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Goldman Sachs Communacopia & Technology Conference

Sep 6, 2023

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Hi. Thank you, everybody. Marc Benioff, in case you're listening, we actually have more people this time than we had for you last year. I hope you're not listening, actually. I didn't say that, did I? It's a fact. It's a fact. Real delight to be able to host Brian Millham. Brian's title is President COO. But, you know, when I ask people, I've-Brian, I've known you forever. We've not really sat on a stage together.

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

First of all, welcome to your very first-

Brian Millham
President and COO, Salesforce

Thank you.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

podcast.

Brian Millham
President and COO, Salesforce

It's great to be here.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Communacopia + Technology Conference, and it feels like I've known you forever, since the beginning of time,

Brian Millham
President and COO, Salesforce

I'm not that old.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Time's very transient, right?

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

I think I saw you at the very first Dreamforce.

Brian Millham
President and COO, Salesforce

Yep.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

2002. I think 2002 or 2003. And finally, this is the day that we get to host you, so thank you for coming.

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

If you happen to do your due diligence on Brian, I think you'll hear a term, presidential. So, you've been termed presidential, and also people say that you're the kind of guy that will run through a brick wall for.

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

I don't know how you developed that reputation, so whatever, it's fantastic.

Brian Millham
President and COO, Salesforce

Well, thank you for that.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

So, so good to have you here.

Brian Millham
President and COO, Salesforce

Appreciate it.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

A quick introduction. How long you've been at the company?

Brian Millham
President and COO, Salesforce

Sure.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

I think it's 25 years?

Brian Millham
President and COO, Salesforce

Yeah. No, 24 years at Salesforce. 24 years tomorrow, actually.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Congratulations!

Brian Millham
President and COO, Salesforce

Thank you.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah.

Brian Millham
President and COO, Salesforce

Currently operating as the COO of the company, running sales, our service organization, support our success teams, alliance and channels, and recently took over our HR function. We call employee success. IT, CMO now works for me. Just hired a new CRO, so, a lot of functions around the business now rolling up through the COO.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

That's great. The only thing that doesn't report to you is financials, right?

Brian Millham
President and COO, Salesforce

Well, product, too.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Pro... Okay.

Brian Millham
President and COO, Salesforce

Yeah, yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah.

Brian Millham
President and COO, Salesforce

David Schmaier runs product-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Oh, yeah.

Brian Millham
President and COO, Salesforce

and obviously, is the CFO.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah, right.

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Excellent, yeah. So, Brian, let's talk a little bit about what has happened the last 12-18 months. So with that in mind, as you march forward, we can talk about the past a little bit, but I'm more curious to see how, since you've been at the company for a very long 24 years, as of tomorrow, how do you see the next four to five years playing out for Salesforce?

Brian Millham
President and COO, Salesforce

Great question. Hard to see beyond the next couple quarters here. We've seen a lot of change in the last 12 months, obviously, at the company. Our focus is gonna continue to be on customers. We're gonna put the customer at the center of everything that we do. Obviously, we're very excited about where we're headed from an AI perspective. Big investments that we're making on the AI front, but also making big investments in data as well.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

Very important that we start with the very complex world of data, so that all of your AI that layers on top of it can be as effective as possible. So hard to see five years out.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

But I know if we are sitting here five years from now, I would hope that our customers would be depending on us more for delivering technology to help drive their efficiency and growth, and that we'd have even deeper trusted relationships, even more than we have today, and so, that would be my hope for five years from now.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm. You're welcome back in five years.

Brian Millham
President and COO, Salesforce

Thank you. I'd love to come back.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

And in the intervening

Brian Millham
President and COO, Salesforce

Yeah

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Period as well.

Brian Millham
President and COO, Salesforce

Perfect.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah, many have asked me: "So why are you doing your conference, like, right after Labor Day?" I tell them: "You gotta ask Brian Millham, why? Because your Dreamforce conference is next week.

Brian Millham
President and COO, Salesforce

Yeah, yeah. It's unbelievable-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah.

