Ladies and gentlemen, welcome to Investor Day at Dreamforce. Please join me in welcoming Senior Vice President of Investor Relations, John Cummings.
Wow. That was a very nice introduction. Thank you, Andrew Zilli. Good afternoon, everyone. I'm John Cummings. I'm the Senior Vice President, Investor Relations here at Salesforce. Welcome back to Dreamforce. For those of you, how many first-timers are here? Okay, cool. A few in the audience. Welcome. We typically go out before some of these events and look for some feedback, and some of the feedback was, "Hey, can you make this a little tighter, a little shorter?" One of the things you'll notice today is we're going to do just that. First of all, thank you. Thanks, everyone, for being here. We really appreciate it, appreciate your support. In the spirit of this idea of being a little shorter than we were, that was one of the pieces of feedback.
We'll kick off here momentarily with Mark Hawkins and David Havlek to talk about our financial review, give you an update of where we were from last year in terms of our growth trajectory. We'll have Bret Taylor come and join us for a conversation about product strategy, and you can ask some of the questions you may be burning after the keynote from yesterday from Mark and company. Greg Schott will be here, the CEO and General Manager of MuleSoft. We'll wrap it up with a conversation with our co-CEOs, first with Mark and then with Keith. The other feedback we got was, "Please no neckties." You'll see that from the team. For those of you who gave that, we delivered.
In events like this, we may make forward-looking statements, these forward-looking statements are subject to risks, uncertainties, and assumptions, all those assumptions can be found on our investor relations website, www.salesforce.com/investor. With that, let me bring up Mark Hawkins, our President and CFO, to kick things off for us. Thanks, Mark.
Hi, John. All right. Thank you. Thanks, guys. Welcome. We're so happy that you spent time with us here at Dreamforce. We hope it's a fantastic week. I hope you've seen the kickoff with Mark. We have a lot in store this week. We have a good story today to share with you, a lot of good information. This is my fifth Dreamforce, and it's just an honor to be here and to share this information with you. Today, I want to talk about durable growth powered by a growing competitive advantage. What I want to do is walk through with you not only a good market that we're in, it's a great market that we're in, and we'll talk about that. That's helping with our durable growth.
I want to talk to you about a growing competitive advantage and all the facts that are coming together there that are really helping us, as a company, propel durable growth into the future. After that, I'll have David speak a little bit about what's been changing and how we measure and manage the company. That'll be a great update, and I think will be helpful to you to understand, including all the accounting changes. Then, we'll wrap up with some Q&A. That's the plan. Durable growth powered by competitive advantages is definitely what I want to talk about. Last we spoke, last year at Dreamforce, we put up this $20 billion-$22 billion target for FY 2022. Well, the main thing I want you to know is we're in execution mode, very much in execution mode right now.
Obviously, we raised the number to include, we bought a great company, MuleSoft. You're going to hear from Greg Schott today. We'll have a great dialogue on that. I know that's important. I've talked to a lot of you, and you'd like to learn more. Clearly, the position is even stronger than last year. We have a lot of confidence in our ability to execute on that. If you look at that chart, you can see clearly we're in the mode of executing in the current year. Just in a few weeks, you guys, I'll be giving preliminary guidance for FY 2020. We're going to take one extra big step closer to that target. I want you to walk away knowing we have confidence in this, and we're in execution mode on that. That's the beginning of it.
I think this gives you a great sense of execution. I'm going to spend a couple of minutes on this, and then we'll go deeper. Right here, we've been, for years, balancing durable growth and also the expansion of operating margins. Five Dreamforces ago, I told you we'd be expanding our non-GAAP operating margins. Five years in a row, we're expanding non-GAAP operating margins. We've taken DR write-downs. We've taken transaction costs. We've taken it all on, and we're still pushing ahead. We're at a size and scale where we can do that. In November, when I speak about non-GAAP organic operating margins, or excuse me, in February, in the normal protocol time, I will again, you should expect a sixth year of expanded operating margins on an organic basis. We know that it's durable growth and operating margin and cash flow expansion.
You can see the cash flow side, too, is very near and dear to me, and I know it is to you as well. The other thing I want you to take away from in this, is if you look at these last several years, we've been in execution mode on our long-range plan. It's one of the first things that Marc Benioff talked to me about, the board talked to me about, we need to have a long-range plan, which I've been the executive sponsor. We've been executing that. Keith and I now co-sponsor that together. We've been working on that together for years with Mark's blessing and the whole leadership team. We're strongly supported by David Havlek and his team, do a great job of helping us with the processes as we go through these decisions.
We're executing a plan, and I want you to think about that on a go-forward basis as well, and we'll have David talk about that a little bit at the end. We're very much in execution mode at this point. The thing that, of course, there's a couple goals here in the current year we talked about. We're on it. We're on track, and you know that, and we'll continue to execute that. I want to talk now about the market opportunity and then the growing competitive advantage and really unpack this for you so you can see very tangibly what's happening and why it is that we've been taking market share consistently for 20 years in a row. Okay? First of all, the market opportunity, there's no question that we're in the right market at the right time.
When you look at how this market of enterprise software has unfolded over the course of a decade, CRM is now the fastest-growing market segment. It's the biggest, most strategic, and I think in terms of the priority for the C-suite, people care about customer experience. They're starting their digital transformation with the customer. This is propelling CRM to be the best market in enterprise software. We know we're at the right place at the right time. We're in the pole position as number one with a growing competitive advantage, which I'll show you in detail. That's powerful. What's interesting is to watch, over the years, really remarkable companies. There's a list of remarkable companies that are what I call generational companies, with generational opportunities and generational chance to grow. These are those. They found a place in enterprise software where they could really make a mark.
By the way, right now, we realize we are one of those generational companies, for sure, in the biggest market, growing rapidly, and we're capitalizing on that. We are truly in the pole position. The other thing I said about markets that are helping us in durable growth, this will help us for years to come, has to do with the digital transformation. One of the things I encourage you to do, unvetted by anybody, talk to customers on a real action basis about what are they doing for digital transformation. I'm certain they will tell you they're starting with the customer, they're starting in the front office, and the very first phone call to make is Salesforce. This chart explains it by IDC.
They talk about the 10 areas of need that CIOs have, I would contend CEOs have, and that is around things they need to properly digitally transform. That's great, but what's more interesting about that is with MuleSoft, we now have seven in the top 10. We are the first partner of choice with digital transformation. In addition to the right market at the right time, this is also propelling us from a durable growth standpoint. I want to make sure you see that from a market standpoint. That's what we see. The second part of the story I want to really spend some time on, which is this growing competitive advantage. Again, for 20 years, uninterrupted, we've been taking market share, and I think you can expect that.
I'll show you some math where you can project what's going to happen in the next year update on market share as well. In those 20 years, what's interesting was we start talking about competitive advantage. I want to start with our values. We're a differentiated company. We are a different company, you guys. You just have to come to Dreamforce to see that. I know you know that. These values have literally guided us and guided our thinking, our prioritization, and how we operate. I want you to look at these values as I show you, step by step, a long list of competitive advantages that are growing, that are really fueling our durable growth. I just want to plant that seed because this has been a big deal for us.
There's nothing that is more of a big deal for us than the ultimate competitive advantage, which is the customer. I've spent my whole career in Silicon Valley and in technology, and I've seen many a companies that can get enamored with different things and not keep the customer in the center. We are obsessive about the customer. We are maniacal about the customer in every way. They help guide 1,000 decisions a day for us at every level of our company, in every part of our company around the world. We agree with Forrester's comment here, that the only sustainable advantage is somebody who's deeply engaged and understanding with the customer. We are. They are in the center of everything for us.
I hope you'll, in any interaction that you see at Dreamforce or beyond, or any partner you talk about with, or customer, I hope you'll get that feedback. That's not where we stop. That's the beginning of it. Our technological advantage, you know the history of our company. We changed the world in software forever with our technology leadership, and we've never looked back, ever. Organically, we've done that. Inorganically, we've done that. The combination of that, we've done that. We've done that driven by feedback from our customer, including the MuleSoft story is quite a great example of Bret Taylor going around the world and getting prioritized feedback on what's most important, coming back, finding out integration's number one, and we bought MuleSoft. We are driven with technology to do it purposefully for our customer.
That advantage, we've been leading, and for those of you that saw some of the Einstein materials we're doing, nobody's doing that in CRM like we are, and we continue to propel ahead. Also, if you take an obsessive focus on the customer need and prioritize that at the top, and you're an innovator that's changed the world in technology, and you apply those two together, guess what? You create purposeful products that our customers are asking for. This is one of my favorite charts because this tells what's really happening in the world today. This is the buildup. This is the coverage. There is nobody in the CRM market, nowhere in the world, that has the coverage that we have today. Not someday, not an ambition, today. That is powerful because the CEOs that I talk to are not looking for a point solution.
They're not looking for a one-trick pony. In today's world, when they're trying to get a 360-degree view of the customer, and you're going to have a chance to talk to a ton of them, they absolutely want full coverage. That gets amplified with AI, and I know you get that. We've been guided by the customer. We have built out our coverage by the customer, guidance, and that is really helping us. It's not just the breadth that we're doing. I also want to make sure you understand the depth of what we're doing. You can see a number of the different functionalities and features that we're providing were literally direct feedback from the customer. You should build this, or you should buy this. We have acted on that.
Also, if you go deeper, you'll notice that Einstein's showing up everywhere, where all of our clouds are becoming more intelligent. When you saw Qingqing's demo on main stage, you begin to really easily understand when Einstein talks to Siri and Alexa, and you begin to see what's really going on. It's not about voice recognition, but about actions and commands and tasks that are happening in a computerized way. It's quite powerful. Our product advantage is unmatched in our market space. We know that that's helping to drive durable growth, for sure. The other thing I always say is if you got focus on customer, you've got technology that you're focusing on as well, and great product coverage, then you ought to be able to take market share. You ought to be able to get feedback, objective, candid, factual feedback on how we're doing.
This was a third-party update. What I like about this, I'll just point out a couple points. One is we're either number one or we're in hot pursuit of being number one in every one of our core markets, first. Secondly, the thing I enjoy the most is look at the market growth rates. They're the most attractive in all of enterprise software, and then look at our growth rates. What's going to happen on this chart? Our market share continues to go up. It won't be just 20 years. I think that's pretty straightforward. If we're getting market share, is the market attractive enough? Well, because we've been building this out, we've come a long ways from 2006, when we had a $700 million total addressable market. We're at $140 billion and a fast-growing market.
We're in the pole position, you see the advantages that we're having. This is what's happening in our market space. This is what's giving us the durable growth for now and the confidence to go forward, not only to our long-term target, but with ambitions beyond. Let me also talk to you about the cloud advantage. Actually, leadership. It's one thing to have coverage, breadth, and depth, but when you get into the core clouds, the quantum that we have on these four big engines, they're all firing. They're all firing strongly. And even though we manage a total portfolio, each of these would be some of the biggest cloud companies in the world if they were independent.
What I like the most about this, besides the fact that they're all growing strongly to the left, if you look to the right, you look at our four big engines are getting more and more balanced. We have four big balanced engines that are driving our durable growth going forward. This is encouraging. The thing I want to also call out to you in terms of not only the cloud leadership example and advantage, we also have the ability to plant seeds. Plant seeds of future durable growth, both organically and inorganically, and consistently and persistently succeed in that. I want to show you some details you've never seen before. Just point out a couple, just for food for thought for you.
CPQ, not only to the left is core hitting on all cylinders, but you look to the right on the add-on, CPQ growing 100% at over $100 million business. We like that. You look at Field Service, greater than $80 million, growing 800%. You look at Heroku, you look at analytics, growing 80%. You look at Pardot. Let me stop at Pardot for a moment. Whether it's organic or inorganic, great business, doing really, really well, and plus, it's part of an entire customer success platform. When the customer doesn't want one cloud or one capability, they want the 360-degree view. It's the strength of the capabilities and the completeness of the capabilities that is really driving the advantage.
This is another advantage, in part, because we have a great M&A team and in part because we have a great product development team, and you'll be talking to Bret later today. This is another thing that's propelling us with this durable growth. This is one of the most important slides to me in the entire presentation. When you build out like we have, and you build out the capabilities that we have, and you know that the customer is deeply going to 360-degree view, and the digital transformation, this literally modernizing of their digital capabilities with the customer is going rapidly. Then you throw AI in there to amplify the value. Look what's happening. Multi-cloud is a very, very unique capability and advantage that we have, and it's really an advantage to pay attention to. You've never seen this data before.
This is 100% of all the paying customers we have. All 150,000-plus paying customers, and 38% of them are multi-cloud, which tells me a very encouraging bit of news, which means that 62% are not. The reason that's particularly encouraging is when you go to multi-cloud, you spend 10 times as much. Guess where the customer is going with 360-degree view? They're going to multi-cloud. You talk to them. We see it. We get the phone calls. We get the dialogue. I talk to the CEOs. It's happening. This will power durable growth for years to come, and others do not have this. I think point solutions in today's environment are very, very vulnerable, especially with the advent of the 360 view, digital transformation, and AI. The integration advantage is also helping us. MuleSoft elevated the entire discussion. You're going to hear from Greg directly.
We know, and we hear from people, that it literally enhances the clock speed in terms of the ability to transform digitally. It's not just our data. We already have the most complete CRM data in the world compared to anybody, but we can integrate everybody else's data. I think people really began to understand why MuleSoft was so strategic to us, and the reception's been so good. We have a customer success advantage. I want to unpack this one for you a little bit to really think about how I see the world and one of the most valuable assets that we have that we don't always talk about. At the top, that when you make a customer successful in that advantage, you get to leverage your entire install base. That is an asset that is really, really powerful, let me explain.
At the top of the chart, when you see the red, you think about landing, think about this as incremental new business, think about what's happening here is despite our scale, the percent of our business that is new logo is not slowing down, which is really quite a feat, if you will. We love to see that as the fourth biggest software company in the world, we're picking up all that new business. That's great. Why is it? Because we have the best offering in the marketplace. You can see it in the data. My story about customer success is when you look at the rest of the business that we sell into our install base. Take it down to the lower chart about expanding. Half of the business that we sell under the installed base are new products.
When they've asked us to build out the offering, they buy it. That's a very good thing. We get to sell into our installed base. That will fuel durable growth for years to come. The other side of it is they want more seats on what they have. You don't do that unless you've been successful with what you have. When you're successful, you get to leverage your installed base. We are very successful. This is an advantage that's helping us with durable growth in the biggest CRM installed base in the world. That brings it back to facts. Then I put this in front of you, I updated that other chart that we've shown before, I know a couple of you really like to have that update, I try to give that to you.
Here, every time I'm in front of you, I show this chart. There are three very important points on this chart. This is all about the facts from the third parties. The first is the persistent trend. I've showed you every year, this is going up into the right, and in fact, it is going up into the right. You know right now, with the guidance that we have for revenue growth this year, it's growing faster than the market. You already know where that chart's going to be next year when it's updated. You can already see it. We're extending that persistent trend that we have for 20 years uninterrupted, and what's driving it is competitive advantage. We can see it.
The second part is you see the widening and the down into the right for everybody else, that is evidence, fact evidence, that our competitive advantage is growing and growing. This is helping us. Keep in mind, in the hottest market in enterprise software. We see that, we feel that. The third point that's probably as important as anything is we have a lot of room to grow in a $140 billion TAM market. That will help us with durable growth. We're really pleased about that. Another update on a chart that I know that you like to have us speak to. This one's quite encouraging to me. It's about our strategic value continues to grow with big customers. This talks about the number of customers that we have that are greater than $1 million per year in business.
As you can see, that's growing across the way. What I really like are two points here. One is I like the quantum of growth that we're getting, and the second thing I like is the fact that as we go up to the bigger and bigger accounts, that's growing even more rapidly. Our strategic relationships are really powerful. We're building that more and more so, that will help us in the future. If I look at a view from the top, I like to show you this to you periodically, this is our top 10 customer list. What's it take to be in the top 10 with Salesforce? To the left, you see in Q2 of 2015, to the right, you see Q2 of 2019.
The two things that you notice on this one, when we had this growing set of relationships, is you've had to double the amount of business that you're doing with us to stay in the top 10. That's a good thing from us, from a durable growth opportunity standpoint. The second thing, if you notice to the far right, is we're getting more and more diverse in our industries that we're covering, that is really powerful. Our vertical initiatives are working, our vertical investments are working, that is going to really propel durable growth for the years to come as well. Let's look at the traction in the verticals. This, again, is information you've never seen before. If you look at this, speaking the language of the customer really matters. It's even more than that.
It's speaking the language and then actually delivering product that is customized. For example, in financial services, when we've done 7x, we came out with Wealth Cloud. We came out with Retail Banking Cloud. We now have unified Financial Services Cloud. We're just getting started in these product roadmaps. Watch what happens for durable growth as we drive deeper and deeper in here. You can see a 3x improvement, and lots of room to run. This will help us with durable growth for the future. We know the digital transformation need is global, and we know the language of the customer is universal. There's no doubt about that. To the left, you can see our geographic mix, very clear. We have a lot of room to run internationally. We know that.
The other thing that's clear, when you go to the right, at the top, you can see we're disproportionately hiring internationally to tackle that. We're also making other kinds of investments internationally. What you also find, the reason it's hard to change the ratio on the left, is because we're hitting on all cylinders in all geographies on the right in terms of revenue growth. We have a lot of room to run internationally. This will help us for years and years to come in delivering durable growth. With a team all over the world that is obsessed with the customer, a culture that is obsessed with the customer and making them successful. Speaking of the culture, I just want to talk about this as a competitive advantage, and I want to just break this down as a CFO.
There are two things. We're proud of a lot of things, very humbly thankful for things that are on these charts, awards and that type of thing. There's two things that really matter to us. Being the kind of company that a customer wants to trust for the long term and be a great partner, and we are. Just take a look at the market share data. Being the kind of company with a culture where the best people in the world want to work, and they stay there, and we are. That really matters for the long play. As we know in the war for talent and the war to have a culture that really stays on focus for the long play, this is critical. We're driving that advantage, and it's allowing us to build an amazing team.
When you look at an amazing team, look at an unmatched group of people. Check this with all of your analysis. Anybody else have 33,000 people, 100% dedicated on CRM? It's us. There's nobody else that's close to that level of quantum. We're applying it, and we're racing to a $140 billion opportunity, and it's driving, and it's helping us with durable growth. We couldn't get this talented professionals without being the right kind of company and the right kind of culture. We were humbled just recently to get the number one best place to work in the world by Fortune magazine. We are on it. This culture is part of our advantage. We're driving it as part of a much bigger mosaic picture of what's going on. If you like this scale, I really want to speak to this as the CFO of Trailblazers.
I want to make sure the finance community really understands what's happening here. What a Trailblazer is, I'm simplifying two things. It's a customer evangelist or an ecosystem evangelist. What we had done, if those that saw Mark's update at Dreamforce here, know we have over 1 million Trailblazers that are growing rapidly. What do they do? These are people that work for our customers in their account, and their full-time job is to make the investment in CRM Salesforce successful. That is their full-time job. Our full-time job is to make them successful and make them heroes, and help them have credentials where they're marketable and they're building their careers, and that is exactly what's happening. They're using Trailhead, which is an enablement capability, to scale up themselves and skill them. Think about that.
