Today, global challenges require businesses to digitally transform while leveraging customer data to become more responsive, resilient, and efficient. Companies must also rethink and reshape everything about how and where their employees work.
Every business, in every industry, has to optimize for a digital-first customer, employee, and partner experience and connect with their customers through digital channels.
Salesforce understood this business need back in 1999 and started providing Customer Relationship Management (CRM) as a SaaS tool. Salesforce empowers companies to take advantage of powerful technologies, including cloud, mobile, social, blockchain, and artificial intelligence, to connect to their customers in a whole new way and help them transform their businesses around the customer in this digital-first world.
Companies of every size and industry worldwide are making significant investments in digital transformation. They trust Salesforce to help them connect with their customers in a whole new way.
Through this strategy story, let’s aim to understand various aspects of Salesforce: Business Strategy, Growth Strategy, and Acquisition Strategy.
Business Overview of Salesforce
Salesforce is an American cloud-based software company headquartered in San Francisco, California. It provides customer relationship management (CRM) software and applications focused on sales, customer service, marketing automation, analytics, and application development.
Founded by former Oracle executive Marc Benioff, Salesforce quickly grew into one of the largest companies in the world, making its IPO in 2004. Salesforce’s continued growth makes it the first cloud computing company to reach US$1 billion in annual revenue by the fiscal year 2009. In August ’22, Salesforce had leapfrogged SAP as World’s Largest Enterprise-Apps Vendor.
Salesforce aims to deliver a single source of truth, connecting customer data across systems, apps, and devices to help companies with their digital transformation.
Salesforce also gives teams sales, service, marketing and commerce capabilities, and more, and a single shared view of their customers so they can work together to build lasting, trusted relationships and deliver the personalized experiences their customers expect.
Salesforce primarily delivers solutions as highly scalable cloud computing applications and platform services on a multi-tenant technology architecture. Multi-tenancy is an architectural approach that allows Salesforce to operate a single application instance for multiple organizations, treating all customers as separate tenants who run in virtual isolation from each other.
This approach allows Salesforce to spread the cost of delivering its services across the user base and scale its business faster than traditional software vendors while building new functionality and enhancing existing offerings.
To read Salesforce’s history, you have Wikipedia. In The Strategy Story, we will analyze Salesforce’s business, growth, and acquisition strategy in detail.
Business & Growth Strategy of Salesforce
Salesforce continues to expand in the growing addressable markets across its service offerings, providing additional opportunities for business growth. Salesforce orients its business strategy and invests for future growth by focusing on the following five key priorities:
1. Expanding relationships with existing customers
Salesforce continuously seeks opportunities to deepen existing customer relationships through cross-selling and upselling.
As Salesforce customers realize the benefits of its entire suite of service offerings, Salesforce aims to upgrade the customer experience with new products, features, functionality, and additional subscriptions by targeting new functional areas and business units.
Salesforce also adopts a product expansion strategy with new features, functions, and increased security through its own development, acquisitions or partnerships.
Salesforce engages in direct discussions and strategic engagements with customers to focus on relevant innovations and enhancements that fulfill their requirements.
2. Extending go-to-market capabilities globally
By extending its go-to-market capabilities globally, Salesforce aims to grow its business by selling to new customers in new regions, primarily through its direct sales force.
Although Salesforce continues to increase the number of direct sales professionals, it plans to continue developing indirect distribution channels for its global solutions and new go-to-market strategies.
3. Expanding into new categories and verticals
As part of its business & growth strategy, Salesforce delivers innovative solutions in new categories driven by existing and potential customer needs, including analytics, e-commerce, collaboration, integration, and workforce management.
Salesforce provides customized solutions in various industries, such as financial services, healthcare, life sciences, manufacturing, and more. These solutions help Salesforce expand its potential customer base and attract new customers.
For example, in fiscal 2022, as a result of customer input and demand, Salesforce introduced a Health & Safety Solution, or Dreampass, which helps companies safely return to work, travel, manage contact tracing, and also helps governments, healthcare providers, nonprofits, and organizations distribute vaccines around the world.
Salesforce also introduced Net Zero Cloud, which helps customers analyze and report their carbon footprint and provides actionable emissions data insights to create long-term, sustainable value.
4. Expanding and strengthening the partner ecosystem
The Customer 360 Platform by Salesforce enables customers, independent software vendors (“ISVs”), and third-party developers to create, test, and deliver cloud-based apps. These apps can be marketed and sold on AppExchange, Salesforce’s enterprise cloud marketplace, or directly by software vendors.
As part of its growth strategy, Salesforce relies on its consulting partners to deliver technology solutions and expertise to customers wherever they are in their digital transformation journeys, from large-scale implementations to more limited solutions that help businesses run more efficiently.
This business strategy helps Salesforce reach new markets and industries, offer a variety of solutions, and address the business requirements of current and future customers.
5. Promoting strong customer adoption and reducing customer attrition
Salesforce is well known for its accessible, curated resources, such as Trailhead, to help companies learn its systems.
This community of Trailblazers drives innovation and customer success programs, including success management resources, advisory services, technical architects, and business strategists to enable and accelerate digital transformation.
With these resources and customer success programs, Salesforce aims to reduce attrition and secure renewals of existing customer subscriptions.
Acquisition Strategy of Salesforce
As part of its business strategy, Salesforce periodically makes investments in, or acquisitions of, complementary businesses, joint ventures, services and technologies, and intellectual property rights.
Salesforce has a concrete acquisition strategy that evaluates opportunities to acquire or invest in complementary businesses, services, technologies, and intellectual property to complement its organic innovation and advance the development of the Customer 360 Platform.
Acquisitions can range in size and complexity, from those that enhance or complement existing products and accelerate the development of features to large-scale acquisitions that result in new service offerings.
Salesforce has acquired multiple businesses over the years that it feels complement its existing offerings and would nurture the overall ecosystem of product offerings by Salesforce. Acquisitions enable Salesforce to deliver innovative solutions in new categories, including analytics, integration, and collaboration.
Over the years, Salesforce has spent over $70 billion in acquisitions. Slack, acquired in 2021 for $27.7 bn, has been its most significant acquisition to date. With this acquisition, Salesforce wants to create a new digital headquarters, one where companies, employees, governments, and stakeholders can create success from anywhere. The acquisition of Slack contributed approximately $584 million to subscription and support revenues in FY22. Check out our detailed case study on Slack’s business model.
Some of the other significant acquisitions are Tableau ($15.7bn), MuleSoft ($6.5bn), Demandware ($2.8bn), ExactTarget ($2.5bn), ClickSoftware ($1.35bn), Vlocity ($1.33bn) among many others.
Performance, functional depth, security, usability, ease of integration and configuration, and sustainability of solutions are critical factors in the acquisition strategy of Salesforce and influence Salesforce’s technology decisions and product direction.
Going forward, Salesforce expects to make investments and acquisitions to continue its growth and expand its service offerings and professional services organization.