February 28, 2023

Big Picture: What Is Up With Salesforce?

At the close of today’s bell, Salesforce reported Q4 revenue of $8.38 billion, up 14% year-over-year versus analysts expected $8 billion. This increase included an increase in Tableau’s Q4 revenue of $636 million, up 5.6% year-over-year.

At the same time, we are hearing about active investors, including Elliot Investments that has a multi-billion dollar investment into the company, that have nominated an alternative board slate to the Salesforce board of directors.

Adding on to this, it was reported today that Salesforce is paying the actor Matthew McConaughey $10 million a year to serve as a “creative advisor” to the company. With a reported total of $160 million.

All while the company is laying off 8000 people and closing its locations, including its employee wellness retreat.

Background

Salesforce has acquired 70+ companies since its inception. These acquisitions include several extremely large deals over the past ten years, including:

ExactTarget	Email Marketing	$2.5 billion
Demandware	Cloud e-commerce	$2.8 billion
Mulesoft	Cloud integration	$6.5 billion
Tableau	Data Visualization	$15.7 billion
Slack	Office Messaging	$27.7 billion
ClickSoftware	Mobile Workforce Management	$1.3 billion

The challenge is that several of these acquisitions have not been strategically integrated well.

For Example:

MuleSoft provides well-respected cloud integration and platform services. Salesforce is leveraging MuleSoft within its Customer 360 platform as an external service for integrating connectors to additional services. However, it is being maintained as a separate subsidiary and is not the foundation platform for Customer 360.
The Slack acquisition is that it immediately positioned the company in direct competition with some of its previous partners, such as Microsoft. In addition, its current market position in team collaboration is behind Microsoft in several areas.

Salesforce SWOT

In 2020, Aragon Research released a SWOT analysis on Salesforce Customer 360 platform which is still very accurate today. We identified several threats, including:

Limited integration strategy and roadmap of diverse acquisitions (Tableau, MuleSoft, Quip, etc.)
Unclear commitment to Salesforce 360 as an independent digital business platform.
Lack of a clearly defined and articulated business strategy beyond tactical growth.
Integrating ever broadening portfolio.

Big Picture

Salesforce is at a chasm of its own making. The company has positioned itself against Microsoft, Google, Oracle and all the other collaboration and analytics service providers, without having the strategic integration, commitment, and innovation to take a leadership position.

Salesforce is a significant technology provider and will continue to be a major industry force with respect to business applications. However, its efforts to transform its business into being a one of the leading platform, integration, collaboration, and analytics providers, particularly given it significant investment in acquiring these technologies and skills, is lacking.

Bottom Line

Salesforce is not operating based on a strong commitment to a strategic vision. The company is making solid revenues based on its existing market position. Furthermore, the company has been spending money on frivolous areas at the cost of employee resources.

Salesforce will continue to have a solid market position in its core markets: salesforce management and customer automation. However, Salesforce has not shown the strength of vision, investment commitment, strategic integration and discipline needed to take on the big players in its target adjected markets.

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This blog is part of the Business Transformation blog series by Aragon Research’s VP of Research, Betsy Burton.

Big Picture: What Is Up With Salesforce?