They're learning skills to make Salesforce more productive, and they're helping their company. That's powerful. Now I want you to think about having over 1 million people like that are growing rapidly, and contrast that to other environments where you don't have that capability in the customer account. That's what's happening. I'll give you an example that's near and dear to me. Years gone by, I was with Autodesk, and I actually was involved in implementing Salesforce from the glimmer in somebody's eye to an S&P 500 company having that. They pulled out this example just as one of many. There's a guy named Damian O'Ferrall. He was trying to help them actually convert to Lightning adoption. What did he do?
He got on and had them use Trailhead, this scalable, gamified online system where you can get badges and that type of thing, and got the whole team to adopt Lightning and do it quickly. Imagine that happening 1 million times. They get more value from their investment. That's what's happening. That is a very, very unique advantage. That is powering us through. By the way, I just want you to know that Salesforce uses the same capability to scale. We enable our sales team with it. We enable our cross-functional teams with it. This is a powerful tool, and I just want you to fully grasp that. If you look at the ecosystem advantage, this is also extending our value and our reach.
The thing I like about this is, if you look to the left, our partners, some of the best SIs in the world, there's a reason they're going there. They see the same market share data that we do publicly. They see who's growing and who's not growing. They see who's winning and who's not winning, and they see where the market in the future is going, and they're investing in partner certifications. Notice to the right of that, they have 150% increase in partner badges. There you have it. The ecosystem with Trailhead, the Trailblazers there are literally learning how to do what? To solve and implement successfully for the customer, Salesforce. That is really unique, and it's scalable, infinitely scalable. If you go to the right, you can see independent software vendors that we work with that help us in our reach.
If you look at the bottom, we have the best, biggest B2B business AppExchange in the world. That is helping our advantage. That is extending our ability for durable growth. The next thing I wanted to talk about is our partnership enhances our value proposition and further enhances our ability to compete, this is extending our competitive advantage. These are a very short list of people. When you go to the expo and you see Apple next to AWS, I just ask you, how many companies do you see that happening? Look at what they're delivering, what their ship dates are, and really understand what's happening with these partnerships. These are going to help us along the way. Obviously, Apple, the best mobile experience that they can provide and how we can partner there.
You look down at Google, we now have the ability to sell Google Analytics in the same sales motion as Marketing Cloud. That's a really powerful connection, you can go through each and every one of them, Bret Taylor will be here to talk more. That's enhancing our ability and our competitive advantage. What you begin to see is an addition to a great market, an addition to that helping us and being a tailwind, an addition to being in the right place at the right time as a generational company. You can see that. You can see the digital transformation helping us and being in the pole position and absolutely the first partner of choice that people are calling. You can see this growing set of lists of competitive advantages.
You can pick your favorite around the circle, these are some of them. That is what's causing us to take share for 20 years uninterrupted. That is what's given us confidence to do something that only generational companies do, which is to make history again. We are the fastest to $5 billion. We told you, we declared. I remember being on the stage when we said we had ambitions for $10 billion, we're there. We talked about the $21 billion-$23 billion. We're in execution mode on this, when we do, we're confident we will yet do it again, we'll be the fastest to what? $20 billion to make history again. On that note, I want to thank you, I'm going to turn that right over to David Havlek. Thanks so much.
Great. Thanks so much, Mark. Great job. I am very, very excited to be here with all of you today. This is my 14th Dreamforce really is all about connections. I spent yesterday meeting with customers and talking with them about the opportunities in the fourth industrial revolution, I was able to connect with many of you last night, I'm very happy to be with you here today. Dreamforce is also about amazing experiences, I wanted to share an experience I had this morning. Actually, I know all of you are having experiences as well. I was walking in from the hotel, I was walking through the campground, a bear jumped out from behind a tree, the bear gave me a huge hug. For the first time in a decade, it wasn't John DiFucci.
It was a great, amazing experience for me. Dreamforce is an amazing time. By the way, John gave me permission to tell that joke, so I want to thank John for that. Are you guys ready to have some fun with numbers? Are you guys ready to have some fun with numbers?
Yeah.
Okay, great. All right. I'm going to spend the next 20 minutes or so Talk a little bit about how to measure our success on that journey that Mark talked about, a journey to $21 billion. Then we'll talk a little bit about how we're managing the business and how you should think about it. I'm going to get started with some incredible changes in our accounting world. This hasn't just been a huge year of change in innovation on the side of our product teams, who've been working very hard, and our accounting teams have been working very hard as well to implement all of these new accounting standards, and all of you are also trying to internalize those things. I want to talk about the ASC 606 revenue change, I want to talk about the ASC 340-40 capitalized commission change and also ASU 2016-01.
Not the changes themselves, but how those changes are impacting the metrics that all of you are using to measure and manage your business. Let's jump into it on the ASC 606 side of things. I'm going to start with this slide. This slide shows the deferred revenue number, or this is a concept slide. It shows the deferred revenue number and the unearned revenue number. We've introduced the unearned revenue metric this year on our balance sheet. It really is the same thing as deferred revenue. It's our booked and billed business, but it's different in one very small way, and that is the ASC 606 accounting standard requires us to recognize revenue in a slightly different way, and in some instances, we actually pull revenue forward.
Essentially, if you look at on the right-hand side, we've pulled a bit of revenue forward into prior years, so that revenue is a bit higher, the offset is a slight reduction in what was the deferred revenue number, that essentially is now the unearned revenue number, okay? This idea that it's our booked and billed business hasn't changed, okay? From a materiality perspective, this slide shows our FY 2018 numbers. We're showing you both the deferred number and the unearned number, and what you should note is there's really not a material change. On a $7 billion number in our fourth quarter, we're talking about a delta of about $100 million. Again, that $100 million was recognized earlier, so the UR number's a bit lower, our prior year's revenue was a bit higher.
We exited our second quarter of 2019 with approximately $5.9 billion of business that is booked and billed and on the balance sheet, and that's up 24%, a number that's consistent with the durable growth rates that Mark's already talked about. Many of you look at this number on a quarterly basis, and sometimes a picture is worth a thousand words. This chart shows our sequential change in first quarter deferred revenue, or now unearned revenue, and the unearned revenue numbers are obviously in the dark blue boxes. You see a very, very pervasive pattern, a deepening of the seasonality of this metric. Importantly, this is not a change in the seasonality of our business. This is a change in the seasonality of the metric, okay? The reason for that is we have the compounding effect of our business.
Our invoicing's becoming a little bit more seasonal as we co-term deals in Q4. It's really this rising water level of amortization, which is much more linear, and that rising water level's washing out that incremental invoicing in the first quarter, and you can see that washout is becoming more deep over time. If you look at the same numbers for our second quarter, you see a very, very similar trend. You look at for the third quarter, again, you see a very, very similar trend. The first three quarters of the year, we are essentially amortizing more than we're incrementally invoicing, and that's why you see this pattern continue to deepen. Then, of course, all of you expect that number to jump up in the fourth quarter. Okay?
As you're thinking about the unearned revenue number, it's important to understand that the seasonal pattern in the metric will continue to change, and it does not mean that the seasonality of our underlying business has changed. Okay? That's very, very important. Lastly, I just want to remind you that we will only be guiding this number for one more quarter, and there's a very good reason for that, and that is because we're giving you some incremental disclosure on what's called the remaining performance obligation. I want to talk a little bit about that. In a 605 world, we gave you a DR number, which was on the balance sheet, and we gave you a backlog number, which was the business that was booked, contracted, but not yet invoiced. You guys all looked at that number.
The remaining performance obligation essentially continues to be the sum of that. Essentially all of the business that we have contracted. One of the questions we often got under 605 world was how much of that unbilled piece is going to become revenue in the next 12 months? Well, with an RPO measure, you're now going to get that because we now are providing the current RPO, the current remaining performance obligation, and that's the amount of business that's both billed and unbilled that will become revenue in the next 12 months. This is a really important incremental insight for you as you're looking at our business. If you look at over on the right-hand side of this slide, $21 billion of total RPO as we exited our second quarter. Approximately $10 billion will become revenue in the next 12 months. That gives us this predictability.
You can see we've also provided you a couple new numbers on there, the Q3 and Q4 numbers. We hadn't previously disclosed those. This slide deck will be available for you if you want to add those to your models. The $21 billion number was actually up 36% year-over-year. This is important. The RPO number was up 36% year-over-year, our business wasn't up 36% year-over-year, right? The metric was up. I want to talk a little bit about how the metric is recorded and how the accounting works a little bit. To do that, I want to give you a hypothetical example of a customer. You and I are going to walk through and do the accounting. We're going to be accountants for a day. We're going to be CPAs for a day. This is for you, Prasad.
We're going to be accountants for a day. This is a hypothetical customer, $60 million, three-year customer, $20 million a year. We bill them annually, and we did this deal at the end of the first half of the first year here. I'm showing you halves and not quarters. All of you know how this works. We shoot out an invoice for $20 million, right? Then we begin the process of amortizing off that revenue. The UR number goes from $20 million to $10 million, as we've amortized off that half, and we re-invoice, it goes $20 million, $10 million, $20 million, $10 million across the page. Does that make sense? You guys are all ready to do accounting at Salesforce? The RPO measure is the total value of the transaction.
In this case, we had a $60 million transaction, we have $60 million, and we waterfall that off $10 million each half until it amortizes, obviously, down to zero. You notice a little bit of lumpiness in these measures. This is very important. If you look at the current RPO, remember the piece of business that is both billed and unbilled, you see something very different. You see this nice, consistent, predictable pattern, $20 million each half until you get to the end of the contract, of course, when it waterfalls off. The current RPO measure is a bit more predictable, a bit more consistent, and doesn't reflect some of that lumpiness. Obviously, you notice the revenue number is also very consistent and predictable.
The top two lines there are a little bit more lumpy, the bottom line's a little bit more steady. Stick with me, because now we're going to renew this contract. Just like if we were re-signing Tom Brady, we wouldn't wait until the last day of his contract, we'd try to sign him a little bit early. We tend to renew customers a bit early. We tend to renew them a little bit before. Let's say this customer was going to renew in the first half of the third year. The customer said, "We love Salesforce," all that success Mark talked about, $80 million four-year renewal. Again, $20 million a year, no change, a little bit longer, we're going to do this deal also at the end of Q2.
We would drop another invoice just as we would have had we not done the renewal. There's no change to UR. In fact, you notice no change to any of the numbers on that renewal except for one. You notice the RPO measure jumps from $20 million to $80 million. It's a $60 million change, and there is no new business here. Okay? This is very important to understand. This is simply a renewal. No change in any of the other measures, but the RPO number changes. Let's say the renewal period changes. Say the renewal happened in the second half. This is where it gets really interesting. If this renewal happens in the second half of the year, notice now what happens to all the measures.
The UR measure, if you were doing a year-over-year compare, had we not done the renewal, you would've had a flat $10 million versus $10 million, you're going to see that number double to $20 million. The RPO number, which would have been down by $20 million had you done a year-over-year compare, is now up by $50 million. It's a $70 million difference in RPO, and there's no new business. The current RPO measure also changed. I said it's a more steady measure, but when you get to the end of the waterfall, it can also change. Notice now because we're renewing it, the current RPO would have declined by $10 million, and now it stays flat at $20 million. Here's the best part. The revenue didn't change at all. No new business, no new revenue.
All of the measures that you're using to evaluate Salesforce's progress are subject to these kinds of uncertainties, it's very important that you understand that. We've talked for a long time about the timing and duration, et cetera, of renewals can have an impact. Understanding the components of growth is something I know is very much on your mind. There's four things that are going to become revenue in the next 12 months. You might write this down because there's four things, and they're all the things below that dotted line. Number 1, what's booked and billed? That's what's on the balance sheet. It used to be the DR, now it's the UR. The 2 is what's booked and unbilled, but going to be revenue in the next 12 months. You didn't use to know that, did you?
You used to get a backlog number, you didn't really know that. Now with the CRPO, you kind of do. Now you know that second piece. The third piece is renewals. Renewal timing is hard to predict. It has an impact on the measures. There's also that little stub period of renewals. As you get to the end of a contract, if you're six months in, there's six months till the end of a contract, there's six months that's still left that's sort of not recorded anywhere because we're hoping to get that renewal done. If we only have six months on contract, we'll only have six months in our numbers. We talked about how timing, duration, and terms impacts some of these key measures. New business is the same thing. New business is subject to those same sort of challenges.
The timing, duration, and terms can impact the key measures that you're following. The other thing is, remember, and we've said this very consistently, we would rather book a good long-term economic deal in the first week of the next quarter than book a bad deal in the last week of this quarter to make one of these measures. Remember, we're recognizing revenue on a daily basis. We'd rather give up two or three days or five days or 30 days or 90 days of bad revenue to get 10 years of really good revenue. I think it's really important to understand that that is a very key philosophy for how we think about the business. We've talked about how we internally think about it, and it's really this simple picture on the right-hand side of this slide.
It's a bit of a Fisher-Price way to think about it, but it's really how we actually do our revenue forecasting. Our revenue forecasting leader's actually in the back of the room here, it really starts out with what is our ARR? What is our recurring revenue? How much are we going to lose from that recurring revenue pool? How much are we going to add to that revenue pool for ongoing revenue? What does that sort of ongoing ARR look like? I know he's smiling because he's like, "It's a little more complicated than that, David." At some level, that's kind of how we think about it and probably a better way for all of you to think about it as well. I just want to make one more comment on 606. I'm going to change gears a little bit.
That is there are certain times in 606 where we actually, because of the standard, recognize revenue ahead of invoicing. Our traditional business, we invoice business, record UR, amortize it off. There are certain instances where we actually record revenue ahead of invoicing, and this is an example. This is a ramp transaction for a fixed number of users. We have these at times at Salesforce. We invoice the customer. We call this a one, two, three deal, 100, 200, 300, but we're recognizing revenue evenly at 200 per year because that's what the standard has us do. In the first year, we're going to recognize $200 of revenue, but only invoice $100. If we invoice $100 with $100 of UR, we don't have enough UR to fully amortize.
Once we get to the end of our UR amortization, we start to record a contract asset, and you see that here. At the end of the first year, the contract asset grows to $100. We had $100 of UR, $100 of contract asset, and that's how we created that $200 of revenue. It's important for you to understand this. The contract asset also will net against the UR when that second invoice drops. When that second invoice drops at $200, we net the $100 contract asset against it. We have a net $100 UR, and the process begins again, and you can see that here. You guys will probably want to study these slides because this is very important to understand as you're evaluating our cash flow. This doesn't change our cash flow. We still are invoicing one, two, three.
As you're evaluating our cash flow, it's important to understand this. For the MuleSoft license business, this is even more pervasive. This is an example of a similar $600 deal that's $300 license and $300 maintenance. The $300 license, we recognize upfront, and then we recognize the rest ratably over time. In this deal, we are actually taking $400 of revenue in the first year. Against the $200 invoice, and that's why we put a $200 contract asset in the first year. It's the same basic concept. It's just very important for you to understand this as you're evaluating our cash flow. The contract asset is part of our other assets on our balance sheet. You will start to see it on our cash flow statement as well. As you guys are evaluating our cash flow, it's important to understand that.
Again, there will be a quiz on this slide later in the presentation. Everyone's a little nervous, like, "Really? Is there really going to be a quiz?" Just quickly, I'm not going to spend any time on this. The commission standard, ASC 340-40, essentially means we're amortizing all of our commissions now the same. It used to be we amortized our commissions over the term of the deal. Now we're amortizing all of our commissions the same, four years on new business, two years on renewal, and we're amortizing a bit more. Again, this is per the standard. This isn't different across companies for what's capitalized. The capitalization period is a bit different across companies, so I encourage you to understand that as you're evaluating Salesforce against other companies.
On the 2016-01 mark-to-market accounting for strategic investments, we've had a great year, as have most of you investing in software. We have recognized $0.43 of gains on our GAAP results, $0.36 on our non-GAAP results. Importantly, this does not impact our operating margin. This is a below-the-line OIE gain, and as you're doing your year-over-year compares, just be mindful of that. Quickly, as I said, none of these accounting changes have any impact on cash, and that's really important because I know cash drives a lot of your valuation. The good news is, even if you don't understand all those accounting changes fully, it has no impact on cash flow, and we're super proud of the fact that we've continued to grow our cash yield over time, and Mark and the leadership team are very focused on that. One last point on cash.
The seasonal effects I talked about earlier for unearned revenue are also true for cash flow. This shows sequential change in cash flow by quarter. You're seeing a deepening of the seasonal pattern. Again, a little bit more seasonal invoicing because of this co-termining in Q4 offset by a higher water level this time instead of being amortization. That higher water level is cash expenses. As you're modeling cash flows, please be mindful of that as well. All right. That's all the accounting I have for you guys today. I'm going to now talk a little about managing our success, and this is actually my favorite time of the presentation, and you guys would all be disappointed if I didn't say we're going back to school.
We're going to talk a little bit about— Last three or four years, we've been talking about subscription economics, and everybody in this room is a subscription economics expert now. How do we think about long-term economics around cost to book, cost to serve, and attrition, and how do we model those things? Last year, we talked a little bit about long-range planning, and I used three companies, if you recall, the camper, the explorer, and I called it a Trailblazer. This year, I'm going to call it a pioneer so I don't get in brand jail here at Salesforce because we use Trailblazer for other things. We talked about how to think about model leverage and operating leverage in the subscription economics world.
I'm going to bring those two things together this year and help you understand sort of how that works and then apply it to Salesforce. If you recall last year, I talked about the camper. The camper was a company that was growing from $100 to $170 roughly over four years, and they were doing it by adding the same amount of new ARR every year, that $30. And because their business was getting bigger, their attrition dollars were growing, their revenue was decelerating from 20%-10%. If I apply subscription economics to this, and I say, let's apply a cost to book of $2, cost to serve of 40%, and attrition rate of 10%, we could build simple P&L for this company.
I'm not going to go through the math because you guys are all subscription economics experts, but I want you to notice a couple things about this company. Firstly, they start at 5.5% margin. They have a tremendous amount of model leverage. Their subscription economics didn't improve, but because their business is decelerating from 20%-10%, their margins move from 5.5% to nearly 23% in just four years. Unbelievable amount of model leverage. It's the magic of deceleration in our business. Second thing to take note is you'll note that the marginal return each year declines. The second derivative of growth is negative, and this is what happens in the model as well. Model leverage, as you approach your terminal operating margin, actually starts to get harder to get. You get more profitable, it gets tougher and tougher to get.
You see that with this company. I encourage you guys to go through the math after this session today. Look at the Explorer. If you recall the Explorer, we're going to see a similar effect. Remember, the Explorer was a company that wasn't just growing their new ARR, they were growing their net ARR by a constant amount. They were growing that $20 by a constant amount. And they were growing from 20%-13%, so a little less deceleration. The good news is they got to $180. If I apply the same subscription economics to this company, again, they start at 5.5%. If you recall last year, the first year of all three of these companies looks identical, which makes your job a little bit tougher as you're evaluating companies. But what do you see?