Brian Millham
President and COO, Salesforce

It's next week.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah.

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Can you tell us a little bit about Dreamforce? Not that it was something I had in my mind, but just since we're the topic of Dreamforce-

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

What can we look forward to next week?

Brian Millham
President and COO, Salesforce

Yeah, Marc called it the biggest AI event of the year. We're gonna have some of the greatest minds around AI in the world joining us for Dreamforce. And so we're excited to tell a story. Many of our customers are looking for us to help guide them. We wanna be a pioneer in the AI space, and we're doing that next week. Very focused on the trust element-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm

Brian Millham
President and COO, Salesforce

of AI, and you'll see that threaded through the entire conference, ensuring that we're delivering on the expectations our customers have for us around being the most trusted enterprise in the world.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Excellent, excellent.

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

So let's talk about the macro picture a little bit. Our Chief Economist, Jan Hatzius, presented yesterday. He lowered his recession odds from 20% to 15%. He's been largely constructive on a soft landing. In fact, we're gonna call it the software landing. That's patented in case some of the sell-side firms are listening to this. Software landing is Goldman Sachs terminology. So he's been calling for a soft landing, and given your perspective, and you practically talk to the whole world, I mean-

Brian Millham
President and COO, Salesforce

You have a customer base that's one of the largest in the industry. What do you observe to be customer behavior with respect to spending on technology? It looks like the recession that everybody's been waiting for, waiting for, waiting for; it seems to be dodging us. So what are... When are customers gonna wake up and say: I need to do the right thing? So where are we in that cycle?

Well, I'm not an economist. I'm thrilled to hear that that is a possibility, that we're seeing less likelihood of a recession coming our way. Based on my experience and what we've seen over the last couple quarters, we're seeing the same tough environment that we face, very measured environment in the markets out there. Deals that we used to get done would sort of sail through the process, constrained, more deal approvals, more layers to get through, smaller bites at the apple on the transactions. And so, we're factoring that into all of our guidance going forward. I hope you're right. We have to be a little bit thoughtful about how we're guiding for the rest of the year. And so, we're predicting that sort of same thing for the second half of the year.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

If I'm wrong and we're wrong, then great, it's upside. But for now, we have to be thoughtful about what we're doing. We've changed a lot of the way that we operate as an organization.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

Knowing the environment that we're operating in, obviously.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

And so our sellers being much more thoughtful about justifying spend, very value-oriented in the way that we're selling. We're making all the enablement changes that we need to-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

having good impacts.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

We saw the results. We're happy with where we ended up in the quarter.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

But it's certainly harder out there than it was, say, 18 months ago or two years ago, and so my view of it is sort of stabilized, but still very difficult to be out there. Not any better, not any worse.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Okay.

Brian Millham
President and COO, Salesforce

We got to continue to operate in that market.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Stability is good.

Brian Millham
President and COO, Salesforce

Yes.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

That's what we've heard from a lot of other management teams as well. So what are customers saying about their budgets for calendar 2024?

Brian Millham
President and COO, Salesforce

I mean, I think everybody's trying to figure out how they take advantage of, of AI.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

My guess would be, many of them are looking to sort of, in their same envelope that they have-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm

Brian Millham
President and COO, Salesforce

Find ways to spend in this AI world. We're very hopeful that that will happen.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

Budgets on software, again, probably stable to what, what they're doing. We see many CIOs are saying: "We wanna invest in an AI. We wanna invest in data strategies.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

But many of them also told me that their budgets haven't gone up, so it's a trade in an envelope on an existing spend, that they're gonna have to find dollars to spend to go make it happen.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Got it. Alicia?

Jillian Patel
Equity Research Analyst, Goldman Sachs

Yeah, and maybe I'll jump in here-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Jillian Patel, who works with me on Salesforce.

Jillian Patel
Equity Research Analyst, Goldman Sachs

Yes. Hi, thank you so much for spending the time with us.

Brian Millham
President and COO, Salesforce

Absolutely.

