Revenue train kept rolling all year long for Salesforce

Salesforce turned 20 this year, and the most successful pure enterprise SaaS company ever showed no signs of slowing down. Consider that the company finished the year on an $18 billion run rate, rushing toward its 2022 revenue goal of $20 billion. Oh, and it also spent a tidy $15.7 billion to buy Tableau this year in the most high-profile and expensive acquisition it’s ever made.

Co-founder, chairman and CEO Marc Benioff published a book called Trailblazer about running a socially responsible company, and made the rounds promoting it. In fact, he even stopped by TechCrunch Disrupt in San Francisco in September, telling the audience that capitalism as we know it is dead. Still, the company announced it was building two more towers in Sydney and Dublin.

It also promoted Bret Taylor earlier this month, who could be in line as heir apparent to Benioff and co-CEO Keith Block whenever they decide to retire. The company closed the year with a bang with a $4.5 billion quarter. Salesforce, for the most part, has somehow been able to balance Benioff’s vision of responsible capitalism while building a company makes money in bunches, one that continues to grow and flourish, and that’s showing no signs of slowing down anytime soon.

All aboard the gravy train

The company just keeps churning out good quarters. Here’s what this year looked like:

  • Q42019: $3.69B
  • Q12020: $3.74B
  • Q22020: $4.00B
  • Q32020: $4.50B

Consider that Salesforce only passed the $10 billion revenue run rate in Q22018. It only took 8 quarters to break $4 billion. The leap from Q22020 to Q32020 is particularly impressive to arrive at 18 billion run rate with two years left to reach its $20 billion goal. Believe it or not, the company has already set a $60 billion goal for 2034, which suddenly doesn’t feel quite as audacious as it did when they announced it in 2018, especially since in the most recent earning’s call, Benioff indicated he expects the company to reach at least $34 billion by 2024. “What’s more significant and extremely exciting to me is that we are also intending to double the company by fiscal year ’24, with a revenue target of $34 billion to $35 billion, making us the fastest enterprise software company to reach that milestone,” he said in the call.

Chart: Salesforce

Salesforce divides its CRM portfolio into four main categories: sales, service, marketing and platform. All but marketing is over $1 billion in quarterly revenue revenue. It’s surely not a coincidence that Gartner finds it controls 19.5% of the CRM market. Its closest rival SAP has just 8.3%. It’s worth noting that Gartner found the worldwide CRM market grew by 15.6% in 2018.

Chart: Salesforce

John Dinsdale, VP, chief analyst and general manager at Synergy Research agrees with the 20% market share estimate when you count on-prem and the cloud. When you count just SaaS, Salesforce has around 50% market share, he said.

“Unsurprisingly Salesforce dominates the CRM SaaS market with a worldwide share of just over 50% in Q3. This is trending slowly downwards as other mainstream software vendors push on their SaaS migration initiatives, and as new vendors enter the market. But the market share erosion is pretty slow. In CRM SaaS the other leading vendors are Adobe and Microsoft, who together control another quarter of the market. These are then followed by SAP, ServiceNow, Oracle, Zendesk and a long tail of minor players,” he said.

Acquisitions and other strangers

Salesforce doesn’t always have an active M&A year, but it sure feels that way. This year it made a total of six acquisitions. That included buying its own charitable arm, for $300 million, which wasn’t as strange as it may sound. It helped consolidate the education and non-profit market under a single umbrella.

Paul Greenberg, who is author of the book, CRM at the Speed of Light and founder and managing principal at The 56 Group, LLC, says the consolidation was significant for the company. “Probably their most significant acquisition was the purchase of the Salesforce Foundation which aligns more with their corporate mission than any other one they did, no matter what the size,” Greenberg told TechCrunch.

Salesforce 2019 acquisitions. Chart: Crunchbase

The biggest acquisition by far this year was buying Tableau for $15.7 billion. In fact, it was the largest acquisition in Salesforce’s history by far. Aside from the pure flash of such a large acquisition, it showed just how central data has become to the company’s mission, says Brent Leary, principal at CRM Essentials, who has been following Salesforce since its earliest days.

“The acquisition of Tableau at close to $16 billion this year, on the heels of the $6.5 billion MuleSoft acquisition in 2018, define just how foundational the movement and analysis of data is to the future of Einstein (Salesforce’s intelligence layer) and by extension Salesforce. Einstein is so critical to Salesforce that many of the biggest moves the company has made in recent years have been related to providing a more complete view of a customer in order to automatically recommend more effective next best actions on the way to offering better and more personalized experiences and journeys to customers. And that takes a lot of horsepower to do that at scale and speed expected at the enterprise level,” Leary said.