You see a lot of model leverage, not quite as much. This company traded off a little bit of margin for a little bit more growth. You see the same second derivative marginal return declining, right? This is an important part of the model. I think you know where this is going. The pioneer, remember, this was the company that was delivering durable growth year in and year out, 20%. As Mark Hawkins just talked about, that's our goal. That's what Salesforce is trying to deliver. Year in and year out, 20% growth, 20, 24, 29, 35. Consistent 20% across the board. I think you guys know the payoff here. If I apply simple subscription economics to this is a company that shows zero model leverage, 5.5% every single year.
You guys can go through this math, it's very important to understand this dynamic, and you can see just how sensitive it is to the bottom line. With that, I want to talk a little bit about how that applies to us. Mark's already showed you this slide, $21 billion-$23 billion. You guys have seen it. We all love it. It implies consistent, durable growth. We have confidence to give you that number because of that $21 billion RPO number. 80% of the next 12 months is already done. More amazing, 60% of two years out is already done, and that's pretty awesome. There's not a lot of businesses like that. Imagine if 60% of your portfolio return two years out were already done. That would be pretty cool.
We start out with this top line, to that, we begin to work through our planning process. This is what my planning team does, and my planning team is all here, they're going to check my work. The first thing we do is we say, what does that sort of durable top-line growth rate look like? We're going to start to build our expense envelope, if you will. This is how Salesforce does its planning. Now, if we were a perfect pioneer, Trailblazer in the old world, we would have flat margins. I just showed you that. Our margins would not improve, and everything below that red area would be our expense envelope that we could use to spend on the business. Okay? Now, I'd love to tell you we're a perfect pioneer. Uh-oh.
Hopefully, I didn't push the button six times and give away the slide. We're not a perfect pioneer. By the way, the slide is not to scale. We get a little bit of model leverage. If we hold our cost to book and cost to serve flat, we get a little bit of model leverage, and that's good. Makes us a little bit more profitable. The challenge is we've actually committed more than that to all of you. When we give you a commitment, we don't have enough model leverage to meet our profit expectations for the street. When we do our fiscal planning, we actually build a whole lot of operating leverage in, and we get that operating leverage by making our cost to book and our cost to serve better.
In our fiscal planning process this year, or our long-range planning process, I'm super happy to say that we have built that discipline into every function in the company. Every single major function in the company has got a better cost to book or cost to serve. We're trying to build in a culture of discipline. It allows us to deliver the profit you want, and equally, you might note, it gives us the opportunity to make incremental critical investments in the business in some areas that don't drive immediate growth, might be trust or culture. They may be small tuck-in acquisitions, et cetera, but they're important to the long term. They may be areas that do drive growth. In those instances, we're able to sort of raise our guidance. Here's one of those areas right here. We are durably investing in sales capacity growth.
This is a sort of build of Mark's earlier slide, 21% headcount growth, 23% sales headcount growth. Again, another number that's consistent with the durable growth. All these numbers are very similar. We're doing that by growing our G&A headcount a little less quickly. To sort of wrap up this section, we are delivering durable top-line growth. Mark talked about it. You see it again on this slide. On the right-hand side of this slide, you see our year-on-year operating margin improvement, and it's pretty consistent excluding big M&A. In fact, this year, 25-50 basis points, our organic number is still 125-150 basis points. As long as we're delivering this kind of durable revenue growth, we've been delivering pretty consistent operating margin expense, and that's probably how you should think about the business.
One other takeaway on this slide, as I just said, big M&A is really the wobbler here. You might note that as we've grown and gotten bigger, we're able to do some pretty big M&A. Continue to grow margins, and that wasn't the case in FY 2014 when we acquired ExactTarget. Just to close and wrap up here, Mark showed you this slide to start. We're on a path to $21 billion-$23 billion. Mark showed you this huge opportunity that we're addressing. Nobody's better positioned to go after it. We're super focused on continuing to build that differentiation over time. Hopefully, it gave you a better sense about how to measure us. It's tricky. It's really important you understand it.
Hopefully you got also a little bit better sense about how we manage a subscription business at Salesforce. How you should think about it as well. With that, I want to thank you for your attention and your time. I'm going to invite Mark to come on back up here. We're going to open things up to your questions.
Let's give it up for David
Whoops. Whoops, how do I go back? Go back. I went too far. Sorry, you guys. It's not Bret Taylor, actually. Sorry.
Exactly. One thing I do want to take the opportunity right now on is, before we get started with questions, is make sure we don't get out of the room without thanking John Cummings, and his team,
[Andrew Zilli]
Rose, and the entire finance team. John and team, thank you, and-
Please round of applause for you. I would just add not just the best IR team, but also the best-dressed IR team, huh?
There we go. There we go. Indeed. Okay. Questions, please, and team will bring the microphone.
Thank you, John. Mark Murphy with J.P. Morgan. I'm interested, I guess, in what Einstein is saying about Q4 from a perspective of Q4 last year was a heck of a quarter.
It was.
part of it was, I think, David, to your point, there was this incredible cluster of mega deals that happened to renew all at once.
Yeah.
just to try to get ahead of that, do you have any thoughts on how to model that? Because I think, in some ways, it's probably the toughest comp you've ever had in your history, because of all the deals that renewed. Should we be thinking about that RPO growth rate, these billings growth rates being 10, 15 points lower just to try to get through that comp? Or is the environment so healthy this year that we don't necessarily just need to think about it that way?
I would say a couple things here, Mark. First, thank you for the question. I'll jump in, David, feel free to jump in. I think the first thing you would do to model the total business is, obviously, we're thinking at the revenue, and I think David showed really importantly how that is very critical. I think Mark's question's more directed to RPO, whereby we don't guide that. It is a good business environment, for sure. We feel like we're in a good position to execute not only our revenue guide for this year, but obviously, being very much on track for our FY 2022 target, which implies that we're going to be able to grow the RPO in the way we need to achieve that. That would be my starting point. David, anything you want to add?
Yeah. Obviously, these big enterprise renewals and the timing is really going to create some lumpiness in the RPO number. I really encourage you to stay focused on the current RPO number, which as I said, is going to be a lot less lumpy and should take some of that volatility out of the measures. There's no way for us to perfectly forecast that number as well. Again, my planning team's back here, and I ask them this question every day, "How do we do this better?" There's just no way to forecast some of those things. I would encourage you to look at the more stable measures. I think the CRPO number's a great measure for you, to give you sort of a sense of the trajectory of our business.
I do think, Mark, too, I totally agree, David. I think, just looking at the total long view, we feel great about the demand environment for all the reasons that we talked about beyond just the quarter or next quarter, but really this year, next year, the following year, that type of thing.
Agreed.
Thanks very much. Kirk Materne with Evercore ISI. When we think about the durable growth plus margin expansion that you guys have talked about, is there any reason that the cash flow yield shouldn't trend essentially in line with margins? Is there anything we should think about given that operating cash flow, free cash flow are going to be the valuation metric? I guess, how should we think about that relative to the guidance out to fiscal 2022?
Sure. I think there should be some level of correlation, Kirk. There's always things that are wild cards as the farther out you go. If you remember last year, I talked about I wasn't sure what would happen with tax reform, for example, and that could have an impact. That's an example, as you go further out, that could have an impact on it. Generally, I think the idea of that correlating with revenue growth, and to some degree, profit, I would agree. David, anything?
The only sort of wobblers are we've done some M&A, and that impacts our interest income and our interest expense, and equally our cash taxes, as we become more profitable, becomes more of a headwind for us likely over time. Ex those things-
Yeah
I think that you should expect our cash yield to slowly improve over time.
Yeah. It has, to a degree.
Yeah. This is Terry Tillman from SunTrust. Mark, I love the slide on the add-on products.
Yes.
We hadn't seen that before. What I'm curious about is if you could talk about still the mothership here, the Sales Cloud business. The growth was a little slower last quarter, maybe with that FX. What should we think about these add-on products like CPQ? Is there enough you have in store to keep that growth at least in the double digits going forward in Sales Cloud? Thank you.
Right. Yeah. Thank you, Terry. You're exactly right. When you look at the FX, we had an FX tailwind to a degree, in Sales Cloud in Q1. It was not a tailwind at all or a headwind at all in Q2. You saw a little bit of a differential growth rate year-on-year on Sales Cloud. Again, strong growth. We achieved our first billion-dollar quarter in that way, and we feel like that business can grow and grow and grow for the foreseeable future. We do get a ton of feedback from people, like CPQ was a great example.
We talked to you guys last year about a plus one strategy, where you sell the core. Then you do a plus one, you add an additional functionality. It was like the cherry on top of the cake when you were growing the Sales Cloud as an example. We feel that there are more functionalities there and more things that we're doing to really make that a very strong cloud in the future. Continue to be so.
Hi, David. It's John DiFucci. Listen, really appreciate what you put up there. Also just appreciate the fact that you recognize that we're going to try to figure out what new subscription ACV is.
Yeah. For sure.
Which, by the way, most companies just say, "Don't even do that," and some investors don't, and some still try to do it anyway. Keep in mind, we only have the financials. We don't have a lot of early deals and stuff like that. I guess, I'm just wondering, we're still going to try to do it. Could you suggest something that, if we looked at trailing 12 months, would that smooth things out a little bit better? We understand longer term. Most people in this room are investing in Salesforce longer term, if they're invested in it. If a quarter's a little bit weak on new subscription ACV, just want to know it, though, because short term turns into long term.
Maybe it's because of the timing here, and if we looked at trailing 12 months, would that just be a better way to do it? Just wondering. I have a quick follow-up.
Yeah. I'll start, and you can jump in.
Sure. Yeah, of course.
There's no perfect way to do this, obviously, and I think you have to also remember our guiding principle, right? Is we don't want to chase a number at the end of a quarter, because the nature of our business is we'd rather give up a few days of revenue to get a good deal. Right? I think it's really important to understand, that's why we've been so consistent year in and year out, despite some of the optics of some quarters being better than others. I think the CRPO measure's a better number to look at, remember, the CRPO number doesn't capture the attrition. I talked about those four things.
Right.
CRPO captures the first two. I won't explain what the four are again, it captures the first two, billed and unbilled, next 12 months. It doesn't capture the attrition. There's no perfect way. I think a trailing 12 month on the CRPO is probably the best way to sort of evaluate kind of the trajectory of the business. I wouldn't get hypnotized by any individual quarter's number because of this philosophy of always book good deals.
Yep. Book good deals, renewals.
Good deals. We would rather wait 90 days and book a good deal, than book a terrible deal and get 90 days of.
No, it's
Bad revenue.
Just to make a number.
It's why, by the way, we don't say, "Here's our bookings number.
I know.
That would cause us to change our behavior
To David's point, I know people get this, but we just want to reiterate. When you say that, well, if we have a deal that runs for 10 to 15 years, to be able to compromise for 10 days or 90 days or whatever makes no sense as opposed to taking that. I think it really supports the economics of what David's saying here.
I think one of the things that's very unusual, if you look at our history, I encourage you to do this, there's times on our earnings call where we will say, already in this quarter, because we're a month into the next quarter, we've booked another big deal. That does not happen in software, where you book a big deal the first week of the quarter or the second week of the quarter, except with us. If you go back in history, it's happened many times, and that's that philosophy paying off. Right? We don't want you to be thinking that way. We don't want our customers to be thinking that way, because it would hurt the long-term economics. If we've talked about anything over the last four years, it's the long-term economics are really what matter most.
They do, the competitive position that's going to drive those.
Appreciate that. By the way, it used to happen at Oracle when Keith Block was there, doesn't anymore. Just a quick follow-up. You showed that ramp deal, which I think is really interesting, I'm just curious how you think about that internally. Salespeople get paid on new business, right? They sign this ramp deal. Do they get paid based on the $100 million, or I forget what the numbers were. The $100 the first year, then they get an extra $100 the second, an extra $100 the third? Or do they get paid on the average of $200, or do they get paid on the three? Because that's what it's going to be. That's the renewal rate long term. How do you think about that in ACV, new ACV, the day that's signed?
Well, let me start with that, David, feel free to jump into it. I think for when you think about new business, what we look at is to the degree that somebody generates new business, right? For the most part, I'm going to generalize, because keep in mind, we have different models for lots of different parts of the Salesforce. If somebody generates new business for a year, then they get paid on that new business, they may get a kicker for multi-year as well. Then if it steps up again to a second year or a third year, depending on which part of the Salesforce they're in, they'll get paid when the new business arrives. I think, for example, if you did $1 million worth of new business, you're going to get paid on $1 million.
If the next year you built on that annuity, now as that account, you grew that to a $2 million business, you're going to get the difference between the $1 million and $2 million as an increment, because you're generating that new business. There's lots of exceptions, depending on what part of the Salesforce you're in. That's probably a salient point for you. John, I hope that helps.
Yeah, we pay them on each of the 100s. 100, 100.
Right.
Right? Why do we do that? Because as a customer, the economic value's 300 at the end, and it's going to renew at 300. Don't let the revenue recognition hypnotize you about the economic value, right? The economic value is, it's a $300 a year deal. When we exit that deal, that's what the customer's thinking, "I'm going to renew at 300." That's what we're incenting our reps to-
Right. Exactly
drive to.
Any other questions? Here we go. Yeah.
Hey, guys. Alex Zukin from Piper. I wanted to ask, you guys showed a slide where you continue to accelerate growth in the largest of deals, $10 million and $20 million ARR. How does the cost to book and cost to serve kind of change in the company as you continue to accelerate the growth of those large strategic deals?
Sure. Well, as you would guess, the bigger the deal you get, you should get some kind of scale, some kind of efficiency from that standpoint. Again, we're investing in those accounts, too, to go for the long play. We may have a penetration in even a big account that we consider a big relationship. When you see the opportunity there, we may be investing for the long play and not trying to over get efficiency on cost to book, because we're really trying to develop that account wall to wall over the long term. I would say in general, we get some level of efficiency.
We absolutely do.
Yeah.
You should think about cost to book and all of our measures as a rate versus mix analysis.
Yeah.
If I was to improve cost to book in every one of my sub-segments, and the mix was to change to more international, to more emerging clouds, then the aggregate may not change. That's how we think about it. We manage it as a portfolio, even as we're trying to drive efficiencies in each of the sub-segments. There's absolutely efficiencies to be had.
Yeah. I think the key thing, Alex, is just making sure that we don't take a short-term view. If you have a phenomenal account relationship, and you don't try to over-optimize that, you try to run the whole play and really help them be mostly successful, then that's where we have to balance the efficiency with the opportunity. Hope that helps.
Hi. Thanks, guys. Philip Winslow, Wells Fargo. Going back to the cost to book idea here, one of the slides you put up there was 62% of customers are still single cloud, and obviously there's a lot of room for upsell there. When you think about just the efficiency of upselling a newer customer versus, let's say, net new and sort of the trend that you guys talked about, the long-term growth there and the profitable growth, just how are you thinking about sort of balancing that, I guess, the crossover multiple clouds. How much more efficient is that than, let's say, a net new cloud to a customer? And then also sort of the flip side of leverage of sort of churn. Obviously, if churn comes down, customer renews, obviously very low.
When you think about multiple clouds and pushing more of that 62% over, how do you think about sort of churn going forward and the impact there on margins?
Yeah. I think a couple things here. The more multi-cloud we have, the less attrition. There's a difference. The more times people use our AppExchange, our attrition's lower. It just makes it stickier, if you will, Phil. I think that's a really important point in that way, and I would also say that the more we land and satisfy the customer, like I was showing in that land and expand chart, the more that we land and they're happy with the product in general, I think the more efficient the sales cycle is in general. Those would be two elements of what you touched on. David?
Yeah, we don't have hunter and farmer reps.
Yeah.
That's kind of where you're going, right? Is we don't think about it that way. To some extent, the reps do get the benefit of that. We adjust our quotas to reflect that, and that's another good example of an efficiency opportunity in our portfolio that we may reinvest somewhere else.
Yeah.
Obviously, you're right on the attrition. There's just clearly some benefits to our cost to serve on the attrition side, as Mark said.
Yeah. I think the most important thing, though, Phil, the more they use, the better the relationship, the better the length of the opportunity.
Hey, it's Walter Pritchard from Citi. Just on the cost to book, cost to serve, so one of the biggest cost to serve variables is your subscription gross margins.
That's correct.
I look at scale of the company.
three years, five years, 10 years, you actually haven't seen any leverage. In fact, it's been more de-leverage in the subscription gross margin. Could you help us understand, I guess, why that is, what are the sort of factors today, and how do we think about that as we build out our own cost to book, cost to serve models over the next-
Right
five or 10 years?
Happy to. One of the things, Walter, that has affected that, when we brought in new companies, for example, that had different structures of gross margins, for example, we do an acquisition, Demandware, whatever, you could see publicly that their gross margin for their subscription was different than ours. When you put things like that together, by definition, you start to get a mix issue here that's having an effect here. Fundamentally, I would say our core gross margins have been very stable. When we're weaving in new companies and snapping in things such as that, I would say there's a mix effect there that definitely has had an impact, and I would say that you shouldn't expect us to swerve the bus a lot, Walter, in terms of gross margins in general for subscription. It's been relatively stable.
I take your point because you're looking over a longer period of time, if you net out some of the M&A, I think it's relatively stable between.
Yeah, I would agree. I also would say that our gross margins are literally the best in cloud computing today from a subscription basis. They're in the very high 80s, it's a good number. The mix issue that Mark talked about is very real, not just with M&A, but also as we expand into other geos. Remember, our model requires us to be the most trusted, secure, available service in the world, we are willing to invest into that to make sure that that's the case.
Yeah. Walter, where I thought you were going to go with that, too, just to add on all the way since you touched on gross margin, is our pro serve mix is down a little bit. You probably noticed that, too, for everybody's benefit, when that mix is down, that actually has had a slight uptick on our gross margin. There's some netting out of those effects, that's because we have a fantastic SI community that's really served well, we want them to serve well. I hope that helps, Walter.
Great. We'll go with you, Keith. We'll take our last question from Mark and David right now. Mark and David will be around after Mark and Keith are here, you can have additional follow-up questions for them at the end of the day. In order to keep us on time, I'm going to have to.
Perfect
cut you guys off. Thank you both very much. We'll take our last question from you, Keith.
Excellent. Thank you guys for hosting us today. Thank you for the new numbers. We always love new numbers. When talking about, I want to make sure I understand these numbers right, the multi-cloud versus single cloud customers.
Yeah.
You said that 38% of customers are multi-cloud out of the 150,000 base. If I ran the math on that means multi-cloud customers on average are about $160,000 per year in ACV. The single cloud customers are much smaller. They're like $9,000 a year. Is there an opportunity for the single cloud customers to become multi-cloud customers?
Yeah.
Are they different classes of customers? Is that all the SMBs that really aren't going to get bigger? Can we see that connect in those small guys to become the big multi-cloud customers?