Jillian Patel
Equity Research Analyst, Goldman Sachs

Really appreciate it. To jump in here around AI, I think it's a great segue to talking a little bit about the AI day that Mark and you and the team hosted a few months back, and maybe talk to us a little bit about the customer conversations that you've been having since then. How are they thinking or framing that productivity unlock that they can reach?

Brian Millham
President and COO, Salesforce

Yeah.

Jillian Patel
Equity Research Analyst, Goldman Sachs

Maybe what are the hesitations or even technological challenges that they're facing?

Brian Millham
President and COO, Salesforce

Yeah, it's a great question. Every conversation we're having with customers these days seems to be anchored in AI. Everyone wants to take advantage of it. Two things that I think are top of mind for every CIO and CEO that we're talking to, number one: Is my data in a place where I can take advantage of it, and have I managed it appropriately from an architecture perspective over the many decades that we've gathered data? And typically, the answer is no.

Jillian Patel
Equity Research Analyst, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

So we're very excited about the fact that we have a product that can go help our customers bring that data together, harmonize it, and then leverage the AI on top of it, and get the great insights and the efficiencies and the growth that's required. The other piece is trust. So many of our customers are concerned about trust. A big part of their hesitation is: Hey, how do I know that when I leverage your AI, it can be trusted? And we've delivered a trust layer as part of our offerings out there. Many of you know, trust is our number one value as a company. It's how we started the company 24 years ago, now 25 years ago, I should say.

It is core to who we are and how we have to operate, but trust is top of mind for all of them. And so, we'll continue to educate them. Next week will be a great opportunity for us to talk about what we're doing around the trust of their data, ensuring that they can remain in compliance and that their data does not float outside their enterprise. So we're excited to showcase that next week.

Jillian Patel
Equity Research Analyst, Goldman Sachs

Yeah, no, that's, that's super interesting. And also thinking about the prior cycle of AI and thinking about Einstein versus the new GPT-

Brian Millham
President and COO, Salesforce

Yeah

Jillian Patel
Equity Research Analyst, Goldman Sachs

type of features that you're releasing. How, where do you think we are in that process and in that cycle of even fully embracing Einstein, and then how GPT is different than that?

Brian Millham
President and COO, Salesforce

Yeah. So, 10 years ago, we started making investments in AI, all predictive. We do 1 trillion transactions or predictive predictions a week for our customers today. Mark made fun of me on the earnings call, I think—talking about how we use it internally to guide us on forecasts in a given quarter. All the inputs around our pipelines, close rates, geographies, products that we're selling, size of deals, all inputs to our predictive Einstein product that gives insights to where we're gonna land in a particular quarter. That's been part of our offering, embedded in our technology on the sales and service side, marketing for over a decade. We're very proud of what we do there. It's very exciting to see who's more accurate, me or the Einstein guidance in any given quarter.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Who has won it so far?

Brian Millham
President and COO, Salesforce

It depends. As Mark would tell you, that I'm. He called me a sandbagger on the call, which is an indication of what he thinks about the Einstein capabilities. But that's always been part of who we are, and I think the next generation will be very interesting as we start to deliver generative AI. We see so many use cases out there in the customer base, where they're gonna get tremendous efficiencies from what they do. I'll give you an example of things that we're talking about internally, where when we use generative AI as an example, and customer adoption of our technology, unbelievable that we can see all the insights, all the signals around how our products are being used, and also leverage things like, Hey, are these...

Is your client showing up to events? And know that information about them. Give predictions around the health of a customer. In the future, could we also be generating a success plan, a proactive outbound to a customer that says: "You should take these 15 actions based on our information that we see and the way that you're using our technology"? Automated, you know, for our SMB customers, where we can't dedicate resources today, could we do that through a generative effort that drives better outcomes for our customers, higher success in the use of their technology, better efficiencies and growth, and also better results for us from a retention perspective? And so we're very excited about the use of generative.

We think internally we can use it, and many of our customers will be leveraging the technology to drive results for their customers.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

So on that, the internal use cases, how have you redeployed your own technology? What are the-

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Because you are the ultimate test case, right?

