Despite the clouds, Salesforce’s outlook looks bright

A small storm has brewed up around Salesforce’s most recent earnings announcement, triggered by a string of executive departures and a lack of guidance on the next fiscal year.

Some commentators used the words “turmoil” and “crisis” as the company’s shares slid on news that co-CEO Charles Taylor would step down, and that the bosses of the acquired Tableau and Slack operations would also be heading for the departure gate.

CFO Amy Weaver referred to the “very unpredictable macro environment” when she said it would be “premature” to provide guidance for the company’s fiscal 2024, and it is a brave individual indeed that sticks their neck out at this time, given global economic volatility.

However, PAC has spent the last couple of months talking with leadership teams at Salesforce’s leading IT services partners in Europe as part of our Innovation RADAR, and the picture that we were provided with was a much more positive one. It is worth noting that despite the gloom, Salesforce still delivered double-digit growth in both top- and bottom-line performance in its quarter ending October, and the anecdotal view of pipelines that their partners have built up in recent months gives grounds for optimism.

Europe, in particular, remains a bright spot. Revenue in the wider EMEA region rose by 22% to $5.2bn in the first nine months of the current year, putting it ahead of the growth rate in both North America and Asia Pacific. Based on PAC’s latest rankings, Salesforce now ranks as the sixth largest total software and cloud provider in EMEA, but is closing fast on a top five position.

The main focus of our Innovation RADAR was to explore how Salesforce’s key services partners are adapting to the shift in the market which is seeing customers embed the Salesforce portfolio much deeper into their core, industry-specific processes. For example, one insurance carrier in the Nordic region now runs claims and policy administration processes on a Salesforce platform, while several major telecoms operators have extended the use of Salesforce to support core and highly complex billing activities.

But while Salesforce has developed an interesting platform of business in these sectors, it has barely scratched the surface in industries such as manufacturing, utilities and public services. In the first two, the Industry Cloud proposition has started to build some momentum in Europe, while its partners’ current level of engagement suggests that the public sector will emerge as a major opportunity for Salesforce, particularly in the UK, France, Nordic and Benelux territories.

Salesforce’s partner will be key in helping customers to join the dots between its portfolio and their most pressing business challenges. The growing importance of the partner ecosystem to Salesforce was further underlined by the announcement that the vendor has made its DevOps Center generally available. This move is designed to make it easier for partners, such as systems integrators, to build, test and deploy extensions or automations on top of the Salesforce platform.

Salesforce has set a target of reaching revenue of $50bn by 2026. It should reach around the $30bn mark in its current year, which means there is some distance to travel – and the company’s aggressive M&A engine will continue to play an important role. But despite the negative vibes, Salesforce’s investment in its platform, industry-centric go-to-market and partner network put it in as good a position as any of its peers, to ride out any potential bumps in the road in the year ahead.

Please find further details on our Salesforce Innovation RADAR, including profiles and analysis on leading partners such as Accenture, Atos, Capgemini, NextView, Reply and T-Systems here.