Most of the recent analysis I have read about Salesforce has focused on the stakes taken by Starboard Value and Elliott Management. Activist investors play a useful role as they push for efficiencies and resets to increase shareholder value. I hope in this case, however, the activists don’t just use old playbooks and benchmarks. We have entered a very different world of enterprise applications. Four big drivers – COVID, the Ukraine energy crisis, climate change urgency and major digital transformations – have opened up a slew of new enterprise application markets.
Take intelligent returns in retail as nearly 15-20% of ecommerce sales are returned and have to be efficiently restocked, refurbished, scrapped or donated to charity. Or complex CPQ as companies “servitize” and bundle products, services, spares, financing and more in outcome based contracts. Direct to consumer models that take advantage of new micro-fulfillment ecosystems. Field service of complex equipment which leverage mixed reality and digital twins. Smart insurance as cars get smarter and more connected. EV battery charging operations. Applications for the emerging hydrogen economy. Applications for the growing utility prosumer market. Telemedicine. Digital mortgages.
I could highlight another hundred such applications which have emerged or accelerated in the last few years. These are nascent markets and easy to dismiss. There is plenty of wishful thinking – help me find the next ERP or CRM market. I have been in the industry long enough to have seen when both ERP and CRM were tiny markets. I have seen them mature and I am seeing them get commoditized as too much investment has chased after core functionality in each.
I have spent a fair amount of time with Salesforce’s vertical teams and many have presented in my Analyst Cam video series. They are not anywhere as deep as SAP’s vertical capabilities but that is by design. Salesforce focuses on front office, revenue centric apps, not as much on operational areas that SAP thrives in. But compared to other enterprise vendors and even hyperscalers, Salesforce is very well positioned when it comes to many verticals.
As I like to say business as usual, circa 2019, is a recipe for mediocrity. We have had too many black swan events in the last few years to pretend the world has not turned upside down. One of my recommendations as Salesforce and its investors chart a new course is to double down on its application savvy and lead its customers with a new generation of enterprise applications. Plenty of growth opportunities to mine and generate shareholder value.
