The ability of Salesforce to acquire portfolio adjacencies in response to customer demand and its concurrent evolution into a strategic adviser positions the company to be top of mind for enterprises as they evaluate digital transformation strategies.
While Salesforce is investing in many areas at once, including e-commerce, productivity and advertising technology, at the heart of the company’s investment is intelligence.
As Shubha Nabar, Salesforce’s director of data science, put it: “Intelligence is the electricity of our era.” Harnessing growing amounts of data to create greater levels of intelligence has the ability to change the way people live and work. Salesforce has embarked on an acquisition-led journey to embed intelligence across its applications and platforms, looking to consumer companies such as Netflix, Google and Amazon for inspiration. The result of this investment in intelligence is Salesforce Einstein, which will democratize artificial intelligence and make it accessible for all users.
While Salesforce Einstein is still in its early stages, building the type of deep intelligence promised into the applications themselves will set Salesforce apart from other customer engagement vendors such as Microsoft, SAP and Oracle, all of which are investing in analytics but none of which have truly embedded this level of analytics into their business applications. IBM has also been embedding cognitive into its applications but, while much further along, lacks the customer base or brand recognition in its applications business.
Much of Dreamforce 2016 was dedicated to highlighting Salesforce’s portfolio developments; however, innovation among customers and partners was also encouraged. Ecosystem innovation, particularly as it pertains to verticals, remains a critical aspect of Salesforce’s ability to act as a trusted adviser. Salesforce empowers its ISV partners, renamed App Innovation partners, to build industry-tailored solutions through services such as Lightning Bolt.
In addition, partnerships with services providers such as Accenture, which was the Diamond-level sponsor of Dreamforce, remain critical for Salesforce to evangelize its continuously expanding portfolio with customers. There is no doubt customers and partners are excited about the new product announcements Salesforce highlighted at Dreamforce; however, concerns arise as the pace of investment, much of which is acquisition-led, may be too much, too fast. With acquisitions comes the need for integration into existing offerings, which Salesforce has been criticized for doing too slowly in the past, particularly as it relates to Marketing Cloud. This shortcoming may have led to a changing of the guard in August, when Chief Analytics Officer Bob Stutz was promoted to CEO of Salesforce Marketing Cloud, replacing Scott McCorkle.
With his deep background in CRM, which included chapters at SAP and Microsoft, Stutz will likely play a pivotal role in driving integrations to create a more unified customer experience suite, such as people-based advertising. The ability to harness capabilities of newly acquired data management specialist Krux will be critical to Salesforce Marketing Cloud’s ability to capture a larger piece of the $185 billion digital ad industry, as well as separate but converging opportunities in the addressable TV ad market.
Salesforce will need to ensure integration of new assets is robust, not only within its portfolio but also with core aspects of customers’ IT environments. This is particularly true as Salesforce expands across new aspects of customers’ business processes and positions its portfolio as the backbone to customers’ digital transformation initiatives. In addition, with investment going in a variety of directions, including e-commerce, productivity, analytics and Internet of Things (IoT), there is potential for something to get left behind in favor of quicker returns in other areas. Salesforce, along with its customers and partners, will have to be mindful of the challenges around integration and investment allocation facing the company as the pace of portfolio development is not likely to slow in the near future.
Event highlights
Salesforce announced a number of new products and updates at Dreamforce pertaining to its four pillars of differentiation: intelligence, productivity, platform and mobility. Other portfolio developments enhance the functionality of core clouds or, in some cases, created new clouds altogether.
Intelligence: Salesforce Einstein
Despite having its own name, Salesforce Einstein is not a product, but rather a set of technologies and algorithms underpinning Salesforce’s applications and platforms, similar to Salesforce Thunder, a platform supporting complex event processing, and Salesforce Lightning, the company’s redesigned user interface.
Still in its early stages, Salesforce Einstein promises to build intelligence directly into application functionality to the point that users oftentimes will not even realize they are using Salesforce Einstein. IBM is executing a similar strategy by embedding cognitive capabilities directly into its applications, including its Customer Experience Suite, and is much further along than Salesforce. That said, IBM lacks the applications brand awareness and comprehensive customer engagement suite to make as big of an impact as Salesforce could in the space.
As Jim Sinai, vice president of Product Marketing for Salesforce Einstein, put it, Salesforce Einstein will be “your own personal data scientist,” eliminating the need to hire hard-to-find and expensive data scientists. For developers, Salesforce Einstein algorithms and capabilities will be embeddable in custom applications. While the promise of Salesforce Einstein sounds ideal, Salesforce did make it clear that, in many cases, Salesforce Einstein is only as intelligent as it is taught to be. Opportunity exists for services partners to assist customers with the training of these algorithms. For other features, such as Predictive Lead Scoring in Sales Cloud, Salesforce Einstein is pretaught.
