it may sometimes feel like cloud computing and digital transformations are now old hat in comparison to the groundbreaking innovations in AI, just remember that this is a growing market. The digital transformation market (which includes, AI, Cloud Computing, Analytics, etc.) is expected to grow by 27.6% a year, which could result in a market worth $4.6T by 2030.
Whilst the negative news can sometimes feel all-consuming, it would be a mistake to forget the run that Salesforce has been on since 1999, as well as the current potential to capitalize on the evergrowing technology market.
The smart money also wants a piece of the action. M&A activity in the ecosystem may have slowed down in the past couple of years. However, deals are still being done, with consultancies Cloud Orca and Sercante being acquired earlier this year, and the CloudKettle deal completed more recently. Odaseva also raised $54M, and “roll-up” companies such as Unaric and AscendX are frequently acquiring founder-led ISVs.
Of course, there are many other fantastic reasons to place your bets on Salesforce as a platform, investment, or career choice. But we’re mainly here to talk about the not-so-great headlines that have been circling for what seems like an age.
All Eyes on Salesforce
2023 was a rough year for the cloud enterprise giant after seven activist investors put massive pressure on CEO and Founder Marc Benioff to improve the underperforming share price. Reasons for this include a lack of profitability, and overpaying for some of its acquisitions. This came at a time when Co-CEO Bret Taylor, and Slack founder Stewart Butterfield, also handed in their resignation letters.
This pressure ultimately resulted in layoffs, a disbanding of the Salesforce M&A committee, a huge rise in profitability, its first dividend paid to shareholders, and a stock buyback program. Whilst all good for the share price, this is a different Salesforce we are seeing from the one that grew revenue by a factor of 10 times over the past 10 years (it’s important to note that Salesforce are still investing in M&A, but with much smaller deals, e.g. Spiff).
Salesforce’s share price has been under fire again recently, suffering an 18% drop in one day after its Q1 earnings missed forecast for the first time since 2006. Growth has slowed to 9% a quarter, some of the lowest on record.
As AI has hyped Salesforce and most other tech stocks, this forecast miss was particularly shocking for Wall Street, who despite the economic backdrop, expects fast growth from all companies involved in artificial intelligence. But this is where Salesforce might have a tougher time than some other enterprises when it comes to selling AI. Unlike Microsoft with its Copilot product, Github with its own Copilot product, and Google with Gemini, Salesforce’s AI products aren’t that straightforward and need to be implemented properly.
Use cases need to be fleshed out, experimented with, and then carefully implemented using Salesforce’s suite of tools, such as model builder, prompt builder, and skills builder.
READ MORE: The Definitive Guide to Einstein GPT (Salesforce AI)
Of course, Salesforce has some out-of-the-box solutions, including Sales Emails, Call Summaries, and Service Replies, but these somehow feel less transformational than what we have been promised with AI.
Many of these AI features have also only been made generally available in the last six months or so, which may compound the amount of time Salesforce needs to see meaningful effects on their top-line revenue.
Whilst Salesforce always seemed like the cool new kid on the block, their revenue growth is looking very similar to the dinosaurs they sought to displace, such as Oracle and SAP. On top of this, their smaller competitors, such as ServiceNow and Hubspot, are growing in the 22-25% range. This is also at a time when ServiceNow CEO, Bill McDermott, has put his sights firmly on the CRM market.
What Does the Future Hold?
Whether Salesforce has “lost its mojo” in recent times is mostly explained by the broader economic situation. Budgets are tighter, and Salesforce, among many other companies, are vying for a slice of the Generative AI pie.
Salesforce has grown to be a $35B business through its “land and expand” mentality – sell a customer sales cloud, and then proceed to meet other areas of their digital transformation through customer support, marketing automation, and business intelligence tools. This has been a fantastic strategy ever since they branched out into customer support via Service Cloud in 2009.
Another factor that may be hampering Salesforce’s ability to grow is how much work many customers still need to complete on their existing implementations. Our recent Salesforce Developer survey revealed that Salesforce is getting more complicated, and factors such as technical debt, skill gaps, and platform challenges are still very much present.
So if your Salesforce AE is calling you up to sell you AI and Data Cloud while you have lots of existing technical debt to fix, where is the budget going to be diverted?
Although Salesforce is taking its fair share of criticism at the moment, the market is seriously rough out there, with a recent study on B2B Sales citing that 75% of reps are missing quota at the moment.
So what does the future hold for Salesforce? With its market-leading selection of products, a core platform that is poised to have artificial intelligence integrated at every point, there is a huge amount of potential for Salesforce in coming years. Even at a modest 9% CAGR through 2027, Salesforce could be looking at a $50B revenue run rate in a few years.
Salesforce has also hitched its wagon to not only AI, but the Customer Data Platform software category in the form of Data Cloud – a product that already has $400M of annual revenue, and is growing at 90% YoY. Even the definition of a CDP fits perfectly into the continued customer 360 vision.
“A customer data platform (CDP) is a centralized customer database that builds unified profiles from data it collects across any number of disparate data silos.”
Although Salesforce has switched to be a company that focuses on profitability and stability over risky M&A ventures, this could change at any point in the future; there is a huge chance to capitalize on AI and become a market leader in this new software category. Salesforce still have their tried and tested land and expand model with their market-leading products. As soon as budgets are opened up a bit, products like Data Cloud, Einstein, Tableau, Mulesoft, and Slack will be there waiting.
Final Thoughts
Finally, and somewhat anecdotally, it feels as though people are complaining about Salesforce a lot more often, and there are more contentious issues to solve. But if you ever find yourself at a Salesforce community event, you will see that the Salesforce ecosystem hasn’t changed. You’ll still find lots of happy faces who are passionate about their jobs and promoting Salesforce as a technology and a career choice.
Whilst it’s important to stay abreast of the news, the changes, and the trends, don’t get too bogged down in negative headlines – Salesforce and its ecosystem are still alive and kicking!