Brian Millham
President and COO, Salesforce

Well, we're deployed. As you know, we released our product on July nineteenth for Sales GPT and Service GPT, and so everyone wants to know the results. We're still early innings. It's not, we don't have a ton of, you know, deep knowledge yet, but we're seeing some efficiencies in the sales organization right now around email generation, on the service side, case resolution happening very quickly.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Hmm.

Brian Millham
President and COO, Salesforce

Even on our engineering side, seeing some efficiencies in the way that code is written. And so, we're already seeing the benefits of our own technology there, that's being leveraged inside Salesforce.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

And how about the marketing domain? Is there, is there any efficiency, productivity gains?

Brian Millham
President and COO, Salesforce

Of course, there will be. There will be many there. Just released. In fact, I don't know if it's released or coming out of Dreamforce. I have to go back and check, but it's either been just released or will come out next week.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm.

Brian Millham
President and COO, Salesforce

Content generation, as an example, more personalized email that's being launched.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

There's a lot of great use cases on the marketing side.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

So, Brian, which brings us to a more of a macro question, the effect on the labor market. I mean, have you thought about where this efficiency gain might actually work the other way and constrain the number of salespeople and marketing people-

Brian Millham
President and COO, Salesforce

Yeah, there-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

and service people?

Brian Millham
President and COO, Salesforce

There are a lot of people who are in this camp of: Hey, how many, how many heads do you take out of a business? I run our call center. I'm the gentleman in my organization, runs the call center for Salesforce, and I've, I've never seen a call center that was over capacity.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm.

Brian Millham
President and COO, Salesforce

In fact, almost every single one of them is under capacity.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

I actually think we can automate a lot of work. A lot of the generative can happen within the call center, and the people that you have end up adding more value, doing more, complex work.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

They're the work they're doing is more fulfilling for them, in my opinion. I'm not a big believer in the next year, you're gonna see completely autonomous call centers, and no one's in these call centers. I think humans will always be in the loop, particularly as it relates to our world of customer success, the empathy that we show to our customers, judgment that has to be used, and engagement with your customers. I think we have a long way to go before we see a completely autonomous call center in the world that we operate in today.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Got it.

Jillian Patel
Equity Research Analyst, Goldman Sachs

And touching on that really quickly, just pulling on that thread around productivity and seat-based and thinking through the go-to-market for these generative AI solutions, right? So, you know, they're not necessarily just out of the box. Maybe some will be, right? But I think that maybe it would be helpful if you walk us through the Data Cloud and the other components that will really unlock that productivity and the usability of that within Salesforce. And I also think you're using maybe some consumption element to the seat-based.

Brian Millham
President and COO, Salesforce

Yeah.

Jillian Patel
Equity Research Analyst, Goldman Sachs

How is that different from the other core products that you've been going to market with?

Brian Millham
President and COO, Salesforce

Yeah, the pricing models are gonna have to change and shift a little bit as we get into this generative world. We don't exactly know how the products are gonna be used, what are the use cases, what is it gonna demand gonna be for the generative products. Again, we're early innings here. We've designed a pricing model that is fixed base. You pay for a certain amount of licenses to get the technology, and then there'll be a consumption component of it as well. I think all of you know that cost of delivery of some of these technologies is very high, and you have to make sure that you're managing the cost side of the equation as well.

And so we wanna make sure as our customers derive tremendous value from it, and they're using a lot of your CPU power, that you're ensuring GPU power, you're ensuring that you're able to monetize that through the consumption models. We have many consumption products today. You know, as an example, our commerce product is consumption-based. MuleSoft is a great component of our C360 offering, is consumption-based. So we have models today that we can leverage and great learnings from those. So, we're early and we're learning.

We're taking a lot of input from our customers right now around these use cases, how they want to be leveraging the technology, and we wanna make sure we have agility and flexibility to meet their demands with the pricing structures going forward.