The company also made several smaller deals, the biggest of which was grabbing ClickSoftware for $1.35 billion, a pretty significant move in its own right, even if it was dwarfed by the Tableau deal. This one was aimed more specifically at the Service Cloud to help continue to grow that business segment.

Can Salesforce still innovate?

A legitimate question to ask is whether all of this acquisition activity is a signal that Salesforce is finding it harder to innovate internally. Often when companies reach this stage of maturity, they begin buying innovation, but Salesforce’s flurry of announcements around Dreamforce, its massive customer conference in November, suggests that there is still plenty of innovation going on, even as it continues to be acquisitive to fill in holes.

Greenberg says that a company’s priorities change as it gets older. “I’d say that innovation has slowed but not due to the acquisition strategy. Part of it is the perception of innovation. Salesforce’s big competitors are stepping up innovation dramatically —  and that goes for all of them. Second, there is a point in the growth of every company, and that means every company, that it’s actually wiser to improve what you have, not create what you don’t,” Greenberg said.

Laurie McCabe, co-founder and partner at SMB Group says that it’s about finding the right mix between innovation and acquisition, and she believes Salesforce has struck the right balance. “Salesforce is one of the true pioneers of the SaaS industry, and it has developed over the years into the #1 CRM brand with products spanning across the CRM stack. It’s grown rapidly through a combination of organic innovation (think AppExchange, Einstein, etc.) and acquisitions,” she said.

Adds Leary, “For the big industry players like Salesforce, Adobe, Microsoft, Oracle, SAP, etc., being able to determine the best way to introduce new innovations into the platform becomes one of the greatest challenges to their long-term success.”

The company did more than just buy and fold in large acquisitions this year. It continued to develop Customer 360, which as the name suggests, provides a record of the customer across all its interactions wherever they happen to occur. Salesforce also announced an integrated order system in October that allows customers to track orders across systems in a single place, and it announced a new CMS in November.

In addition, it enhanced its partnerships with Apple and AWS, even while announcing it was moving Marketing Cloud to Azure next year.

A strong sense of social responsibility

Salesforce chairman and co-CEO Marc Benioff wrote a book this year where he outlines the case for responsible capitalism. At TechCrunch Disrupt in September, Benioff said traditional capitalism is dead:

“I really strongly believe that capitalism as we know it is dead… that we’re going to see a new kind of capitalism and that new kind of capitalism that’s going to emerge is not the Milton Friedman capitalism that’s just about making money,” said Benioff. “And if your orientation is just about making money, I don’t think you’re going to hang out very long as a CEO or a founder of a company.”

One interesting product it quietly released this year was a new app to measure the progress of an organization’s sustainability initiative. The company believes that part of being a responsible corporate citizen is helping others, and it hopes that this tool can help other organizations build a more sustainable operation — while they make some money, I should add.

Not all good news

It would be inaccurate to say that it was all sunshine and light for Salesforce this year. Like all big companies, it has its ups and downs and admirers and detractors. Not everyone loved the Tableau deal as an example with some analysts believing that it paid far too much.

The company’s stock dropped sharply in June after the Tableau acquisition news broke, but it did recover by late in the year after a couple of good earnings reports might have eased investor concerns. It will certainly be something to keep an eye on in 2020 though, as Salesforce integrates Tableau more deeply into the fold.

CNBC reported in March that 50 woman sued Salesforce because a company called Backpages had used the company’s CRM software to help run its business. Backpages was found guilty of sex trafficking in 2018, and the lawsuit asserted that Salesforce software helped them.

TechDirt reported that Benioff also ran into an issue when he called for the abolition of Section 230, a part of the Communications Decency Act that gives companies like Salesforce cover, should their software be used by companies doing illegal things — like Backpages. According to TechDirt’s Mike Masnick, Salesforce’s defense team in the Backpages lawsuit is relying heavily on Section 230 — and Masnick called him out on it in the article and on Twitter:

As the year closed, Salesforce announced that Bret Taylor, who came over in the Quip acquisition in 2016, had been promoted to president and chief operating officer. Benioff and co-CEO Keith Block won’t be around forever and many saw this as part of a succession plan.

Should he eventually take over, Taylor will have some big shoes to fill. The Salesforce executive team has built a successful company by any measure, whether you look at the stock price, the $140+ billion market cap or the legacy of good works and charitable contributions.

That said, there is no perfect company, and any large corporation like Salesforce will have to explain philosophical inconsistencies along the way, but as Benioff wrote in an October OpEd in the New York Times, “But suggesting that companies must choose between doing well and doing good is a false choice. Successful businesses can and must do both.” Salesforce continues to work to be true to that ethos.