By all accounts, at SapphireNow this week, CRM will be a major focus. And the bullseye will be on Salesforce. Ho hum? Oracle, Microsoft, Adobe, Zoho and many others have been targeting Salesforce for a while. So, join the chase.
No, the biggest threat to Salesforce comes from within. Here are three angles
Economics
Several years ago, an exec at a Fortune 50 company told me he would never buy from Salesforce. “Every dollar they earn they spend 2/3 on SG&A. How exactly does that help me?” The SG&A is somewhat lower now but in some ways the perception is even worse. I have heard its customers ask in recent months about its massive new HQ, the big parties at Davos and SXSW, the big celebration that is the annual Dreamforce event. The tone is usually “how much did that cost?”
Many of its customers are in their 5th, 10th, 15th year of relationship. What is concerning is they have not seen productivity which should come from multi-year contracting. We live in a world of Six Sigma and CMM and continuous improvement. If anything customers report, the more stickiness you provide to Salesforce and partners on its platform, the more contentious are the periodic renewal negotiations.
Finally, the ecosystem around Salesforce is starting to show in bulging TCO. Salesforce has been bragging it is helping create millions of new jobs and takes credit for hoping to generate $ 859bn in GDP impact by 2022. Service partners drool about Salesforce like it is the SAP of old. Guess who will be paying for all this labor? Customers.
Product
Economics would be less of an issue if the functional footprint kept growing. In my book, The New Polymath, CEO Marc Benioff was quoted as saying “Every time someone buys a server, a switch or a data center, I have failed”. The reality is clouds have only penetrated 20% of the enterprise apps world when you add in industry applications and geographic reach. And the coverage of Salesforce and its platform partners is significantly smaller than that. Is it unreasonable to expect much more from the leading cloud apps vendors? Focus is usually commendable but you run a risk of commoditization when a whole slew of big competitors also start targeting that same, narrow space.
Social Activism
Personally I have always admired CEO Marc Benioff’s colorful personality and his zest for music, gastronomy, and other good things of life. There are a number of people who admire his repeated stands on diversity in employment. A number of publications have the company on their most “admired” lists.
Its 2018 annual report leads off with “Salesforce is a different kind of company.”
It has a whole section on some of the company’s social activism initiatives including
“We believe the business of business is improving the state of the world for all of our stakeholders, including our stockholders, customers, employees, community, environment and society. We are committed to creating a sustainable, low-carbon future by delivering a carbon neutral cloud, operating as a net-zero greenhouse gas emissions company and by working to achieve our goal of 100 percent renewable energy for our global operations. In addition, we have spearheaded initiatives to drive equality in four key areas: equal rights, equal pay, equal education and equal opportunity. We also pioneered and have inspired other companies to adopt our 1-1-1 integrated philanthropy model, which leverages 1 percent of a company's equity, employee time and product to help improve communities around the world.”
Prof. Brayden King at Northwestern School of Management has studied trends in corporate activism for a while. Activism enhances your reputation in certain consumer demographics, but it can just as easily backfire, especially in executive settings. In today’s highly charged political environment, you can come across opportunistic or even threatening depending on your politics. Often, people tune you out if they know you are going to add to all the political talk around us.
I am seeing other tech companies talk about their “purpose” and “values” but Salesforce is clearly an outlier. Personally, I think it is vulnerable to see its product messages get conflated with its social ones.
So, yes, I expect Salesforce will be paying close attention to what is announced at SapphireNow this week, but honestly it needs to look much closer to home.
