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If I had wanted to provoke the guardians of the temple of correct French, I would have called Salesforce a CRM specialist in SaaS mode. In fact, the company is a star of customer relationship management (or Customer Relationship Managementhence CRM), with a business model based on software as a service, or SaaS (Software as a Service).
Salesforce software is designed to enable companies to support their customers from A to Z. Whether it is to manage and monitor marketing processes and the experiences offered, to integrate and support prospects or to ensure follow-up operations. The company offers three distinct software platforms managing each of these three processes: Marketing & Commerce, Sales, Services. Salesforce naturally combines its three solutions in a global platform, called “Customer 360”. A huge machine at the service of commercial activity, with the grail of a single source of truth about the Customer with a capital “C”.
Salesforce’s promise to its users is that they will have a formidable tool to attract, convince, manage, retain and improve the customer. The range of services offered also makes it possible to automate some of the administrative tasks and to have a particularly relevant database. This optimization of the organization, coupled with sales monitoring and analysis tools, gives excellent results. The average Salesforce user experiences a 44% increase in lead volume, a 37% improvement in win rates, a 37% increase in sales volume, and a 45% increase in retention. Behind these fair-talking promises lies an implacable observation: Salesforce solutions are acclaimed, to the point that the American is the world leader in the sector with more than 150,000 client companies.
A phase of growth, and after?
The company focused on developing the Customer 360 platform to make it an ultra-competitive tool. These investments have led to a strong increase in turnover. Revenues have thus increased from 3 to 26.5 billion dollars between 2013 and 2022, which corresponds to an average annualized growth of 24%. To strengthen its hegemony, Salesforce has methodically got its hands on potential competitors or bricks of complementary solutions. We can speak of a real raid with the acquisition of 55 companies since 2006, including the last and famous acquisition of Slack in 2020 for 27.7 billion dollars.
After this phase of growth, partly fueled by acquisitions, investors would like to see Salesforce improve the quality of its results. This market impatience is reflected in the appearance in the capital of a few activists, such as the Starboard Value fund. The management has understood that it must improve its copy. In an attempt to lure the barge, he set an operating margin target of 25% at cruising speed, significantly more than the peak reached by the company (17.8% over the last financial year). A share buyback program was launched in parallel.
These restless shareholders will probably bring contradiction to Marc Benioff, founding director of the company and pioneer of SaaS. He built Salesforce on the idea that software should be delivered over the internet and purchased by customers on a subscription basis: quite visionary at the time. But he is also struggling to bring new blood into the company. Co-CEO Bret Taylor announced at the end of November that he will be leaving the ship within a few weeks. This is the second pair to fail in three years. Salesforce therefore has two ongoing projects: improving its governance and its margins. But there are some great advantages to be had: a status as an innovative pioneer that has become essential in its sector.