Jillian Patel
Equity Research Analyst, Goldman Sachs

Mm-hmm.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Right. Back to me. Thank you.

Jillian Patel
Equity Research Analyst, Goldman Sachs

Mm-hmm.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

How does that change the go-to-market, the shift towards consumption? Does it introduce some new complexity, or is it gonna be less friction?

Brian Millham
President and COO, Salesforce

I mean, it's sort of interesting. I've gotten the question a couple of times around: Hey, in a world where you're consumption-based, do you need to move and design different go-to markets? Our orientation around customer success has always been there.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

Adoption has always been a core part of how we orient to our customer engagement.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

Consumption's obviously a component of customer success.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah.

Brian Millham
President and COO, Salesforce

If you see the consumption going up and to the right, then you're driving value for your customers.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah.

Brian Millham
President and COO, Salesforce

We believe that these products are great add-ons to the existing footprint our customers have. I'm excited about the fact we can go sell these Einstein products, these AI-based products, GPT-based products, to our customers who use for sales and service and marketing, because it's in the flow of work.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

We believe that the engagement model, the insights, the actions that will be taken will happen in the sales environment, in the service environment, in the marketing environment, and so, and kind of where the customers wanna see the insights happening.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

And so we're very bullish on our strategy around multi-cloud.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

We've got many strategies around growth. Industry is obviously a big play for us.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

International is a big strategy for growth.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

But this multi-cloud opportunity with new innovation that's coming around Data Cloud, which is the fastest growing organic product that we put in the market. Yeah, ton of-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Tell me more about the Data Cloud. Everybody, even Marc is, is so buzzing about Data Cloud.

Brian Millham
President and COO, Salesforce

I think it really is a indicator of how important data has become for companies. You know, the insights that you get around your data, all the customer information that you have, it's sticky work, it's hard work, but if you get it right, then you get the insights around it. And Data Cloud is the product that we put in front of all of our AI technology today, allowing you to ingest all the data around your customers in a single data lake, and then use that to power all of your AI technologies.

And so, interesting that we're talking a lot about AI, but the product that we're seeing a lot of traction with and great growth and the organic, the fastest organic product that we've ever put in the market today is Data Cloud, and so a lot, a lot of momentum around that.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Just what you said, there seemed to be a little OpenAI, some Snowflake, some Databricks-

Brian Millham
President and COO, Salesforce

Yeah

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Some Salesforce. That's fascinating. I listened to Frank Slootman and Jensen Huang do a fireside chat a month ago or so at their conference, and they were talking about the value of structured data.

Brian Millham
President and COO, Salesforce

Yeah

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

In an AI world. And everybody's excited about generating poetry and images and videos, whatnot. I think the takeaway from that discussion was structured data is where really it's at, and-

Brian Millham
President and COO, Salesforce

Yeah

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

There's so much value in the structured data. How do you guys think about the—I've always been fascinated by my view, and you perhaps you'll agree, that you have probably the most valuable data on the planet when it comes to purchasing intentions.

Brian Millham
President and COO, Salesforce

Yeah

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

-commerce. It's real transactional data, not intent necessarily alone. So how do you think in AI world, the company can leverage this treasure trove in conjunction with all these new technologies that we're working with?

Brian Millham
President and COO, Salesforce

Well, we're about to find out. We agree with you. We think data is the currency of the enterprise today. We believe that data is hugely valuable. It sits in Salesforce today. We have the privilege of managing all that data for our customers, and they really look for us to help guide them in this AI world. Those things all combine to be a great value offer for our customers around Data Cloud and our AI offerings.

And so, you know, Slack's another example of a ton of information that's floating around companies today that we get to capture, that they wanna capture, our customers wanna capture and make sure they're getting the best insights about best next product to sell, or, you know, how do we go drive a better engagement from a success perspective in our call centers? How do we build better content from a generative perspective in your marketing campaigns? How are we more personalized in the way that we're, you know, showing up in front of a customer or a consumer with an email that drives better conversion rates? Those are all things that we're excited to drive, for our customers.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

That's great. That's great. The Customer 360 framework, how does that work with the Data Cloud? Is there a bearing for how... 'Cause this is the idea that the entire industry has been working towards, common view of the customer.