Sure, Keith. Our view is that we can actually see a really nice step-up. We see a path that's going to be positive going forward. Keep in mind what our experience is, an SMB today is a mid-market or GB tomorrow, which is an enterprise someday. Companies that are successful kind of grow up and through that. That's one natural motion that happens. We also see it at all levels and all customer sizes, the interest for 360-degree view is growing. You're going to get exposed to everybody here. Just sample that. I feel like that is a really legitimately nice opportunity for us to grow.
I actually think that's a great question for our next guest to come on up.
Bret Taylor
Talk about how he thinks about planting seeds and growing them with multi-cloud.
Awesome.
With that
Perfect.
Yeah. Thank you, and welcome to Bret Taylor, for sure. Is that John?
Thank you.
Great.
Thanks so much. Thanks, guys.
All right. I'd like to welcome to stage, Bret Taylor, our President and Chief Product Officer. Bret, thanks so much for joining us for a conversation.
My pleasure.
Maybe just to warm things up a bit, maybe you could just start by telling us what you're most excited about this Dreamforce, what you're focused on, and what some of the highlights have been over the last couple days for you.
Yeah. My priorities this year had four key themes, from an R&D standpoint. The first was integration, and you saw a lot of that come out at this Dreamforce. I think Customer 360 and that announcement was probably the flagship announcement around integration. Obviously you're seeing MuleSoft woven into not only our positioning, but our strategy overall. I was also very focused on Einstein. I think the highlight there for me was Einstein Voice. I'm excited to talk about it. I think I really view this in sort of the broader context of technology shifts happening around us. You saw the transformation of computing from the command line to the graphical user interface to touch, which has really been dominant over the past decade. I don't know if any of you have kids and how easily they use that Alexa on your kitchen counter.
Voice is very clearly the next generation of interfaces with computing, the mix of ambient devices with, I think, an explosion in AI is really making this feasible now more than ever before. We're really happy with that announcement. The last two are completeness, which is just making sure our products are number one in each of their categories. We had a bunch of interesting announcements there. High Velocity Sales, which we add to our core Sales Cloud, major new capability for inside sales and other use cases, Quip Slides, rolling out that functionality. All of our clouds are really filling in those gaps, which is really meaningful for us. Those customers that start with that first cloud have the best experience possible before they make that journey to be a multi-cloud customer. The final was, empowerment and Trailhead.
I think this is a big theme in the keynote yesterday. I think there's two ways to think about it. One of it is truly altruistic, which we really, as a mission, really want to make sure that this technology is accessible to everybody in our society. If you talk to our customers, what they love so much about Trailhead is when they have a Salesforce project, they have the largest community of support around each of those projects in every region for every company size. You hear about our SIs and our partners, that is driven by Trailhead. That is an ecosystem producing millions and millions of people who are experts in Salesforce, who are helping drive success in each of our projects. As I know, if you talk to customers, we're only one part of that solution.
The partner with them is the other part. Trailhead is an engine that's both creating jobs, helping society, and also creating this amazing partner community around our products. Those are the four themes. I think the highlight for me is probably Customer 360 and Einstein Voice. If you didn't see Qingqing Liu do that demo, watch it online. She's amazing. It was probably the highlight of the demo for me. Happy to answer any questions you have.
Hi, Jennifer Lowe from UBS. I want to ask a little bit about Einstein Voice and maybe even more broadly as you think about the strategy, and things like that. How do you view the right balance of where Salesforce can innovate their own IP versus leverage some of the capabilities offered by your platform partners like Google and Amazon, and how do you delineate?
That's a great question. I think one of the themes you hear from us a lot is trying to focus on our core, which is CRM, and trying to leverage our partners where we can. The demonstration yesterday I think was a great example of that. When Qingqing started that demo, she was actually using voice recognition from Siri, but the actual intelligence of what she was saying and parsing that and performing the actions was done by our artificial intelligence engine. The secret behind Voice is actually combining the data from the CRM with the understanding of the voice. As I think she equips, voice recognition is not quite a commodity, but it's getting there. Actually understanding what you mean and the intent behind it is where the magic is. The most remarkable part about Einstein Voice is we can extract structured intent from unstructured speech.
We can do that because we have the data about your customers in Salesforce. When you refer to that proper noun, like someone's name or a company name, we know that corresponds to an opportunity or a contact in Salesforce. That's proprietary to your relationship with Salesforce, you combine that proprietary data with sophisticated technology, I think that's really where the value in artificial intelligence comes out. It's not a coincidence that Amazon Alexa and Siri played a big part in that demo. Voice is a mix of this device ecosystem, produced exclusively by companies other than Salesforce. Even will.i.am as a speaker, he's demoing right now at the Einstein keynote, and our platform, which is about providing conversational customer experiences and conversational interfaces to Salesforce, leveraging those devices.
Hi, it's Keith Bachman from Bank of Montreal. I wanted to ask you about Customer 360. What's the progression you think that customers are going to see from an impact perspective? Because it seems like it's a great idea leveraging the data across your various clouds, but it seems like it still has aspirational features to it. What's the progression you think customers should be able to expect in terms of having an impact on their business?
Yeah. I think there's sort of multiple layers. At the simplest layer, this provides a platform by which you can connect, our Service Cloud, our Marketing Cloud, and our Commerce Cloud, particularly. Those three clouds we see as a really strategic combination. If you imagine you're a retailer, how strategic it is to combine those customer experiences. It provides out-of-the-box point-and-click ways of providing the most valuable integrations between those experiences. I'll give you a couple examples of some of the pilot customers, like Crocs. It's things like if you abandon your shopping cart on a Commerce Cloud site, you can be put on an email journey, to sort of get you back and complete that transaction. Or if you actually complete that transaction, to be put on that journey.
Those are the types of integrations that our customers have been doing themselves and with partners for a long time, now we're making it easy, simpler, and cheaper to do so. You're right about the aspirations. One of the things that has come up as we've been working with our partners on what do you want in your single view of the customers, how nuanced that problem is. I think it was probably most illustrated by GDPR and how nuanced it is to deal with your customer data across geographical boundaries, across organizational boundaries, dealing with regulatory constraints. One of the things that I think, if you talk to the team around Customer 360, what's so exciting about this platform is it gives us a mechanism to really help customers with those very challenging problems around customer data.
When Parker searched for his name in that demo yesterday, you saw where his data resided across all of our clouds, you can imagine how useful that is as a data steward who's dealing with GDPR compliance issues, right? I really feel like, just like Einstein, when we announced it two years ago, was the beginning of a drumbeat of features and intelligence. Customer 360, to me, is the first step in a drumbeat of announcements around cross-cloud, single view of the customer capabilities and features. You should really think of it as a starting point as opposed to a big reveal, then we walk away. This is really a platform that we'll be building on in a lot of subsequent Dreamforces.
Thanks very much, Bret. Brad Zelnick with Credit Suisse. Just following up on that, specifically, if you look at what we've seen in the last day or so around Customer 360, very compelling, but it all involves known identities versus a lot of what you do across commerce for a shopper who comes in and doesn't actually register or your data management platform and a lot of what goes on inside of the Marketing Cloud involves unknown identities. What's the opportunity to double that to, say, Customer 720 to be able to marry those two?
Spinning around in circles? Yeah.
Is that even a possibility?
Yeah. We like to say with our customers, it's about going from unknown to known, to customers, to loyal customers. We really want our platform to be that end-to-end solution, from unknown to loyal. I do think that one of the things, if you look at the evolution of Salesforce, and I've only been here for two years, so I can take credit for the things I didn't work on, but we started in very much a B2B mindset with sales automation, and we added service, and we added our platform. Over the past five, six years, we've added all these B2C capabilities organically and inorganically. I think what I see as our opportunity strategically is being the one CRM that does both the B2B and B2C, unknown and known.
If you look at our strategy coming together in products like Customer 360, it's how do we really amplify that advantage for our customers, show them the benefits of having both B2B and B2C? A great example was Unilever, which is one of the stories we told in the keynote. That's a B2B company. They sell through distributors. You can buy their products in Target. If you look at their business model, it's a B2B business model, but they're also a brand company, right? They have direct relationships with the consumers of their brands. When I talk to retailers, many of them, like Adidas and others, have a mix of both direct and indirect channels. They have a mix of B2B motions and the traditional B2C motions you're referring to.
We want our platform to be the best platform for companies who have both partners and consumers and provide a single view of all those stakeholders in one platform. I think what you'll see with the unknown to known in the sort of 720 is when we're talking to a company like an Adidas, we're not talking to them about one product in our portfolio. We're talking about the cumulative advantage of having both, and saying, "Hey, you can do your B2C commerce and your B2B commerce on one platform." If someone buys Yeezy in a store that's not an Adidas branded store, or they buy it through the Adidas app that lets you wait in line for the next shoes, you can have a single view of that customer across those touchpoints.
I think we're really the only CRM that does that. That's really where we're trying to build our core competitive advantage.
Raimo Lenschow from Barclays. Going back to the 360, can you talk a little bit about the implications that MuleSoft or what being MuleSoft is bringing there? It looks more and more strategic now that we know 360 is there. We think what MuleSoft brings to the table, it seems like it's a perfect fit. We were one step ahead of asking questions around that. Kind of double-click on it.
Yeah. This was definitely a part of the strategy this year. When I think of integration, I think of it in two ways, really reflected in Customer 360 and MuleSoft. The first is, how do we transform our product portfolio from a set of products to a set of capabilities that people are stitching together to create customer experiences? You hear lots of talk about cross-cloud deals or multi-cloud deals. That's another way of saying we've gone from we're selling a product to a customer, we're selling a solution strategically to our customers. That's really what's driving the growth of this company. That's one area. That's really where Customer 360 comes in, which says, "Hey, you shouldn't just be thinking about customer service as one part of the customer experience.
You should be weaving together customer service and marketing and commerce and sales into one integrated experience." The other side of that, though, is recognizing, Mark talked a lot about this. I think it's a really real trend. Every single CIO I talk to has a strategic initiative to move their infrastructure to the cloud. AWS, Azure, GCP, depending on which vendor they choose. We are in a world of heterogeneous infrastructure. If you're thinking about transforming a customer experience, say you're a manufacturer trying to provide a customer service experience, how much of your data is trapped in an on-prem ERP? How much is trapped in a private cloud that you just set up on Amazon? How much is trapped in other cloud applications other than Salesforce?
You combine our multi-cloud approach with Customer 360 with the connectivity to these third-party and legacy services with MuleSoft. It enables us to go into a conversation with our customers and say, "Hey, where does your customer data live? Okay, let's make a single view of the customer using our technology." It's a really simple and strategic conversation that gets us past some of those, what I'll call infrastructural hurdles, to really drive what we're good at, which is customer value and customer experience. It has, I think you're right, it's changed our conversation with our customers, where we end up in a much more consultative relationship with them and helping them sort of map out their infrastructure transformation to achieve their customer transformation.
Great. Thank you. Sarah Hindlian with Macquarie. Customer 360 is really important to us. Just a week ago, we put out a very deep dive on this topic and what it means to uniquely identify customers and how important it is in digital marketing. One of the things we discovered when we were looking into this was how many layers of people are just trying to get their hands around uniquely identifying their customers, whether it's Omnicom, whether it's WPP, Publicis, they're all working on these products, Criteo, et cetera. Then you have the walled garden properties like Facebook and Google, who have obviously achieved a significant scale off of their ID graphs.
At the end of the day, I think what we found is that data privacy and privacy in general around the consumer is going to be the most important thing that you can grasp, and maybe where Salesforce has the most unique advantage. I was wondering if you can talk a little bit about how you're thinking about data privacy, consumer protection, and embedding that all within this, I think, really important product.
That's a great question. We alluded a little bit earlier when I talked about GDPR and Customer 360. First of all, to take a step back, you're absolutely right that this broader sense of identifying your customers is hard. It's also remarkable how many customers can't even do it within their own systems, too. If you just talk to a bank, they have a retail banking division, a commercial banking division. Talk to your colleagues. They often are in two completely separate systems. You can end up having two different relationships with the same organization as a consumer and getting fragmented relationships. I think that one of the things is we really want to make sure to help our customers walk before they even run, which is like, "Hey, you have all these different departments. You have all of these different geographies.
We want to help you create a single view of customer across those." To answer your question about privacy, I think this is one of the most vital steps to helping our customers deal with the right privacy and trust frameworks, especially for companies that are multinational. Which really means, can we help you rationalize where the data about your customers live, so when you get a right to be forgotten request, or you get a data deletion request, you know how to actually perform that operation across all of your different organizations around the world. I do think that broadly, the internet and regulations around the internet are becoming more balkanized, and we're seeing this around the world. We believe that as the premier CRM, we can really help our customers navigate that complexity.
I think I hear a lot of customers choosing to work with us because they know we can help them navigate that complexity and how important it is for each of our customers to have that trusted relationship with their consumers, and how hard it is if you try to roll it your own. It's getting virtually impossible to do so. We have a lot of teams working on this. If you're hearing in my voice, we've turned this from a, "Okay, we're going to meet GDPR requirements," to, "Let's be a partner to our customers who are navigating this complexity." We think it's something that we can become great at, and we already are, I think, better than our peers at.
Oh, hey, Bret. It's Pat Walravens with JMP. I'd love to hear what you make of this, the open data initiative that Adobe, Microsoft, and SAP announced, is it a coincidence it's come at the same time?
Likely not a coincidence. I'm kidding. I haven't read it in-depth. I'll just say that you're talking to Greg later. MuleSoft has been integrating those systems for years. I'm not sure what's new about this. I'm sure there's some substance to it. MuleSoft has been sort of doing these types of integration projects for a long time, and we have a lot of successful customer scenarios around it. It's exciting to see sort of integration become such a sort of the topic du jour in our industry. I think the other thing to note is that we've been really focused on sort of doubling down on the strategic partnerships where we're seeing our customers want integration. There's a lot of announcements with Dreamforce, but you probably saw we announced a relationship with Apple on Monday.
We announced a partnership with AWS on Tuesday. A partnership with Google today to directly sell Google Analytics. I wanted to call out the AWS example because it really, I think, plays to what I'm hearing from customers on this integration front. This partnership with AWS essentially integrates Salesforce and Amazon Web Services at the infrastructure level. If you are a customer who's using Amazon's technology to create a private cloud for your business and you also use Salesforce, you can seamlessly transfer data between them without going over the public internet. As a CIO, you can actually start to conceptualize Amazon Web Services and Google as one security context, which is really differentiated. We're really focused on making sure that we are aligned with every single strategic infrastructure vendor that all of our customers are using.
Thanks. Ross MacMillan from RBC . It's along the same lines. It's really a question on the boundaries of where you think Salesforce should play and where it shouldn't play. As we think about MuleSoft, for example, you can start to tie in data from on-premise transactional systems and custom-built systems, and you start to get into the domain of, call it ERP, core transactional systems. It seems like you want to keep the value in your environment, and I'm just trying to understand, maybe you could help-
Yeah
us with how you see this evolve as you start to go down this path of enriching the data at the front end and becoming closer to the transactional system.
Yeah, it's a great question. First, you'll hear from Greg later, just to state it without ambiguity, we're really committed to MuleSoft being a neutral integration platform. We think it's vital when a customer is choosing an integration platform that it works with every system. We're going to be selling MuleSoft to connect SAP to Oracle, and we're going to be celebrating those deals because that's the value of integration, is that it's technology neutral. When we acquired MuleSoft, it was because of the synergies we see with our business, but not limited to those synergies, if that makes sense. I think, though, to speak to the synergies now, where I think where your question was going, we see so much value in unlocking that data in some of those systems.
When you're thinking about creating that single view of the customer, whether it's a loyalty program or an ERP, when you are talking to a salesperson or talking to a customer service representative, it's so important to have that data available. If you don't, you have the standard sort of customer service experience. "Can you tell me your whatever number?" We call it swivel chair integration. You have two screens with two different systems, and you're going back and forth. This happens for so many salespeople and customer service people, and we think the power of MuleSoft is really unlocking that data. The other thing that excites me about MuleSoft, that Greg will be much more articulate about, is this concept they have of the application network, which we talk a lot about.
The way I think about it is, once you've done the hard work of setting up an integration for one project, you can reuse those integrations for subsequent projects. As an example, if you connected three on-prem point-of-sale systems to make a mobile Commerce application, then in the next day, you wanted to make an Instagram Commerce experience, you could reuse those APIs and those integrations for that subsequent project. When you talk to MuleSoft customers, the value really comes because it's a piece of infrastructure. It's a platform that you can reuse to accelerate all future integration projects. What I love about that is it's such a great value proposition for our customers because we have long-term relationships with our customers, as Mark was talking about earlier.
That means that when we come in, we're really speaking to them strategically, not about that one project, but how can you, as Greg would say, increase the clock speed of every future project, which is really valuable.
J. Derrick Wood at Cowen. I wanted to ask on analytics, it's your third biggest TAM, but I think maybe more obscure in terms of how you're going to market. Maybe if you could give an update on what the product strategy is with Wave and how you think about trying to attack more market share.
We're really focused on sort of analytics around our core products and services, so analytics around the CRM. I think the big shift that we did recently was the acquisition of an amazing Israeli company called Datorama. If you think of our core analytics service as analytics for sales, service, and sort of the suite of services around our core B2B products, Datorama is analytics for marketing. I always joke, rather than a single view of the customer, it's a single view of the campaign. It's a really unique product. It's really unique in that it's not just used by individual customers, it's used a lot by agencies. It's a very flexible platform for really viewing cross-channel marketing experiences, multimedia, multiple touch points, and multiple campaigns. The marketers that you talk to at Datorama will tell you it's their dashboard to their entire marketing experience.
For us, if you look at it strategically, what dictates what areas we invest in, it's really about closing that loop. Analytics is about telling you where the results of the decisions you made, how did they turn out? Helping you forecast, helping you close that loop. With marketing, it's a way of telling our marketers, the return on investment and where to invest dollars next time. You combine that with our suite of marketing products, we really want to have that relationship with the marketer from deciding the creative process all the way through to sort of closing that loop. I think analytics is a crucial part of it. That's the way to think about it.
Thanks. Brent Bracelin with KeyBanc Capital Markets. Question for you. We think about Customer 360, talk a lot about MuleSoft and the role there, another component that we hear a lot, I think there's 900 sessions over the next couple of days of Lightning. Obviously you have customers like Autodesk that can do it in 60 days. This has been a multi-year journey. Maybe give us an update. Where are we at relative to install base that actually has migrated over? Do you think we're gonna get a tipping point here in 2018 or 2019, where the vast majority of customers are in Lightning and then are capable of going to a Customer 360 environment?
That's a great question. This year has been amazing for Lightning. We've made just a tremendous amount of progress. I would say this year is a meaningful tipping point from my perspective, in the sense that we've closed many of the technical gaps that are preventing our customers from moving over. Now we've entered into the world for those customers who have not migrated over yet. It's largely sort of the change management of shifting from one experience to another experience. You're seeing that, I don't believe we're disclosing the Lightning adoption numbers, I'll have to be vague, I apologize for that.
