Salesforce Is Bidding To Be Your Strategic Customer Platform; Should You Accept?

As Salesforce seeks to achieve its goal of being the first cloud vendor with $10 billion in revenues and its aspiration to reach $20 billion, understanding its strategy for achieving those targets will help CIOs determine how aggressive to be in price negotiations, which new offerings to adopt, and whether to embed Salesforce more deeply in your business. Salesforce has pursued a "growth first" strategy centered on customer relationship management (CRM) solutions; profitability was secondary. Its clients have benefited from Salesforce's heavy spending on research and development (R&D), support, and sales and marketing, while shareholders have accepted losses thanks to its strong revenue and cash flow growth. But by 2017, as revenue growth slows, we think shareholders will start clamoring for profits as well as growth. To satisfy shareholders, Salesforce will need to increase deal sizes, push into new product categories, and achieve GAAP profits by slowing expense growth. Customers should expect Salesforce to make modest changes to its pricing model but aggressively push a diverse set of acquired and organically developed new products and services, each with a premium price tag. CIOs must decide how much to rely on Salesforce as a strategic platform for their business technology (BT) agenda and understand the true costs of a broad commitment.