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

You guys have been on it for multiple years. Where do we stand with the Customer 360 strategy?

Brian Millham
President and COO, Salesforce

Well, it's the beautiful thing about the one. I think you heard us talk on the earnings call about more on core. We're bringing more of our technology on a single platform, our core platform, Marketing Cloud, Commerce on core, along with Sales Cloud, Service Cloud, our platform, to get that single source of truth around the customer. We wanna put the customer at the center of everything, all the data in the center of the C360.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

Data Cloud becomes a repository of all that data.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Got it.

Brian Millham
President and COO, Salesforce

It doesn't mean it's just the customer data that we store either. We're seeing more and more customers bring in data from outside Salesforce into Data Cloud-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm

Brian Millham
President and COO, Salesforce

-to, to have better insights around their customers, ingesting data from their financial systems, purchasing systems, whatever it is. We're seeing, extreme amounts of volumes of data coming into-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Right

Brian Millham
President and COO, Salesforce

... into Data Cloud, and it's all on the single platform. Single platform, so that data is readily available for any AI strategy that you have.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

That's fascinating. Can you tell us any example of a customer that's using the Data Cloud at scale? And,

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

You don't need to mention the name, but you can anonymize but-

Brian Millham
President and COO, Salesforce

Sure

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Give us the scale of how this thing is working.

Brian Millham
President and COO, Salesforce

Well, I'll, I'll give you one. Salesforce is using Data Cloud extensively internally. And I'll, I'll, I'll give you the context of it in the, in the lens of, our motion around customer success has always been super strong, as I mentioned earlier. And we think we should be capturing more and more data around the use of our, customers' use of our technology, how often they're showing up at our events, how many resources they have trained, what features and functions are they using or are they not using, to develop what we call a health score.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

There are thousands of pieces of data that we can know about our customers that give us better insights into driving adoption and retention from those customers. It's a, it's a model that we've been building actually for the last six months. And now getting the insights, we're gonna launch at Dreamforce next, next week. Health scores for every customer, that then they can action and get insights from, Salesforce automatically around ways that they should be driving better, better consumption of our technology, more adoption, and, and what strategies they should be employing to get better, better outcomes from the, the product usage. A product that we did not have a year ago, now adding value to our customers in everyday interaction and, and very exciting opportunity for us.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

That's great. Now, I wanna get to the street's favorite topic.

Brian Millham
President and COO, Salesforce

Mm-hmm.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Maybe not necessarily for someone who has been in go-to-market all their life-

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

-but, margins.

Brian Millham
President and COO, Salesforce

Yes.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Let's talk about margins, a little margins. You guys have done an amazing job. I mean, it's unthinkable how quickly you've gone from 20 points of margin to 32 points of margin.

Brian Millham
President and COO, Salesforce

Yeah. Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

So that must have resulted in a lot of change, as you've went down a path that you've not been. Tell us a little bit about what the transformation has been like, both positives and negatives, and we can talk after that, the path forward as well. But-

Brian Millham
President and COO, Salesforce

Yeah. But obviously, you go through a process of structural change. You know, the restructuring that we did in the first part of the year was difficult to go through. Not a fun process to live through. Necessary, we had to get it done. You know, the structural changes that we will have going forward, we sort of put those, that in the bucket of short term, the work that was done the last couple quarters. And then we have some long-term structural changes that we're making inside the organization. An impact to the organization, no doubt, impact to our culture, but I feel like we're in a very good place right now.

Very, the organization is very inspired by the fact that we have a vision around AI, really driving sort of the excitement in the company in new ways. And so Dreamforce, a culmination of that next week. But as we think about the structuring, we really look at it through four, now five lenses.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

which is, one, how do we make decisions around profitable growth and productivity in the organization? Very important that, that this sort of guides us is everything that we do is around profitable growth.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

Kash, you've been around us for a long time. We used to talk about growth. We're now talking about profitable growth, an important strategy for us. Our prioritization around our product offerings.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm.