What you're seeing, you're seeing that in the numbers, I'll put it that way, where we're seeing an acceleration in the adoption numbers, where essentially the dynamic I see with most of the customers that I deal with is what they'll do is when they're doing a business change for whatever reason, rethinking their customer service experience, they'll use that as an excuse to migrate over to Lightning, because we removed those technical barriers that are preventing them from doing so. This year was actually probably the year of the most rapid Lightning progress since I've been here. Hey, Bret.
Hi, Bret. Tom Roderick with Stifel. Thanks for joining us. I want to go back to MuleSoft question again. You got a lot of questions here around, is it actually speeding time to market and time to multi-cloud for customers? As you think about it as an internal development tool, does this change the sort of buy versus build calculus in your mind? Does it give Salesforce the opportunity to go out and be more aggressive with M&A, knowing that you can stitch these platforms together?
I've never had anyone tell me that we weren't aggressive in M&A. Thank you for that. Yeah. Yeah. It's interesting, I was a product of M&A, obviously, and MuleSoft was. It's remarkable, you can't overstate how much the entrance of these companies impact the DNA of your companies. MuleSoft has this world where everything's an API, everything's a service. As I think you correctly hint at, this makes it really easy to compose services from a variety of different platforms. That's really the promise of the application network and why it's such an effective platform for integration. I don't think it changes our core M&A strategy, which has always been about sort of adding TAM, finding adjacencies to CRM, or finding add-ons to our core product portfolio, as I think was so eloquently talked about earlier.
It does mean that we have, I think at the architectural level, a much more opinion way about how do we integrate these for our CIOs and our IT development staff. How do we actually bring this concept of API-led connectivity and an API-led point of integration for our customers and partners who are sort of weaving these together. I don't think it sort of changes the fundamental business logic around why we would build versus buy.
Great. I think, Bret, I know you have to go to an admin keynote-
Yeah, I've got-
in a few minutes, why don't we start-
6,000 admins waiting for me.
Yeah, we don't want to keep them waiting. So.
Hey, Bret. Alex Zukin from Piper. One question I wanted to ask you was actually a competitive one from a product perspective. You talked a lot about B2B, B2B2C. You had a competitor that's going for the other direction, right, from B2C to B2B, recently make a bold move in the market. I want to ask you, at the content layer, right, you guys added the commerce layer, you talked about Datorama on the analytics side for B2C. How do you think about the content layer? Is that a build, buy, future strategic direction? Any comments that you'd have?
Yeah. Right now we've obviously chosen to partner with a number of companies working in content. I can't really speak to what we'll do in the future, but I will tell you where I think I hear customers really putting a lot of their focus, which is on the intelligence. Having the content there is one thing. Deciding what piece of content to show to what person at which time, that's the hard part. If you look at our B2C strategy broadly, it's very focused around Einstein, very focused around intelligence, and this concept of a personalized journey. The core of our Marketing Cloud is this Journey B uilder. The idea of it is, how do you provide personalized journeys at scale? Where at scale means you've got hundreds of millions of consumers, so no human being can actually personalize those journeys.
I would say that's where I'm seeing a lot of the value right now in the marketplace, a lot of the differentiation in the marketplace, because that's what is impossible or was not possible without modern large-scale intelligence services like Einstein. That continues to be the tip of the spear of our strategy. That might not preclude us doing things in the future, but I just wanted to bring it up because that's where I hear customers having the most pain and seeing the most opportunity to improving their marketing.
Great. Bret, thank you so much for coming. Appreciate your time.
Thank you so much. I really appreciate it. Thank you.
We're running a little bit tight on time today. What we're going to do is we'll take a break right now for, how long? Is it like 30 minutes? We'll take a 30-minute break while we wait for Greg to come over, and then we'll launch into a discussion around MuleSoft. Okay? Thanks.
I bet by calling to a cop shop the other day. He just told us sometimes life's a game. I ran my mouth off a bit too much of what did I say? You just laughed it off, it was all okay. We're all float on nothing. We'll all float on a cave. We'll all float on nothing. We'll all float on anyway. I bet you make a joke every last time without fail. It was worth it just to learn we're gonna fly again. Bad news comes don't you worry, it is on its way to Eggland. Good news will work its way to all them lands. We both got fired on the exactly the same day. Well, word's out, good news is on the way. I can't tell. We'll all float on nothing. We'll all float on a cave.
We'll all float on nothing. We'll all float on all right already.
We'll all float on. All right, don't worry. We'll all float on. All right, already, we'll all float on. All right, don't worry. Even if things end up a bit too heavy, we'll all float on. All right, already, we'll all float on. All right, already, we'll all float on. Okay, don't worry, we'll all float on. Even if things get heavy, we'll all float on. All right, already, we'll all float on. All right, don't you worry, we'll all float on. We'll all float on. He wakes up in the morning. Does his teeth, tries to eat and be lonely. He never changes a thing. The weeks and the weeks take him to sheep. We look at each other, wondering what the other is thinking. We never say a thing. These crimes between us grow deeper. Take these chances.
Place them in a box and do make quiet the time. Lights down, you up and die. Goes to visit his mummy. She sees him well, but sometimes he forgets her. Remembers being small. Playing under the table and dreaming. Take these chances. Place them in a box and do make quiet the time. Lights down, you up and die. Driving on the highway. All these cars end up on the sidewalk. People in every direction. No words exchanged, no time to exchange. When all the holy colored lamps are passing. Red and black run down our veins. They all do it the same. They all do it the same way. Counting down the building above. Sweet tune starts all around. Program across playing the part of a newsstand. Cops come, hold my friend to knock him up and down. Cops. Take these chances.
Place them in a box and do make quiet the time. Lights down, you up and die. Lights down, you up and die. Digging for gold in my neighborhood, where all the old buildings stand. They keep digging it down. The copper's gonna run underground.
Middle of the wrecking ball. Through these glass and plaster walls. Letting all the shadows in. The ones I wished would follow me. Follow me, follow me. It didn't used to be this way. Follow me, follow me. It didn't used to be this way. I remember when it was night. We kissed beneath the streetlamp light. Outside a bar and a record store. Better than condos for a year or more. Now that our hearts have taken flight. Abandoned place, a construction site. Oh, how I feel like a stranger here. Searching for something that's disappeared. Digging for gold in my neighborhood. For what they say is the greater good. All I see is a long goodbye. A requiem for a skyline. It seems I never stop losing you. 'Cause every die is something new. And all our ghosts get swept away.
It didn't used to be this way. Be this way. Be this way. It didn't used to be this way. Be this way. Be this way. It didn't used to be this way. Be this way, be this way. This house of lies. Be this way, be this way. advertise. I describe these monuments. A false sense of permanence. I place faith in geography. To hold you in my memory. We're sifting through these wreckage piles. Through the rubble of bricks and wire. Looking for something I'll never find. Looking for something I'll never find. Digging for gold in my neighborhood. Where all the old buildings stood. If you dig, you down and down. Until you're caught in locked underground. It seems I never stop losing you. 'Cause every die is something new. And all our ghosts get swept away. It didn't used to be this way.
It didn't used to be this way. It didn't used to be this way. It didn't used to be this way. It didn't used to be this way. It didn't used to be this way. It didn't used to be this way. It didn't used to be this way. It didn't used to be this way.
Five on the floor, gonna start the fire. What you want, what you need, what you come here for? Well, an eye for an eye and a neck for a fight. To pick a knee down is a prisoner's right. Got blood on my hands and pride. This could make you fight or fly. Locked in love that's hard to hide. Sometimes I wanna disappear. Well, I feel kinda plain in the warmth of stress. I bested up on ability. What you got, what you want, what you never knew? The perfect gift from me to you. Got blood on my hands and pride. This could make you fight or fly. Locked in love that's hard to hide. Sometimes I wanna disappear. Never knew that I'd do time. The goal helps me realize. No wonder the call for lies.
Yeah, I care but I've missed the key. Run to man before I come with you. Lock you so might I lock you in.
Hey, what's it like? Baby, I'm the one who likes it. Sunny, you're a deity. Come the sunny, you're a deity. Now, come the sunny, you're a deity. Come the sunny, you're a deity. Getting together with the ones that do. Getting together with the ones that feel. Gonna get together with the ones that do. Getting together with the ones that feel. Today is gonna be a good day. Don't care what anybody else say. Oh, I don't need a fortune cookie. To tell me the way I'm feeling. Gonna be a good day. A good day. Woke up, spoke up. A girlfriend want me, said I drink too much. I do, good 'til. Head down, hit the bass in the party bus. Memories. My Instagram telling me everything. I regret nothing, oh. Ooh. I feel like a million bucks in the toilet. Ooh.
My head to my toes and my soul is important. Ooh. Even when your heart like dust in a storage. You still can enjoy it. Hey, today is gonna be a good day. Don't care what anybody else say. Oh, I don't need a fortune cookie. To tell me the way I'm feeling. Gonna be a good day. A good day. A good day. It's gonna be a what? A good day. Last night. Got in a fight with the karaoke mic. Shots fired, fireball. Can't tell what I'm feeling, only the wall. Ooh. I feel like a million bucks in the toilet. Ooh. My head to my toes and my soul is important. Ooh. Even when your heart like dust in a storage. You still can enjoy it. Today is gonna be a good day. Oh, yeah. Don't care what anybody else say.
Oh, I don't need a fortune cookie. To tell me the way I'm feeling. Gonna be a good day. Oh, yeah. A good day. Keep it going on. Ooh. Keep it going on. Ooh. When the morning comes. We'll be going on. Ooh. Keep it going on. Ooh. Oh, yeah. Okay. You know what I mean? Today is gonna be a good day. Don't care what anybody else say. Oh. Ouch. Today is gonna be a good day. Yeah, that's right. Don't care what anybody else say. Oh, I don't need a fortune cookie. To tell me the way I'm feeling. Gonna be a good day. Oh. A good day. Gonna be a good day.
Keep it going on. Don't care what anybody else say. Keep it going on. Oh, I don't need a fortune cookie. To tell me the way I'm feeling. Gonna be a good day. Oh. A good day. Na, na, na. Na, na. Oh, yeah. Na, na. A good day. Na, na, na. Na, na. A good day. All day, I was out. Falling, thinking about you. Buzzing by myself at night. Same place, same old rhyme. Same troubles on my mind, too. I still chase and don't know why. Forever and ever, you'd never believe. For better or worse, this is all just a dream. Whenever the pressure got you on your knees. Just take it or leave it as long as you're free. Cut me loose. What am I, what am I into? Move you soon.
To the beat of my, beat of my drum. Hallelujah. Feeling I, feeling I stand up. Make you move. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. One day, I realize. I'm never satisfied. I'm too drunk on this lullaby. Forever and ever, whenever. Oh baby, can you feel me? Whatever you do. Cut me loose. Put 'em up, put 'em up hands up. Move your shoes. To the beat of my, beat of my drum. Hallelujah.
Baby now, baby now stand up. Make some room. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. Going, going off the deep end. We sing, and preach and out the mouth and. Hoping, hoping I see you again. Cut me loose. Put 'em up, put 'em up hands up. Move your shoes. To the beat of my, beat of my drum. Hallelujah. Baby now, baby now stand up. Make some room. To the beat of my, beat of my drum.
To the beat of my. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. To the beat of my, beat of my. To the beat of my, beat of my drum. How long has it been? Shall we get into it again? Excuse our disarray. We've had no time to paint the place. The dog is always barking at the mailman. I won't waste your time with my revelations. Hello my friend, I see you're back again. Hello mystery, don't bother to explain. How about maybe it's all been in my head? Yeah well I'm tired of this black and blue, black and blue. Hello my friend, I see you back again, back again.
Hello, mystery, don't bother to explain, to explain. How about maybe it's all been in my head, in my head? Well, I'm tired of this black and blue, black and blue. My dear, come again. Your voice is fading out again. Out of the long dripping, I found my innocence again. The dog is always barking at the mailman. I won't waste your time with my revelations. Hello, my friend, I see you're back again, back again. Hello, mystery, don't bother to explain, to explain. How about maybe it's all been in my head, in my head? Well, I'm tired of this black and blue, black and blue. I want it, I want it, I want it all. I want it, I want it, I want it all. I want it, I want it, I want it all. I want it, I want it, I want it all.
How long has it been? Shall we get into it again? Excuse our disarray. We've had no time to paint the place. The dog is always barking at the mailman. I won't waste your time with my revelations. Hello, my friend, I see you're back again, back again. Hello, mystery, don't bother to explain, to explain. How about maybe it's all been in my head, in my head? Well, I'm tired of this black and blue, black and blue. My dear, come again. Your voice is fading out again. Out of the long dripping, I found my innocence again. The dog is always barking at the mailman. I won't waste your time with my revelations. Hello, my friend, I see you're back again, back again. Hello, mystery, don't bother to explain, to explain. How about maybe it's all been in my head, in my head?
Well, I'm tired of this black and blue. Hello, my friend, I see you're back again. Back again. Hello, mystery, don't bother to explain. To explain. How about, baby, you hopping in my head? In my head. Meanwhile, outside, I guess I can do, I can do. Baby, put on your high heel running shoes and let's just run away. I got the plan to kill your blues and all it's gonna take is you and me. I got a full tank, lady, and I'm ready to drive. I got a full tank, baby, just look up at the sky. Don't you pack a bag, I'll buy you all the things when we find a place to stay. Yeah. Whoa. You say that you hate it here. Why don't we disappear? If you want to go to the moon, I'll take you there, baby.
Pick a spot on the map. I'll get us there as fast. If you want to go to the moon, I'll take you there, baby. Pedal to the metal like the devil, gonna drive you straight to hell until you're smiling hard. Wishing on a model that your engine starts to throttle like a shooting star. Yeah. I got a full tank, lady, and I'm ready to drive. I got a full tank, baby, just look up at the sky. Name a time and place and I'll come get you, it don't matter if it's near or far. No. Whoa. You say that you hate it here. Why don't we disappear? If you want to go to the moon, I'll take you there, baby. Pick a spot on the map. I'll get us there as fast.
If you want to go to the moon, I'll take you there, baby. Hey. Where you going? I'm going, too. Where you going? I want to ride with you. Where you going? I'm going, too. Where you going? I want to drive with you. Whoa. Hey. You say that you hate it here. Why don't we disappear? If you want to go to the moon, I'll take you there, baby. Pick a spot on the map. I'll get us there as fast. If you want to go to the moon, I'll take you there, baby. Yeah. Woo. Haha. Zoom. I can't get no satisfaction. I can't get no satisfaction. 'Cause I try, and I try, and I try, and I try. I can't get no. I can't get no. When I'm driving in my car with the radio on. Playing my favorite song.
I got some useless information. Coming from my imagination. I can't get no. I don't know. Hey, hey. That's what I say. I can't get no satisfaction. I can't get no satisfaction. 'Cause I try, and I try, and I try, and I try. I can't get no
Comes home and tells me. How white my shirt he sees. No, buddy. He can't be a man because he doesn't smoke. The same cigarettes as me. I can't get no. No, no. Hey, hey. That's what I say. I can't get no satisfaction. I can't get no. Goodly option. Because I try, and I try, and I try, and I try. I can't get no. I can't get no. When I'm riding down the road, and I'm doing good. I'm trying my best, and I'm trying to make some dough. Baby, baby better come back very next week. Because you see I'm all you can speak. I can't get no. No, no. Hey, hey. That's what I say
All right. Welcome back. Delighted to get started and invite to the stage Greg Schott, who is the CEO and General Manager of MuleSoft. I think this has been one of the main topics of conversation, at least I've had in the break. Greg, welcome. Thank you so much for spending time with us. You're the man of the hour, I think, today. In any case, yeah, turn it over to you. Yep.
All right. Thank you. Hey, everybody. Some of you know MuleSoft. We've worked together over years, and some of you are probably just coming up to speed on it. For those of you who know the story, I apologize. I'm going to give a two-minute primer on MuleSoft, and then we'll get into the meat. We all know this. Did everybody get that? Okay. The mission of the company is fairly straightforward. It's to help organizations change and iterate faster by making it easy for them to connect the world's application, data, and devices. It's actually a fairly straightforward top-level mission statement. Once you click 1 level down into that, things get incredibly complicated, and that's really where the opportunity is for us. As organizations continue to grow, with all the cloud apps, now an average enterprise has 1,100 cloud apps.
MuleSoft, three or four years ago, we did an internal survey. We thought we had maybe a dozen cloud apps. We had NetSuite, we had Salesforce, we had Marketo, and a couple others, I thought, kind of the big nexus, big ones. We found out that we had 250 cloud apps at MuleSoft. Big companies, 1,100. They'll have 80, 90 in marketing, 70 or 80 in finance. Everybody is dealing with this problem, just kind of bring your own app to work problem, and then everybody still has all their legacy, all the mainframes, all the data, everything that's been built up, SAP, Oracle, all the mess that they have to deal with. This is a problem for every single time somebody is running a mobile app or an IoT app or any kind of process. They tend to need to connect to, on average, 35 different systems.
What they do is they Let's see if that builds out correctly. Back it up one if you could, please. Can we back that one? Back it up one. Sorry. Leave it there. Okay, here we go. What they end up doing is they write custom point-to-point code, and that works if you make it happen for an individual app to app. They start doing these one-off, point-to-point, wired up. What happens over time is the project gets done, but you end up strangling the business. You start losing. It's really expensive. It's really fragile. It's really insecure. You start losing control of your business with all the spaghetti code. It is a massive cost problem, too. Companies spend approximately $700 billion a year doing this, $30 billion a year in software and the rest in writing custom point-to-point integration code.
We never call this a TAM, because it's obviously we're going to make it better, and we're going to shrink it over time. When we were doing the math for our S1, at our current penetration rates, where we currently were, if we just extrapolated out by company size, at that moment in time, we had a $29 billion TAM projected, and we were probably single-digit to maybe 10%-15% penetrated at most of our customers. We think the TAM is many tens of billions. It's not just the cost, though, it's the agility, and that's even more important. It's not only saving companies $700 billion in pain, but it's all how to get them to go faster and be more agile in this environment. A lot of folks ask the question, okay, there have been a lot of solutions over time.
We had TIBCO. We had IBM WebSphere. We had all these different ways of doing this. There's been integration problems. There's been integration solutions for decades. Why now? Why is this market actually going to solidify into something much, much bigger? I think of it actually very similarly to the way one might have looked at Siebel and Salesforce. Somebody could have looked at Siebel and said, "Okay, well, the CRM market, if you want it before pre-Siebel, the CRM market was tens of millions. Siebel, it was a billion." You might've said, "Well, CRM market's going to grow 15% a year at a billion." You look at it, and Salesforce with the cloud unlocked tens of billions in market opportunity around CRM that just wasn't there. We have that same kind of opportunity, and it's driven by the API.
That's the fundamental change here that allows you to build out a platform and a product on top of this, where none could've been built out before. The way to think about it is, when you think about the internet, the internet was around for 20 years, from 1970 to 1990. It didn't go anywhere, and then in the early '90s, we had HTML with the first real API on top of the internet, and the internet just exploded. That was the fundamental change, was the API. Now, here we are, fast-forward to today, and now we actually have APIs sitting on top of all these other systems. We've got APIs sitting on top of Salesforce, on top of Workday, on top of SAP. You can build APIs on top of your legacy mainframes.