However, there are capabilities, including Social Studio with Predictive Vision, where Salesforce Einstein’s algorithms need to be taught initially how to recognize objects and sentiment inside images. There is significant opportunity for Salesforce and its partners to create industry-oriented algorithm packages, where the algorithms are pre-taught to recognize common industry images or text blocks. For example, in healthcare, Salesforce Einstein could be taught to recognize characteristics in scans or patient images to assist with diagnoses.
Productivity: Quip
Salesforce has made productivity one of its four key portfolio investment areas, alongside intelligence, platform and mobility. The August acquisition of document creation vendor Quip enables Salesforce to quickly embed productivity into its core clouds and capture new parts of the sales process, including the creation of contracts, product data sheets and support documentation. At Dreamforce, Salesforce announced the ability for users to sign into Quip with their Salesforce account credentials, and for users to link, access and create documents in Salesforce using a new Quip Lightning Component.
While Quip will ultimately expand Salesforce’s addressable market, it also puts the company in direct competition with partner Microsoft, which is also investing to break down silos between document creation and customer engagement. While there is an opportunity for Salesforce to broaden its productivity suite — by combining Quip and Chatter with features such as presentation creation, for example — TBR does not expect Salesforce will try to uproot Office as the de facto productivity suite. These investments, however, will help Salesforce differentiate from other CRM vendors such as SAP and Oracle.
Platform: Salesforce DX
Salesforce touts App Cloud as a place for both code-driven developers and point-to-click application builders. As part of its ongoing strategy to improve user experience for both types of app development, Salesforce announced Salesforce DX, a new way to develop, deploy and upgrade Salesforce applications across life cycles. Salesforce DX brings together aspects of Force.com and Heroku developer experiences to enable source-driven development, improved collaboration with governance and automated testing.
Initial Salesforce DX features center on the traditional developers, with a new command line interface as well as the ability to build applications on Salesforce’s platforms and combine them with microservices developed on open languages such as Git. Further, the new experience includes “scratch orgs,” a new type of environment that is configurable to allow developers to emulate a variety of Salesforce editions to ensure custom applications work across all customer deployments. However, the road map for Salesforce DX will focus on abstracting certain parts of the development process to allow for admins and business users to build more comprehensive applications on Salesforce’s platforms.
Mobility: Salesforce1 App
The Salesforce1 mobile application received a number of updates at Dreamforce to make it more comprehensive and personalized. A new branding scheme called My Salesforce1 allows enterprises to brand their Salesforce1 application with their own colors and logos and list it in mobile app stores. TBR expects this new branding feature will make the Salesforce platform more attractive and spur additional use, particularly by partners. Further, Salesforce added more intelligence to the Salesforce1 app with Salesforce1 Forecasting, which enables users to manage their sales forecasts from their mobile devices.
Commerce Cloud
Commerce Cloud is Salesforce’s newest major cloud, resulting from the June acquisition of Demandware. Commerce Cloud has Salesforce Einstein intelligence features, including Predictive Sort, baked into e-commerce shops that learn about and provide insight into the customer over time. The combination of e-commerce with Salesforce’s customer engagement, analytics and IoT applications presents a unique value proposition. While most vendors lead e-commerce go-to-market strategies with ties to ERP, Salesforce differentiates by leading with CRM.
Salesforce will leverage its expansive front-office customer base to drive e-commerce sales. Although Commerce Cloud will have deep ties to the data stored in Salesforce, making it uniquely valuable as an e-commerce engine, it will also expose Salesforce’s lack of back-office ERP functionality. Commerce Cloud inherently has some basic ERP functionality, such as order management, built in, but without the ties to ERP systems, these capabilities won’t be nearly as useful, particularly to large enterprises. For Salesforce to meaningfully drive enterprise adoption of Commerce Cloud, particularly with large enterprises engaging in business-to-business commerce, the company will need to create ties to procurement and purchase order systems that are embedded in these organizations from legacy vendors such as SAP and Oracle, or newer players such as NetSuite.
Marketing Cloud
Salesforce is buying Krux, a 6‐year‐old advertising technology vendor, for a reported $700 million. Krux operates in the data management platform segment and will play an integral role in providing new sources of consumer touchpoints that feed into Salesforce Einstein.
Krux is already a Salesforce partner, connecting its DMP to the Salesforce CRM platform, and will provide data signals from 5 billion offline activities and 3.5 billion digital devices, per Krux CEO Tom Chavez. The Krux acquisition could complement a huge volume of social and sentiment data Salesforce would acquire from an acquisition of Twitter as well as create an advertising front end to Salesforce’s customer engagement suite that includes the company’s $3 billion acquisition of Demandware in June 2016 and its existing Service Cloud.
By Kelsey Mason, analyst and Seth Ulinski, senior analyst at TBR