Brian Millham
President and COO, Salesforce

You know, how do we make sure that we're prioritizing the products in the lens of profitable growth as well?

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

How do we continue to look at the long-term structural changes that we need to make in restructuring this organization? Short and long term are important, and we're making decisions, really core decisions, each and every day, with margins in mind.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

This is a, you know, decision making around the organization, around, trade-offs in a, in an envelope. Do we invest in this? Do we invest in that? Is an important part of how we wanna operate. You know, obviously, we want to have better relationships with all of our shareholders and importantly, stakeholders as well. How do we make sure that we're driving great relationships with, with all of you, out there, that you understand our strategies, where we're going, our focus on, top and bottom line growth as an organization? And then finally, we wanna mark at it in this last earnings call, we wanna be, seen as a, an AI pioneer.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

How do we continue to drive this business forward? We've got a lot of work to continue to do and leveraging automation around this business.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

I talked about some of the work we're doing in Data Cloud, but there's a lot of manual processes that we continue to automate-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

-in this business. I think there's pricing and packaging changes that we can make that can drive better efficiencies in the organization and better, growth-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Can you tell me a little bit more about the pricing and packaging changes?

Brian Millham
President and COO, Salesforce

Yeah. We have, we have always been a company that puts great product in the market and, and, lots of SKUs out there, and we dedicate sales resources to them, and we go sell to our customers. A great strategy that worked for us for many, many years. Fast forward to the last couple years, and we've got a lot of people showing up in front of our customers. And it can be a not the best experience for our customers, but also not the best experience for, for all of us internally, when we think about the efficiency of the organization. Why not bundle products together that address a particular buyer's need? If I'm selling to VP of sales, can I have just one seller show up instead of three or four sellers show up?

We can go bundle products together that are much more focused on buyers-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

versus the SKUs that we put in the market.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

We can also go to market by the same strategy around verticals.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

How do we put products together that support our vertical strategies as well? And so, you know, my view, big upside-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

-and we think about, going forward, is we package products together that are, you know, highly adjacent-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Mm-hmm.

Brian Millham
President and COO, Salesforce

that are needed by a particular buyer.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah.

Brian Millham
President and COO, Salesforce

And we just go sell them in a single bundle-

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah

Brian Millham
President and COO, Salesforce

in one single motion, not

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah

Brian Millham
President and COO, Salesforce

five different selling structures. So that's... Or selling motions. So that's, that's really where we wanna get to in, in a structure that we'll launch in the year.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

How does the sales force that's not used to that P times Q make the transitions? Do you think everybody makes it, or some people make it, and you have a lot-

Brian Millham
President and COO, Salesforce

Yeah, I mean, I think we're all aligned to what we need to go accomplish.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah.

Brian Millham
President and COO, Salesforce

I think we're, you know, product teams, the finance teams, the selling teams, everyone understands what we're trying to accomplish. Great outcomes for our customers, great outcomes for our investors, great outcomes for us. These things seem pretty easy to get aligned behind.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah.

Brian Millham
President and COO, Salesforce

Not too hard to go out and make those changes if you're solving for customers, investors, and ultimately, Salesforce. So, won't be too difficult for us to get through it.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Got it. And before we open up to a couple of questions from our investors, so also wanted to ask you about the boomerang. You have a new CRO—who is not a new CRO.

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

You have a chief of staff who's not a new chief-

Brian Millham
President and COO, Salesforce

Yeah

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

chief of staff. You have a CMO who's not a new CMO.

Brian Millham
President and COO, Salesforce

Yeah.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

... It's funny that when I, I didn't realize that Ariel had left Salesforce. He would come back, in his capacity as, as AWS executive, and I never felt that he left, but he left, but he's back.

Brian Millham
President and COO, Salesforce

Yes.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

So talk to us about how you have two important functions that are reporting to you. You've seen coming back of the old guard. How does that feel? How does it feel to the company and how are customers reacting, or partners reacting? What's the vibe like?