You now have this ability in a fairly standardized way for systems to communicate. It does not make sense anymore to hardwire it point to point because you have these APIs. Some people ask me, "Okay, but if you have the APIs, can't they just talk to each other?" I don't want to get into the technical aspects of it, but technically, the APIs can't talk to each other. They're mute. They don't talk to each other. They just wait for somebody to ask it a question. All those APIs are ready to communicate, but you need something to communicate between them, and you don't want to hardwire the integration code into the applications, because then you've just created that same kind of point-to-point spaghetti all over again. What we tell our customers is, you need to go build out an application network.
This, to me, is the fundamental game changer that I think if you go out and talk to most CIOs today, they will not use the word application network yet. They will not use that term. Our best customers, the ones that are really leaning into it. We just got done delivering a keynote with Unilever and Jane Moran, the global CIO at Unilever, and she was talking about how they're transforming Unilever with the application network they're building on top of MuleSoft. We're seeing it in big banks and big airlines and big insurance companies, all the way down to midsize organizations are starting to build out these application networks. If you think about a computer network, computer networks started getting built out in the early '90s. IT people didn't think, I need to go build out a computer network.
They just started, I need to do voice, I need to do video, I need to do web, we kept buying more Cisco routers and switches. Now we are at a state where an organization, a manufacturing plant, a law office, a hospital could not even run without their network. Their network is at the core of everything they do. We stopped there. We stopped at where Cisco left off, which is just the computer network, and that was the end of standardization was there. Now I can go buy a video conferencing gear or an iPhone, and everything talks computer network, talks TCP/IP, but nothing goes above that layer in a standardized way.
Now with APIs and with Anypoint Platform, which is our product, now you can actually build an application network to layer up where everything starts being composable, everything starts being pluggable, and companies start reusing. When they create a patient record or a student record or an inventory record, they start building out those APIs. They start reusing all of them. When we go to one of our bank customers and they say they have built 8,000 applications, it is not because that bank needed 8,000 applications to run. It is because everything is built in silos, and they did not have visibility into all the other stuff that has been built. We provide this ability for everybody inside the organization to see all of that work that has been done before and start to reuse it. That is when you start seeing the clock speed of business speed up.
That is who we are. I will just give you two minutes on the acquisition. We had been partners with Salesforce for years. We had been a customer of Salesforce. Salesforce had been a customer of ours. Marc and I had talked for some period of time just about trying to figure out how to do more together. I could tell year after year that the interest and the drive to do digital transformation for Salesforce's customers continued to expand as the platform expanded. When Marc and I met back in February, and we started talking about this, he was saying, "We see digital transformation. Salesforce is now thinking about digital transformation of industries." Well, I was saying, "We think about we are the engine for digital transformation.
We are at the core of all that digital transformation." Putting the two companies together felt like a really amazing strategic fit. I can answer more in the Q&A, but it has turned out to be exactly that. I had a very high degree of confidence that strategically, this was the right fit. You never know until you get in just how well that is going to go. As we have gotten in and as we have seen it, Simon Parmett is going to join me in a second to talk about how it is working in the field. We are seeing that kind of traction. We are seeing how well it is working with the industry analysts, with our customers. Everybody understands the power of this, and it is just working. It has just been amazing to watch.
I want to bring up Simon to talk a little bit about what we're seeing in the field.
Okay. Building on what Greg said, just a quick glimpse into what we're actually seeing in the market, and also a little bit of insight into what we're seeing internally as we work with the Salesforce teams. If I were to put just a bit of a headline around or a wrapper around my comment, I expected coming into Salesforce that we would see good, and that it would take a significant amount of evangelism and education, both of the internal communities within Salesforce, the partner network, and the customer. What I've seen is actually extraordinary. The customer feels this urgency, understands the importance of what we do, and has a very bright line connection between what MuleSoft does and what they are trying to do, both with Salesforce in a big way, as well as the other applications, and core initiatives in their environment.
MuleSoft has very well and very quickly moved into the center of the story, both with the customer and the internal narrative within Salesforce. That would be the other big upside around my choice of extraordinary as the word to use. The way that Salesforce teams, particularly in the field, and within the product organization, have embraced us, and embraced us for all the right reasons, has been nothing but extraordinary because they also so acutely understand what the Salesforce customer is going through and what their challenges are in being able to realize not just the value of what they've purchased and what they can do with those applications, but the broader value of what it means to drive digital transformation and a very different way of engaging the customer.
That's the big eye-opener, for all of us, has been the level of pull and understanding in the market for what it means to engage the customer in a very different way, and how to leverage Salesforce and MuleSoft together in doing that. Two slides to just provide, again, a little bit of visibility into what we're seeing in the market. It is relatively early days. We're just shy of five months post-close. We established a tremendous amount of early traction, with Salesforce. We did all of the planning we possibly could. It was a relatively short number of days from announcement to close, but we did as much planning as we possibly could, and on May 2nd really did hit the go button in a big way. I'll share a little bit more about some internal observations on that one.
In the 4 formal months, June, July, August, and September, that we've been heavily acting and executing with the field, and in the 30 days, again, that we did some heavy post-close planning, this is what we're seeing. 28% of the pipeline that MuleSoft now has is joint engagement. That's split roughly 50/50 between where we're seeing net new opportunities that MuleSoft was not engaged with, and the other half about equally, again, equally split, to where Salesforce has been helping us in influencing and advancing those opportunities. 55% of the joint engagements are with large enterprises. Put a rough stake in the ground at approximately $1 billion in annual revenue when I define large enterprise. The key takeaway on that one is that we're seeing and acting against a relatively similar population.
In other words, MuleSoft and Salesforce are selling into a very similar buyer that actually understands and is looking for what we do, particularly in the large enterprise. They have significant scale, significant complexity, and velocity of business, where what we do is top of mind for them. It was again, a very good positive upside surprise that Salesforce already had conversations engaged with those buyers. That has accelerated our joint engagements as well. The international piece is we're simply seeing about 31% of that pipeline in international regions, meaning non-North American regions. Very consistent with MuleSoft's existing business as well as Salesforce. The takeaway there is we have gone very broad within the Salesforce ecosystem in driving MuleSoft into the marketplace.
We've taken a very broad and aggressive approach in enabling and activating the Salesforce sellers and partner network, and it's worked extremely well. I was actually a little bit cautious on that one as well, thinking we should be a little bit careful. Let's do this in a staged way. Salesforce, right from the get-go, was, "We go big. You are able. We can do this. We have customers globally that need it. Let's roll." The teams globally have rallied to make that a success story as well. Going a little bit deeper into how we measure the success of our joint work together. How do we actually know if it's working? Very metrics-driven, very analytic in the approach. 2 critical metrics right off the top. ASPs, average selling price.
We're seeing a 1.3x uplift over our historical average selling price with MuleSoft over the last 24 months. 2, conversion rate. Conversion, and by the way, the ASP is both, we looked at the cohort of both closed business together, and we now have a significant number of joint wins under our belt. We also have looked at the pipeline of business and watching the behavior of that pipeline and the ASP of that pipeline as it matures, and comparing that to historical behavior of prior cohorts. On the conversion rate side, similar analysis, similar time frames, and we're seeing a 1.9x in conversion rates. With closed business, we're seeing a 1.9x conversion rate, or 1.8x conversion rate actually, improvement. With pipeline, it's currently looking like 2x. Slight improvement for a blended rate of approximately 1.9.
We're seeing faster movement to close. We're seeing increased velocity, and we're also seeing, obviously, increased close rates. Two big drivers, C-level engagement. We're seeing a 10-point increase in our ability to engage with the C-level in the right kind of conversation, and we're seeing a 16-point increase in the type of conversation. We're getting increasingly to the right audience, and even more so, we're having the right conversation. The biggest upside surprise for me on this slide was I knew that we would get, or I believed we would get, significant uptick in the C-level conversation, given Salesforce's engagement and access. What I was thrilled by and was not sure coming into the engagement, was how much uptick we'd see around digital transformation.
It signals to me that the Salesforce buyer, not only are we talking to the same audience, but that buyer is very acutely aware of what they are doing in the market, what they need to do in the market around the imperative for a different way of engaging customers, and the broader digital transformation. Before we move into some Q&A, just a few takeaways. One, again, the broader umbrella is the internal response, and the market response has been overwhelmingly positive. It puts some stresses on the business, no doubt, in terms of delivery resources, in terms of scaling our partners. We're driving that hard. Again, the big upside net positives have been the overwhelmingly positive response of the market to what we do, particularly the comfort with MuleSoft and Salesforce together.
Salesforce made an aggressive move into the API and integration space for all intents and purposes, making a play into the middleware space. That strategy, I believe, is paying off quite well. The receptivity, not only in terms of pull, but the customer's understanding of why this combination makes sense, has been very positive and very strong. If you'd like to join me back on stage, we'll take some questions. Andrew has the mic, I think we'll do it that way.
Thanks. This mic is on. Thanks very much. Kirk Materne with Evercore ISI. I'm sure Keith will come in a little bit and talk about how he's helped verticalize the Salesforce at Salesforce, and I think, speak the language of industries. You all were sort of a horizontal API platform, I'm curious just about how powerful it's been to marry up more of a verticalized Salesforce that can speak to the challenges of integration by vertical, and how that's helped propel you guys forward, and how you think about that going over the next 12 months.
I'll start. I think it's early days to say that we are starting to really engage heavily on getting the Salesforce vertical teams up to speed on vertical integration specific. That's going to be 6-12 months before we're at that point. We had already started building out some verticalization at MuleSoft, but the scale just wasn't there yet. We're going to see a lot of traction as a result of it, and it's going to be a big, we call it rocket fuel. We're going to see rocket fuel from that, for sure. You're going to handle the-
Yeah.
Got it. Okay.
Hi, it's Keith Bachman from Bank of Montreal. I wanted to ask you about the longer-term competitive landscape. Yesterday, I saw some impressive demos about what MuleSoft's doing with Salesforce to advance a lot of different activities. Against that backdrop, you're also a key partner of SAP, of Oracle, of IBM, many companies who don't necessarily want to nurture the long-term success of Salesforce. While the customers ultimately decide, your competitors may influence outcomes as just maybe working with MuleSoft less over time. How do you think about now that you're part of Salesforce, the majority of your revenues, I would think, are integration and attachment to other vendors besides Salesforce. How do you balance that competitive dynamic longer term?
Yeah. Their legacy, pretty creaky products at Oracle and IBM, and we were selling against those for years. Frankly, the customer's in charge. That has never been an issue for us where the customer says-- You can have an issue where there's just a lot of account control, and the customer says, "I'm going to buy everything from Big Blue." We all know there's some of those buyers out there. For the most part, people, the customer forces open APIs. The customer requires that all of the technology vendors work with each other. Very hard to box somebody out in this. The only time we ever had that happen was one of the large EHR providers and electronic health records providers. That took a long time to pry that open, but eventually, we finally got customers to pry that open.
I don't see that as being a potential failure mode. I don't see that as being an issue.
As you move the mic, regulatory and compliance is actually helping in that area with open API initiatives, for example. The whole world is moving to a much more APIified open environment, which is also helping that cause.
Yeah.
Thank you, Andrew. Mark Murphy with J.P. Morgan. Great to see you again. MuleSoft, if you go back a couple of quarters, I believe you always had a hybrid model. There's cloud deployed, and there's on-prem deployed. I think you had said the bookings mix was around 50/50. The new bookings mix, I think, had gotten to around 50/50. I guess I'm just curious, becoming part of Salesforce, is that actually going to accelerate the cloud mix that you've got on the new booking side? Simon, you've given us a lot of great metrics. I don't think we saw that one. Just because it's the center of the cloud universe, or I guess the flip side could be, is there a bit of an offset because there's some pretty large Salesforce customers where maybe they have big on-prem assets that they want to pull into the Customer 360.
Just where do you think that's going?
Yeah. It certainly would have the potential to accelerate it just because there's going to be additional projects that are going to be within the Salesforce ecosystem. Some of the net adds that we're seeing in the pipeline are adds that are going to be more Salesforce-centric than before. We're going to continue to see the reason we were still 50/50, and there's still going to be those
the institutions that look at the nexus of their IT or their data or their SAP instance or whatever as being very much on-prem for the time being, and they want to start on-prem, and then a lot of them want to have that ability to then move to the cloud later, which is what we feel really great about our platform because it's the exact same platform in the cloud or on-prem, so there's no rewriting code to move stuff from on-prem to cloud. I don't see that mix dramatically changing with Salesforce. I think there'll be general pressure moving up toward the cloud, but not dramatic.
We're actively working with several hundred Salesforce clients now with active opportunities in the pipeline. As you saw from the graphics, the majority of those are large enterprises. Those large enterprises, the three or four that I can cite as closed in the last couple of weeks, have very large Salesforce estates with big, big legacy debt and legacy investments, and they need to deploy in a hybrid environment. There will be some cloud deployment, there will be some on-premise deployment. Some of those will be all on-prem if need be, based on where their data resides. The large enterprise, we will likely, that split, will, as Greg said, probably have a bit of a cloud shading to it, but will likely reflect the industry's evolution to the cloud.
I think we'll remain a few points, I can't predict how many, but we'll remain a few points ahead of that curve, but look a lot like that adoption curve because that's where the large enterprise is going, and we follow that gravity.
Thank you. Brad Zelnick with Credit Suisse. The metrics that you've given us, very helpful, so I appreciate the lift that you're getting from being a part of Salesforce, and I think it's natural, big company acquires small company, to think about the expanded distribution and everything that you're seeing. If we were to look at it from the other perspective, by having Mule as a component of a Salesforce deal, being able to connect front office to back office, is there any, I imagine you don't have metrics handy to describe the benefit from the other direction, but is there any kind of anecdotes or perspective that you can share to help us appreciate that?
Yeah. It's pretty exciting when you hear Because hearing our reps talk about, they're talking about how, you look at reps talk about how incredibly busy they are, and that's just, I love hearing that. They're busy, and a lot's coming their way, and that's great. What's really exciting on the flip side is you'll hear Salesforce reps talk about how, "That was something that I used to have to go in, and I kind of had to wave my arms around it, and when the customer asked the question, I had to, 'Well, you could try this, you could use that. Good luck.' Now I've got an answer. Now I've got a great answer. Now I've got a transformative answer that is part and parcel with everything we're trying to do." It is changing those conversations.
I don't think we have metrics yet in terms of how it's, and it'll be a hard one to measure, the incremental lift we see. Certainly anecdotally, I'm hearing all the right things from the reps.
What I can say is it's the primary use case. We are interrogating and inspecting use cases aggressively, so we understand where the sweet spot is and where we're seeing the most pull. By far, it's the most predominant use case, and your assumption is, I believe, right on target. Again, not enough closed data to be able to really rely on that pool yet, as a valid sample and predictor of the future. We're seeing a tremendous amount of pull around the scenario that you just described, and we're seeing a tremendous amount of awareness from that Salesforce seller around this pain, which tells me it has been around a while. Speaking openly, it has been around a while, and Greg's dead right. It's something that we sold around, and now we can sell squarely into.
That language around engine of digital transformation or driver of a very different form of customer engagement, becomes a differentiator and a value prop that no other CRM or application vendor that touches the customer can claim.
Hey, Ryan MacWilliams, Barclays. Good to see you again. When we did the IPO for you guys, the vision was always that you are this kind of great horizontal platform that can address the whole integration needs of a company. Now, as part of Salesforce, the opportunity initially is Customer 360 and all the stuff that you are excited about in the short term. How are you making sure that you stay like that horizontal platform and still be available for other integration scenarios and not just get dragged into just one part?
Absolutely. That right there is probably one of the most important questions that I think anybody should be asking. First we got to work on some terminology. I think there's going to be some confusion for a little while, and I just wanted to see if I can help with it. Customer 360 at the center of the circle that you've probably seen it today, I'm assuming. The concepts around Customer 360 is about unifying customer ID across Salesforce clouds. Okay? That is not MuleSoft technology. That's being worked on, and it was worked on before the acquisition, and it's part of core Salesforce, going to be part of the core app. Everything that MuleSoft is doing about a horizontal platform to connect everything that you have as well as Salesforce, that remains the MuleSoft Anypoint Platform.
We've been very intentional about that, to make sure we don't have, but we are going to have this confusion because there it is. We're trying to be intentional so that people can understand. In fact, that's why we structured it the way we did it. We structured it as MuleSoft, the field organization, the marketing organization, and the entire product team, product engineering, all reports into me at MuleSoft. We want to keep that neutrality. We believe that's critical to be able to close three, four, five, $10 million ACV deals. The minute we start becoming a tying together some Salesforce clouds, that's interesting. It sells short the real transformative capability of what we have, and we don't want to start making it go that direction. That would be a disservice to the asset that we have here.
It gives me confidence that Greg and Keith and Mark are unequivocal, Bret, are unequivocal about that neutrality point. Frankly, it gives me even more confidence that the market demands that. There really is no play for a MuleSoft, and therefore a MuleSoft and a Salesforce, in the market if we're not endpoint agnostic. We must be able, Greg said it just a moment ago in the keynote. For MuleSoft to be able to deliver on its value prop to the customer and its resulting value prop to Salesforce, we have to be able to connect anything, any data, any device, any application, any system. That's where we thrive, and it's exactly what Salesforce's customers need Salesforce to do to power those clouds and power that customer transformation. It's great when you have leadership aligned.
It's frankly even more powerful when the market is providing you with a very clear and distinct path.
Hey, Greg, Simon, John DiFucci from Jefferies. Salesforce has done a lot of good things over the years, a lot of things well. One thing I think some people in this room would question is how well they, or how efficient they've been at integrating acquisitions. It's taken a long time, ExactTarget, Demandware, others. Given that your title, Greg, is CEO and General Manager of MuleSoft, and Simon's President, Field Operations at MuleSoft, doesn't say salesforce.com up there anywhere. It's given, you've seen some benefits here, but I just wonder, have you been given the vision of how this is going to develop over time? Because there are some reasons, especially with MuleSoft, unlike other acquisitions, that they should never really truly integrate you.
Yep.
I think Bret was up there earlier, and he said they're committed to MuleSoft being a neutral integration platform. In order to do that, maybe that persists forever. I'm just curious what the long-term goal is.
Yeah. Great follow-on to that question. Yeah, it's interesting, coming into a company that had been through 60 acquisitions prior to ours, and there's all kinds of learnings about what worked and what didn't work, and Salesforce is very good about trying to keep that beginner's mindset about what worked and learning from that. We came into a situation where some of the prior larger acquisitions had gone too slowly, and things have been kind of left out, hanging out. Ours was the opposite. It was breathtaking how fast it went. Those are the parts that we said going in were going to happen. The G&A functions, HR, legal, real estate, talent acquisition group, finance, in fact, those went in almost instantaneously.
What was just mind-boggling was two weeks post-close, and as Simon mentioned, it was a very short period before the close. It was a record. Two weeks post-close, we were passing leads. The speed at which it happened was unbelievable. Where, John, where I'm feeling confident is to Simon said about, number one, you've got the customer saying, "This needs to be neutral." Number two, the size and scale, the ability to grow. I think Keith and I are talking about how do we turn this into a $10 billion business? That's the stake that we're putting in the ground. This can be $10 billion. Let's go figure it out. That, and I think as a separate business unit, makes a lot of sense, right?
The thing that Simon didn't mention that's been so cool is even though we have similar or same buyers, it's different budget.
It is infrastructure budget versus line of business, sales budget, marketing budget. We're going after, even though it's great because we're there together, but we're going after different budget pools. I have the exact same questions. You say to yourself, "Is it going to be two years? Is it going to be five years? Is it going to be 10 years? Is it going to be forever?" I've looked at some of them, you look at, and I know it's different. This is enterprise software, and everything's different, but you look at YouTube and Instagram and there's examples, LinkedIn, Microsoft, there's examples of companies where those stay, get all the goodness of being together and get all the firepower of being together, but also get all the goodness of having that. We need it from a neutrality standpoint. It could go for, who knows, indefinitely.
There is no plan right now to do anything other than let's go build a big, huge business. That's where we are.
If I can add one quick one to that. It's been a we process from the get-go at all levels, and I think that's very different from my prior experiences, having gone through a couple of acquisitions. What I mean by that is it's been very thoughtful. We have been making decisions together, and it strikes me that Salesforce has really had some learning through those 60-plus acquisitions around what level of thoughtfulness it takes, and that each acquisition comes with a slightly different strand of DNA. Really decoding that and thinking through what's the right go-to market, what's the right people approach, what's the right systems approach, and adapting a playbook to the scenario, is a unique level of flexibility that I think is very much in the Salesforce culture as well.
It's been very much a joint solve around how we do this.
Over to the right.
Thank you. Terry Tillman from SunTrust Bank. $10 billion in revenue sounds like a nice ramp for your business. That'll be good to see that.
We'd like that.
A couple questions. First, is there anything with the much bigger resource base of Salesforce that they could do to actually accelerate maybe some new products that you had been planning on? Anything you can talk about in terms of new products that might get accelerated and expand your own TAM? Secondly, what are you doing, or what can you say about retention of your top salespeople, and what are you doing to retain them as you move further along through this integration? Thank you.
All right, I'll take the first part.
Yep.
Coming in, we did not know exactly what opportunities we'd have around product synergies and to be able to leverage it, because they're fairly different types of products. We actually are starting to see some of it. Around Einstein and some of the AI capabilities that we can use, we're also seeing some things around the Experience Cloud capabilities and what we can do around APIs for those. It is starting to happen fairly early. There's going to be a lot of work around MDM that both sides, both MuleSoft and Salesforce, need to keep working on. There'll be a co-investment there. We're going to see some of it. It's going to be over the next couple of years, but it will get interesting, I think. And then on the retention side, retention cycle. I always look at retention, that's the lagging indicator.
I look at engagement as the leading indicator. As leaders, we can obviously affect employee engagement. Nothing engages a sales organization. We, MuleSoft, very similar actually to Salesforce, have a very continuous way of thinking about the customer life cycle from first touch through how we think about our selling, but also our delivery, customer success, and delivery. The current level of pull from Salesforce, as well as from the customers, is very engaging. The sales teams are incredibly busy. They're working on bigger and bigger and more exciting projects. Salesforce has great respect for our organic business as well and ensuring that we're preserving and continuing to grow our organic demand with marketing and our partners. The level of engagement is very positive within the employee base. The other side of it is obviously compensation, particularly when you're talking about sellers.
The compensation model has not changed. We're looking at 2020. We'll obviously look for areas of alignment, but the number one driver in how we're thinking about compensation across all of those field roles is maintaining engagement and being able to expand our distribution organization as rapidly as possible. Salesforce, in the conversations I've had of late, are very aware that MuleSoft, as you mentioned on that path to $10 billion, an important growth engine for the business. Growth engine incrementally, but growth engine also in terms of what we can do to drive more and more expansion within Salesforce's clients of Salesforce products. A happy, engaged, well-compensated sales organization is a big part of that, and there doesn't seem to be any lack of alignment there.
Will Danoff, Fidelity Contrafund. Can you give us an example of one or two customers that are very happy with your product, and what do they see, if we would ask them, you've adopted this application network, what happens? Thank you.
Go ahead. You want to go first? Yeah, sure. I think a classic would be an HSBC, for example, and what we're doing with them. Something that we've been relatively public about, has been how we've helped them power their digital transformation globally, specifically around a mobile app that they recently launched. That mobile app took them, without providing too much transparency that would be client specific, that was a longstanding project that MuleSoft, once we engaged, were able to deliver with them in a couple of quarters, which was a significant several X improvement over the clock speed of the business previously. Their entire digital transformation is around attacking this type of project, like building out a mobile trading platform, and using that to populate their application network. They refer to the digitization of the bank as their digital journey.
The backbone of that digital journey is the API. Every program and every project that they launch now is on the MuleSoft platform, which means that it's API-led, which means they're creating reusable assets that populate that application network. As that application network gets more and more robust, it is also increasingly secure, multiplicatively secure as it expands, each node as well as the perimeter. It provides them with visibility that no enterprise, frankly, has without an application network. You can't tap in. There's no system, there's no application that I'm aware of in the enterprise today that allows the CIO and the community that needs to know access into what data's flowing where, which systems are live, which APIs are being called by whom, where are there vulnerabilities, where are there not.
That's the next big step that this whole thing takes, is that application network vision becoming increasingly real for our clients. Another one that I won't mention by name, large rental car organization globally, with many fleets addressing many different segments, completely reinventing the customer engagement. I think you're all seeing it when you land at an airport and go to rent a car, that the entire form of customer engagement is changing to a completely digital engagement. When the enterprise talks about digital transformation, and half of the execs out there may not fully have their hands around what it is, that example is a prime example, and it's fueled exactly by what we do and by what Salesforce does.
That's another great example, by the way, of a joint client, where Salesforce is completely transforming the look, feel, and processes around customer engagement, completely digitizing it. The whole thing really comes to life when you get the data where it needs to be so that that car drives itself off the lot, no people involved, happy customer in and out of that lot in 45 seconds versus, let's say, 10, 15 minutes. That to me is a 30X improvement. Because the customer velocity, to me, even trumps the IT velocity.
Hi, J. Derrick Wood at Cowen. Given the level of independence you guys are keeping, I wanted to touch on what the sales structure is and maybe what's effective to
core AEs at Salesforce pass on leads to MuleSoft? Does it go the other way around and they let the core AE target? Do they go joint? How do you see that needing to evolve as you scale the business much bigger?
Right. Good point. In that planning phase, we had one core principle between the two organizations, focus. Singularity of purpose around where we put our energy, and that energy was into what we do refer to as lead pass. Identify both incumbent customer scenarios and prospect scenarios where MuleSoft can have a meaningful additive impact for the customer and get us engaged. Salesforce had all of the mechanisms in place to be able to do that. Wiring the systems together, it's all done digitally. We're using MuleSoft. Wiring all of the systems together to be able to do that was turnkey. We had that online again, Greg, manual lead passing, meaning email, for the first couple of weeks, and then we hit the button and went hard. We also are focusing, I would call that reactive largely.
We've done a lot of enablement around it, but it's largely reactive. The proactive side, we also initiated about four months ago, and that's where we're putting the bulk of our energy going forward, which is proactively targeting where, again, based on where we're seeing traction, both use case and type of organization, behavior of the organization, size of the organization, industry. We are zeroing in on where we can have the most impact and value for the client, and we're engaging those sellers much more proactively. Proactively with enablement, taking them deeper in what we do and what impact that has for the client, so they can effectively, using a bit of a metaphor, they can effectively play the first three innings quite effectively without needing full MuleSoft support, which gives us more leverage and gives them additional credibility in front of their client.
Moving from this reactive mode or augmenting the reactive mode with the proactive mode is what we'll be focused on for the next 6 to 12 months as we gain enough intel to understand what chapter 3 should look like.
Thanks. As we kind of frame the scope of the opportunity around application networks, what's your largest customer spend today? As you think about a large Fortune 500 enterprise that builds out an end-to-end application network, what could that spend kind of look like?
Yeah. I'm not sure if we've stated what our largest customer is, but we have several north of $5 million. I think you could easily see people in the $20s to $30s, because we're putting on top of the application network, it's not just about connectivity, it's about analytics to see Because we see all the data, and we see all the metadata, we understand everything that's flowing through. We have an unbelievable ability to help you run the business. Think about the concept of a firewall. Used to be to protect, I put a firewall around my perimeter, keep the bad guys out, everything was fine. Now my sales data is at Salesforce, my financial data is at NetSuite, my HR data is at Workday, and a whole bunch of stuff sitting at Amazon and AWS. I mean AWS and Google Cloud. How do I protect it?
You basically are protecting thousands of these endpoints, and the only way to really do it is through this application network. There's a whole bunch of security work that we're doing on top of it that'll have more margin expansion. I mean, TAM expansion. There's a lot of room to go.
Thanks. Ross MacMillan, RBC. As you think about the way that the app network and the API, I guess, network, can be linked to kind of the declarative model that Salesforce uses in building applications, can you maybe just talk us through how you see those come together? I think you could really break down some big barriers in-
Yeah
application extension.
Yeah. It's great. If there was one thing that I would say that had been a bit of a struggle for MuleSoft, we had come from very sophisticated, complicated integration, and most of the time, because of the complexity of the endpoints, you're having a mainframe talk to SAP, or even if you're trying to do SAP talking to Marketo or something, it tends to be fairly complex. You start with a set of tools, and the developers actually, you give them graphical tooling, but they actually need to drop down into the code sometimes and to write Java code just to deal with some of the complexities. Because you come from that DNA, you have a little bit of that, what's wrong with colon backslash enter? It seems so obvious.
Over time, what we've done is we've gotten better and hired a lot of UX teams, and it gotten better to have, now we have web-based UX. We talk about this kind of the triangle, the pyramid of users, and the top was high priests of Java. We worked our way down to where we were getting to a fairly basic developer, didn't even ask, it's really kind of core IT person. Hadn't really gotten all the way down to where you get into kind of an admin being able to point click and get two systems to work. Salesforce is going to help us get there a lot faster. I don't necessarily believe that a lot of this will end up in the hands. There's this concept of the citizen integrator. I've never seen a citizen integrator listed on anybody's LinkedIn profile.
I don't know who that is. I think you're going to have to have some level of technical aptitude to deal with error handling and security issues. You know, having an admin say, "I'm just going to start deleting data out of my SAP system and moving it from here to here." You do need some basic fundamental IT controls and IT capabilities. We're going to get down as Salesforce is going to help us get as low as we can possibly go for clicks, not code, which is what Bret talks about. We are going to be going there as fast as we can, and the capabilities are there with Salesforce, but there's always going to be some element of complexity here that is going to be required just to do the heavy lifting. I think we're out of time.
Do you want to do one more?
Just got one more.
Okay. Last one.
Hey, Greg. I keep closing out here.
Hey.
Alex from Piper. As a standalone company, you guys have a lot of aspirations, I think, to add to the platform in multiple contexts. You mentioned security right now as well as being something. I don't think we as investors have heard about Salesforce acquisition having a target like $10 billion of revenue as a standalone-ish kind of business. I guess my question is, do you have the autonomy to expand on that vision in an inorganic basis as Mule?
Time will tell, it certainly feels that way. What we've been getting from Keith and Mark is, "Go, go. Let's see what we can do with this." Mark has said to the company that he knew this was big, he knew it was strategic, he knew it was the right thing to do, but he's actually been surprised at just how much bigger it is than what he had originally thought. By the way, let me be really careful. We did not add $10 billion to the 23 or anything else, okay? It's us having internal conversations about how big could this go. There's no timelines on that, it's just let's think big and broadly. Mr. Hawkins certainly did not give me permission to go add 10 to his number. All right.
All right. I think that's everything. Just please join me in welcoming and thanking Greg and Simon for their time today.
Thank you.
We are going to take another quick little break, then we will have Mark join us. He is on his way over here. We have a few minutes if you want to step outside, then we'll let you know when it's time to get going again.
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Starts to rain, my heart begins to know. You grab the ring as I am sinking, oh. Driving me crazy, watch me as I sway. You can't run from me anyway you try. You're so fishy, sitting so patiently. I'm just waiting to go down. Look outside at the rain, cold stone pavement. Look outside at the rain, cold stone pavement. Hey, hey, hey. Hey, hey. You got your driver's seat, you're in the car to go. Start up the window, hustle to Mexico. Got your seats down, two folds, harmonica, oh. Under the rain on down in Soho. Sneak in apartment, watching tonight. Out of the ring light, here with me. You'll never hurt the bottom line. Look outside at the rain, cold stone pavement. Look outside at the rain, cold stone pavement. Look outside at the rain, cold stone pavement.
Look outside at the rain, cold stone pavement. Hey, hey, hey. Hey, hey, hey.
Walks like a man. You'd think she's older. She understands. She ain't no joker. She's got the glam of rock and roller. She's got the plan. Moves like a soldier. Don't give a damn. She's getting over. She knows she can like Casanova. She knows that she's got the look and he's gonna blink. She knows that she's got the hook and he's gonna pay. She's got attitude. Rock star city life. She's got attitude. Rock star city life. She's underage, a pretty Lolita. She loves the stage, la señorita. Inside a cage, you'll find a cheetah. She's all the rage, a subtle feature. She's got that thing, take the Bible from the preacher. You'll need your faith to fight that creature. She knows that she's got the look and he's gonna blink. She knows that she's got the hook and he's gonna pay. She's got attitude.
Rock star city life. She's got attitude. Rock star city life. She's got attitude. Rock star city life. She's got attitude. Rock star city life. She knows that she's got the look and he's gonna blink. She knows that she's got the hook and he's gonna pay. She's got attitude. Rock star city life. She's got attitude. Rock star city life. She's got attitude. Rock star city life. She's got attitude. Rock star city life. You can't cut me loose until you show me. I told you the truth about this, only. Now you use confession as a proof. Do what you have to do, go ahead and act a fool. Who looks in the end? You want so bad to forget, but you cannot forget. Oh. We've been here before. Oh. You want something more. Lover, best friend, my worst enemy.
You know I won't let you get away. I guess you just can't get out of that plane. You still got champagne running through your veins. You dare me to, step up and challenge you. Either one of us can still lose, there's two to lose. Remember we said it'd be like hell through the rain. Watch as the way I stand. Remember we said that love is a twisted game, and no one ever wins. Oh. We've been here before. Oh. You want something more. Lover, best friend, my worst enemy. You know I won't let you get away. Don't, don't lie to me. Don't, don't lie to me. Don't, don't lie to me. Don't, don't lie to me. Oh, you threw me a rope. I feel so distracted. I'm self-destructing. You're superficial. Oh, without this dirty rain.
Being true to yourself could never be enough. Don't, don't lie to me. I tried to let go. Don't, don't lie to me. We've been here before. Lover, best friend, my worst enemy. You know I won't let you get away.
I keep my hands by myself. Think I dust 'em off, put 'em back up on the shelf. A little baby girl isn't me. Am I coming out of left field? Ooh, I'm a rebel just for kicks now. I've been feeling it since 1966 now. Might be over now, but I feel it still. Ooh, I'm a rebel just for kicks now. Let me kick it like it's 1986 now. Might be over now, but I feel it still. Gotta love a mountain scene. Even with a baby chill, momma call a gravedigger. Gone with the falling leaves. Am I coming out of left field? Ooh, I'm a rebel just for kicks, now. I've been feeling it since 1966, now. Might've had your fill, but you feel it still. Ooh, I'm a rebel just for kicks, now. Let me kick it like it's 1986, now.
Might be over now, but I feel it still. We could start a war for peace. Here's to that easy living, goodbye to my hopes and dreams. Cause it's lifting for my enemy. We'll pick the brains and start the war for peace. Imma get a little bit of kids in the middle. Oh, it's beautiful, don't bother me.
Feel it coming. Feel it coming. Feel it coming. Feel it coming. Feel it coming. Feel it coming.
Ooh, I'm a rebel just for kicks, yeah. Your love is an abyss for my heart to eclipse in. Might be over now, but I feel it still. Ooh, I'm a rebel just for kicks, now. I've been feeling it since 1966, now. Might be over now, but I feel it still. Ooh, I'm a rebel just for kicks, now. Let me kick it like it's 1986, now. Might be over now, but I feel it still. Might've had your fill, but you feel it still. I said you want to be starting something. You got to be starting something. I said you want to be starting something. You got to be starting something. It's too high to get over. Yeah. You're too low to get under. Yeah. You're stuck in the middle. Yeah, and the pain is thunder. Yeah. It's too high to get over. Yeah.
You're too low to get under. Yeah. You're stuck in the middle. Yeah, and the pain is thunder. Yeah. I took my baby to the doctor, with a fever, but nothing that she found. All the doctors in the street saying you just want to be starting something. I said you want to be starting something. You got to be starting something. I said you want to be starting something. You got to be starting something. It's too high to get over. Yeah. You're too low to get under. Yeah. You're stuck in the middle. Yeah, and the pain is thunder. Yeah. It's too high to get over. Yeah. You're too low to get under. Yeah. You're stuck in the middle. Yeah, and the pain is thunder. Yeah. And your mother may say that you're good. When you're always out there, no rules.
You're a villain, yeah, but you're a hero. Your daddy became a razor. Someone's always lying. Starting my baby crying. Mama's starting declining. You got my baby crying. You want to be starting something. You got to be starting something. I said you want to be starting something. You got to be starting something. It's too high to get over. Yeah. You're too low to get under. Yeah. You're stuck in the middle. Yeah, and the pain is thunder. Yeah. It's too high to get over. Yeah. You're too low to get under. Yeah. You're stuck in the middle. Yeah, and the pain is thunder. Yeah. You're invincible. You're invincible. You're invincible. Do they hate you? Do they hate you? You're invincible. If they love you, they love you. You're invincible. If they lie to you, they lie to you. You're invincible.
Well, the game is always talking, when nobody really talking. Got 'em arguing, rubbing shoulders. 'Til they talk about fumigator. Someone's always trying. Start my baby crying. Don't you feel inspired, saying you just want to be starting something. I said you want to be starting something. You got to be starting something. I said you want to be starting something. You got to be starting something. It's too high to get over. Yeah. You're too low to get under. Yeah. You're stuck in the middle. Yeah, and the pain is thunder. Yeah. It's too high to get over. Yeah. You're too low to get under. Yeah. You're stuck in the middle. Yeah, and the pain is thunder. Yeah. You're invincible. You're invincible. You're invincible
If you can't feed your baby, then don't have a baby. Don't blame me, baby, if you can't feed your baby. You'll be always trying. Stop that sorrow crying. I won't let you deny it. No, baby, lord, let's try it. If you want to be starting something, you got to be starting something. I said you want to be starting something, you got to be starting something. Too high, you know. Too low, you shouldn't. You're stuck in the middle. The pain is thunder. Too high, you know. Too low, you shouldn't. You're stuck in the middle. The pain is thunder. If you have a problem, just bring it to the world. I know I am someone, just let me do myself. Don't want to hurt you now because I know what's true. Since I believe in me, don't you believe in you? That's just saying.