Brian Millham
President and COO, Salesforce

I think, I think the vibe is great. I'm excited to bring back people who understand who we are, understand our culture, want to be back at a company because they see the future is so bright. You know, Ariel's a good example of someone who went to AWS, big company, big scale, ran all of marketing for them, then left and went to Oracle, big company, big scale. He sees Salesforce as the future of where he wants to, you know, spend his time and his career. That's a great sign for all of us, a great sign for, you know, our existing employee, a great sign for our investors, that people wanna be part of this organization, that this is, this is a fast...

The margin piece of this has been hard for us to sort of get through. We're through it now, and now we're in this vision for where the future is gonna take us, and so we're very excited about the opportunity to bring back, you know, these boomerangs. It's an indication for all of us that it's the place to be.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

You said that we have a bright future. Just wanna expand. I'm not gonna use the expression DoubleClick and Segue, but I'm intrigued by that. So why do you feel the way you do about the future of the company?

Brian Millham
President and COO, Salesforce

Well, you know, 24 years in, I still have a lot of passion about being at this company. Core values of the business remain very strong and consistent over the many years. This vision for where we wanna go, the opportunity we have to make a huge impact for our customers, our vision for becoming the most successful enterprise software company in the world, it gets people inspired. People wanna be part of a winning team. And it's why we're seeing so many people come back to this organization right now.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

It's great. Fantastic. Any questions from you guys? We've got three minutes. Yes, there's one raised hand here at the center of the hall. Before the mic gets to you, you can just speak up, and I'll try to...

Speaker 4

So, uh,

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Yeah. Are you building your own elements or buying it off the shelves?

Brian Millham
President and COO, Salesforce

Good question.

Speaker 4

So there's a second part, too, sorry. Which is, so one is kind of how you're powering your own GenAI, right? Is it using some sort of proprietary LLM or one of the off-the-shelf ones? And then the second is, in a world where generative AI capability is a one API call away, how do you handicap the risk of your customers just using the data that they have in Salesforce or in any one of your clouds and generating their own, you know, applications on top of that? Because while you, to Kash's point, you do have a lot of data, ultimately, the customer owns their own data, and it's not that difficult for them to pass it to an API call, to OpenAI or somebody else.

Brian Millham
President and COO, Salesforce

Yeah.

Speaker 4

Right? So how will you capture that value versus the customer being able to capture it themselves?

Brian Millham
President and COO, Salesforce

I got the first question. I'll answer that, and then hopefully, I got the second one. We're building our own LLM models and have built them, actually. We have some that exist today, but we also believe in being open, where you can bring your own model to Salesforce. You can embed it and plug it into the work you're doing on the generative side. We believe there will be models that are specific to industries that will require us to be open. Certain market segments, some geographies are gonna want their own models, certain compliance-related issues. So we're gonna be an open framework for models going forward.

Your second question, I couldn't quite grasp, but I think it was something around: Hey, how do you get value if people are passing data to other LLMs? Is that, was that your question?

Speaker 4

Yeah, that's your role in the data.

Brian Millham
President and COO, Salesforce

Yeah.

Speaker 4

That data is now portable.

Brian Millham
President and COO, Salesforce

Yeah. Yeah, I think it's a, it's a good question. Again, I go back to, where's the action happening? You can get the insight, but how are you creating the value for your company? Is it through a better selling motion, a better success motion, a better marketing motion? We believe the values derive not only from the data, but also from, what you do with that data, the insights that you have. Do you get better outcomes for your business because your sellers are better, your service people are better, your marketing campaigns are more effective? That's where we think a lot of the value will be derived from these LLMs and the insights on generative AI.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

With that, on that note, thank you so much, Brian.

Brian Millham
President and COO, Salesforce

Thank you, all.

Kash Rangan
Managing Director, Equity Research, Goldman Sachs

Thank you, everybody.

Brian Millham
President and COO, Salesforce

I really appreciate it. Thank you.

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