Whoo. Gonna save him a time for my cool stuff. Gonna save him a time for my
Ladies and gentlemen, if you wouldn't mind taking your seats, we'll get started in just a minute. Again, if you can take your seats, we'll be getting started in just a minute. Thank you.
Gonna save him a time for my cool stuff. Change the world. Gonna save him a time for my cool stuff. All people they don't understand. Some girlfriends they don't understand. Your friends, yeah, they won't understand. Me, I ain't ever gonna understand. Last night she said, "Oh man, I feel so down." She turns me off when I feel herself so high. I turn around. I'm never gonna help you again no more. I know this for sure. I won't help that soul again
Tie me down. Try to hold me up. The wall ain't high enough. It ain't so right, in a game so rough. I still can't give it up. I'm out here on my own. Work what I got to get mine. Run right into the sun, say, oh. Jump so hard. I jump so high, I jump so high. I got it right. Jump so high. I jump so high, I jump so high. I got it right. Rising up. Find your light in the darkest night. The star burns inside. Heading through the haze to my glory days. When I give up, never too late. I'm out here on my own. Work what I got to get mine. Run right into the sun, say, oh. Jump so hard. I jump so high, I jump so high.
I got it right. Jump, jump, jump so high.
Good afternoon, everybody. How are you doing?
Great.
Are you enjoying yourselves the most you can? Okay. Well, I'm happy to be here, and I hope you are enjoying Dreamforce. How many of you have been to Dreamforce before? Anybody? Okay, we have a few repeat performers. I think it's going well. I just was walking around the trade show floor and just paying attention to the energy, the vibe, see how things are going, and I couldn't be happier. I'm happy to take a few minutes here to take your questions and to see how you're doing, and to see if there's anything that I can do for you. I'm going to go to Metallica. For the rest of you, the financial analysts, we have a great concert put together for you tonight at the bar. You can come to Metallica. It's your choice. Whatever your choice is. All right.
What would you like to do? Questions? Yes, Mr. Kash. Only if you agree to sing, Kash. Otherwise, I'm not doing the question.
Really?
This is what I need. Kash will be performing tonight at 8:00 at the bar. We'll be at Metallica. I won't be able to attend, unfortunately, because of the commitment I have. For the rest of you, we do have Kash a cappella for two hours. Thank you. Sorry we couldn't get you Metallica tickets. Kash.
The question for you is, congratulations, first of all. Happy belated birthday from yesterday. Company's doing fantastic. It's been nine years since the recession lifted. Nobody wants another recession. A lot of things have changed. There's political landscape, there's trade wars, all kinds of new developments that could be hard to foresee and navigate the business of this size around. You have a new co-CEO, joining with you. In the list of tech founders that are still running companies as CEOs, Bill Gates is gone. Larry's not CEO anymore, and you're pretty much the only founder that's still running the company. I'm curious how you're looking through the next four to five years to see how your job changes, how you're approaching things differently given all these developments outside and inside. Thank you.
Very short question. Not that complex. Let's take the first part of it, which is the current economic cycle. How many people here follow the economy? Anybody? I meet with hundreds of CEOs all the time. That's my job. That's one key part of my job, and I do that all over the world. The economy is ripping. Every CEO is investing aggressively right now. I just see that when I talk to them. Their confidence is at an all-time high. The tax cuts for them have been incredible. It just gave them a fever to invest. A lot of them are investing in their digital transformations. They know that we're entering the Fourth Industrial Revolution. They know they need to get their companies ready for that industrial revolution. They're basically only unleashing their capital, unleashing their wallets to do that.
I think a lot of them were cautious before the tax cuts. I think the tax cuts just gave them permission on a deep psychological level to invest aggressively. I'm not just saying here in the United States at all. I'm saying in Japan, I'm saying in Asia, I'm saying throughout Europe. That has been really a fascinating phenomenon for me to watch, to have those conversations, to engage with them, and to understand that. We've seen that we're having, obviously, a great fiscal year. You've seen the results over the last several quarters. I've continued to see that in the GDP numbers. I continue to expect the GDP to continue to perform aggressively. I was optimistic that we would hit a 4% number, that we could maintain that for some time.
To Kash's point, I've also been the CEO of Salesforce through two major recessions. I see, because the way that capitalism works and the way our economy works and the way that our world works, is that there is no continuous upcycle. Eventually, everything has to kind of come back down and reboot and reset, and then there's some natural cycle that happens. I don't know when that cycle is going to happen. I'm hearing things from certain parts of the world, mostly in Europe, when they think it's going to happen. I think that executives in the U.S. are far more optimistic. The European ones are pessimistic in terms of how long it will last. It's already the largest, I think, economic cycle growth of all time. I don't know. You guys are the experts.
We should have a natural contraction of our economy, and it surprised me that it has not happened. I don't think it's going to happen in the next two quarters. It could potentially happen next year. That's kind of a general narrative that CEOs have in their minds. When I talk to CEOs, they are mostly planning for some type of economic contraction next year sometime, in the second quarter, maybe late in the first quarter. Who knows? There's a psychic down the street we could go ask. There's plenty of people. You can give them $20 and get a better answer than I can give you. I'm just telling you what I hear. That's on our mind. Mark and I talk about that on a regular and consistent basis. We have those kinds of things built into our model. We're very fortunate.
The reason why we are fortunate, and I think most of you know this, is we have a deferred revenue accounting model, and we're very pure in regards to the deferred revenue model. That is, the vast majority of our revenue is contracted for years ahead. You see how much of our revenue is deferred. As we've gone through economic cycles, I think that they don't just hit companies with accounting models like we have as hard. We've seen, when those economic cycles happen, different iterations on our bookings, but rarely does it actually impact our numbers. You can kind of see that. If you go back and look now, you have 14 years of public operational data. It's so resilient. I don't know why every company doesn't have this kind of a model. It's better for you. It's better for us. It's much easier to operate.
It's easier to operate, not just the revenue forecasting, but also the expense. It gets you focused on what's really important. I love the accounting model. CFOs that we bring in from other companies who haven't experienced that, like Mark was at Autodesk and then came in, it's just a great model, and I'm sure he will tell you all the advantages of it. When we get to that point in the future, and nobody knows when that's going to be, I feel like it'll be exactly like David always tells me. It'll be just steady as it goes. The ship will continue to do very well.
The number 1 reason why is because we're focused on not just the trust we have with all of you, our key stakeholders, our investors, and the trust we have with our customers, with our employees, our partners, we also are deeply focused on their success. If you go over to the trade show, you'll need to go to them and to say, "How is Salesforce going? Are you buying more? Do you like it? What new products do you like? What partners are you involved in? How are things going?" I'm doing that myself. I don't rely on you to do it. I'm doing it. You're my referential integrity. In many cases, when I read all of your reports, I try to read every single analyst report.
When I see what's happening with the customers right now, I'm like, "Wow, something is really good in terms of we're in the zone with them. We have the right products." You saw the huge focus, not just on Customer 360, not just on sales and service, on marketing, on community, on analytics, on apps, on platform, on integration, on engagement, on enablement, and on and on all around the ring. The Trailblazer community, the vision that these people over there are united as a community, that they are together, and that they are working together to improve each other's lives is really inspiring to me.
The analytics that we did with them, one out of every four of them who's on Trailhead, and literally almost every single person over there is on Trailhead, one out of every four has now changed jobs since they've been on Trailhead and improved their job, their salary, their career, their position, their title, the company that they're working at, because they have improved who they are through their platform by coming to our events, by getting on the technology platform, by also working with each other.
When you go and you meet with them, as I do all over the world, every country, every city, the way that they have organized in user groups and also then by all types of different ally groups, whether it's our women's and technology group or any other specialty group, it's incredible to me what is happening with our community, I fully expect that it will be a complete and total portrait of diversity and inclusion. I already see that. We see that in a lot of what's happening. We saw it at Trailhead DX this summer.
I think we're going to see it going forward because Trailhead, one, provides this kind of democratic platform, but two, they are working as a team somehow, without our influence, to bring in all these other key stakeholders who have been somewhat ostracized from the technology industry, it is growing and expanding, and that's why, literally within hours of us announcing this conference, it was sold out. That's crazy. Those are the things I'm looking at, which is quality of the product, the quality of the customer relationships, the level of success that they're experiencing, what is their happiness, what kind of feedback are they giving us? I also watch, I respond to every email, every phone call, every social media request personally, and I listen deeply to them. That has served me very well over 20 years.
When I listen deeply to all of them and to all of you, it has helped me to tune my vision and my guidance for the company in concert with the Board of Directors. We've been able to have a clear and strategic plan that we're executing, and it's been a great experience. This summer, it became clear to me after five amazing years working with Keith, I said, "My relationship with Keith," I said this to myself, "is like we're co-CEOs," I came to that revelation on my own, I said, "I just feel like he should be recognized for the outstanding executive who he is." Okay. I said to him, "I really want you to be co-CEO with me. I think it's really important." We are running the company in partnership. It has evolved over time. You all know that.
You talk to him, you spend time with him. It's been an incredible experience for me. It's given me the ability to work on things and to spend more time in areas of the company and with customers and with all of you that I did not have. Interesting thing about being the CEO is when you're the CEO, things can start to get constrained and single-threaded, you'll get a lot of calls. "Hey, I want you to come to this conference." "I want you to go to that conference." Mostly from all of you. "I wanted you to do this keynote. I want you to do that event. I want you to do this." Imagine all of you, but multiplied by across our customers, by across industry groups, CEO groups, et cetera, it's like, whoa, I am not a master of multiple manifestation.
I can't do it all. I'm like, wow, this has been an incredibly freeing experience that I can say, "Well, this CEO's available. I can send them to help you. Keith, would you go?" That has been fantastic for me. It's fantastic for him. We couldn't be happier about how it's going. It's a marriage made in heaven, we're considering renewing our vows again, we're moving forward. I'm very excited about it. Did I hit all your points? I'm not sure. Okay. All right. Yep.
Hey, Mark. I want to echo Kash on wishing you a happy birthday. The question I want to ask is, you had two really interesting product announcements that you demoed during the keynote. One, the Customer 360, which almost represented the culmination of a really long journey for you guys to get a single master data record for your customers, then Voice. I actually want to ask, which one of those do you think over the next three to five years are going to have a bigger impact on Salesforce?
Neither. I think that what's the most interesting thing for me, I'll just give you my honest opinion, okay? That for a couple of years, I've been pushing for Einstein Voice. This has been my personal push. I really love ambient computing. I really love what's going on. I don't know if you saw will.i.am's keynote today. Amazing, also his new voice company. What we're doing with Einstein Voice, amazing. What others are doing with voice, with Amazon, with Google, with Apple, it's inspiring me to see this incredible new user interface coupled with artificial intelligence. My vision of Voice is nothing like what we delivered. It's far exceeded my expectations. When Ching-Ching was, we were on the focus groups. We're going all over the country, trying the keynote out. I'm sure you know that.
Ching-Ching is there, and she's doing this amazing demo, and she's talking into the phone, she's saying, basically, I don't know where my phone is, but it's somewhere. Okay. Here it is. She's got her phone, and she's like, "Yeah, everything was great in the account, and it's going to close, but we got to make sure we follow up with the customer. And by the way, play me The Doobie Brothers." Okay. That's not what she said, but that's what I said. I'm like, "Wow," because not only was it voice recognition, which is not really what we're doing, but it's somehow we're able to take apart through NLP, through deep learning, through this incredible artificial intelligence, take all that and insert into the fields in the database exactly what happened and change the fields and modify the application.
Never been possible before in enterprise. That we're doing it declaratively, that we're making it available for everybody, that it is something that everyone is going to be able to use. That this is going to be a core part of our platform, that this is another level of enablement, empowerment. That is what is amazing to me, and that it didn't come from me. That is so powerful. I might have said this is the direction, but that they put together the details that were beyond my expectation, and the customer response, I already knew, by the way, it was going to blow everybody away yesterday. I already knew it because we've been on the focus groups. I already knew she was going to be a superstar, okay? Because of what we saw in the focus groups, and it was just incredible.
On the second one, Customer 360, this has really come out of our core product development organization, but especially led by our President and Chief Product Officer, Bret Taylor. As a core part of his vision, a year ago after Dreamforce, he came to me and said, "We are going to do this, and this is how we are going to do Customer 360." We have not been able to figure it out before, but through him, through our head of engineering, through Parker, through others, and through a key architect that we have, they had some huge technology breakthroughs. You saw, again, this declarative excellence that is letting us integrate everything. When I saw that and saw what was coming, which was really late last year, early this year, I had a pivotal meeting with a prospect. It's not even a customer.
In that meeting, they laid out their gambit of their biggest challenge for this customer. They said, "Let us show you. We are this company." I'm not going to go through what industry it is. "This is our IT architecture. Oh, we acquired this company, and this is their IT architecture. We acquired this company, and this is their IT architecture.
Oh, we're on Google, and we're also on Amazon, and we use these public clouds, Salesforce, and we also use this other great system as well." I'm like, "How are you gluing all of this together?" They're like, "We have no idea." I'm like, "We can provide Customer 360, but how are we going to get to all of these different data sources?" The integration problem is much, much worse today than in every point in our company, in our industry's history, because of the evolution of the public cloud. Every company now has their data, not only everywhere, but are pulling data as well for compliance reasons, for all these reasons. It's like, we have to buy MuleSoft. I have always wanted to buy MuleSoft. I love MuleSoft. I've invested in MuleSoft. I've always thought it's this huge jewel.
There was a huge amount of resistance from the whole company. I won't go through everybody, but it was the entire company against me buying MuleSoft for the longest time. I'm fine. Let them go public. Let them do this, let them do that. They're amazing, and I've always loved them, and Greg and the whole thing. I had everybody. I had them where I wanted them. I said, "Well, look at this." We went through this customer, I said, "Look at Customer 360. Now if you buy MuleSoft, imagine what could happen for us. Think about how great it would be." They were like, "Oh, yeah, that's right." It's even better than we thought. You can go over there and see, it's like, wow, this is perfect. Best of both worlds.
We needed that, and we didn't even realize it. I think there's a lot of opportunity for us because you can't really get the Customer 360 to be as powerful as you want it to be without getting the tentacle into every single data source. That is now possible because MuleSoft gives us that vision and extends us. It is not Customer 360, you have to understand. That was a completely separate development effort, but it motivated, well, it gave me the ability, gave me a stick that I didn't have. I just think it's a great acquisition, and we can do one really big acquisition like that, and then it takes us a while to kind of make it work. In this case, I couldn't be more excited. That's kind of where we're going.
By having both of those, what I learned was that, wow, our development organization is really more powerful than ever. They're doing amazing. They have a lot of challenges. I could go through all their challenges, but the level of excellence of the management team and the capability of who we have, it's incredible, and I think it's reflected by the level of customer success across the street. Does that answer your question? Okay.
Thanks very much. Hey, Marc. Brad Zelnick with Credit Suisse. Marc, I think the Bible talks about one's 50th year as their jubilee year-
Ooh, wow
as a time of reflection.
Good.
If we reflect back.
Should I lie down?
You can do whatever you want. If you're more comfortable, please.
Okay.
If you think back 10 years ago, you were the alternative company. No to software. Now we look back a decade later, you're the gold standard. You're the gold standard not only in CRM, but the business model that every other software company follows. In some ways, if I think about the proverbial dog that kind of tossed up the bumper of a car, as we look out in the next decade, what gets you excited and keeps you enthused now that you're no longer alternative, you're mainstream?
Well, we made that shift, when we kind of saw, okay, the cloud is going mainstream. Everybody's going to be the cloud. Even companies that were cloud deniers or whitewashing the cloud or whatever, a lot of them are paying their own price for that. You see the growth rates. We're not going to go into who's not doing well and who's going to have serious problems for some serious amount of time because they didn't change, they didn't transform, they didn't evolve, and they would just kind of say, "Oh, the cloud is not something." The cloud is here, just like you said. It is mainstream. When we saw that happening, what we said is, "Okay, cloud's mainstream. Everybody's going to have to pick their position. What are you going to be good at?" Look, you can't do everything. There's tremendous opportunity and focus.
Can we focus? That's the question that we asked five years ago. Where are we going to focus? Then you saw a shift when we started talking, we're the customer company. We went through that customer company phase. Then we said, "No, we're going to be number one CRM. This is our focus." Then we had to broaden our vision of what is CRM. Because a lot of the things that we're in, I don't know, you probably don't have my slide with the wheel, but what happened is, and this keeps happening. This beginning of this year, in the first and second quarter, I was on the road pretty much nonstop with customers and really loving it. It was just after Dreamforce. Remember, Dreamforce was November last year. It's only been 10 months since the last Dreamforce.
I was with these customers, and we had our whole architecture and everything, and it was good, but customers had a bigger vision for us. I started iterating on this, what I call the clock. You notice that there's 12 positions on the wheel, and I started iterating on the clock, on the clock, on the clock, and I'm like, "This is amazing. This is amazing. Look at the clock and these 12 positions, and I can really see time. Maybe I should buy time." Then I'm like, "Wait, no. This means that I can articulate the 12 positions of the CRM, and at the center is the customer, Einstein, our community, and there's 12 incredible multi-billion-dollar businesses right here. Are we focused on each one of these multi-billion dollar businesses and growing these businesses?
Sales and service and marketing and engagement." I mean, each one of those things on that clock, if you've seen that slide, is like, wow, it's a powerful thing. I spent a lot of time on the clock. The first time I presented to my management team, they're all like, "What are you This is terrible." It was really like, "Whoa, I guess I'm really disconnected from the customer." I started presenting to the customers, and they're like, "Oh, no, this is great." What I did was I took that clock, and I would go into a customer meeting with CEOs, a lot of CEOs, and I would print out two versions of the clock, both on paper. One exactly as you saw today, okay, and I'd have it in this jacket pocket, and then another one exactly customized for them.
Their logo at the top, and then we make it exactly for them. Like you see in the keynote. Did you see there's two? We always present the generic and then customized for the customer. What happened is, I put it down in front of the CEO or the CIO, or in many cases, both. They always would gravitate towards either the generic or the custom. 50% would go here, and 50% would go here. I'm like, we always have to present both. Because for some reason, I don't know why, some people want to be able to conceptualize it themselves. Some people want it conceptualized for them. In all cases, in every case, all of our customers are going through a digital transformation. In all cases, our customers' digital transformation is beginning and ending with their customer. This becomes really meaningful to me.
In most examples, the CEO would say, "We need to build this even for our own company with our products." They started to see that they need to pivot to their customers. That's our vision. That is, yes, the cloud's mainstream. That conversation is over. We already know what the accounting model of the future of software is. We already know what the technology model for software is. Fine. We have the business and technology model. We're all on that page. I don't have to argue that with anybody anymore. We had a lot of those arguments, you know that, along the way. We're clear. Okay. Now, what's our position? Because if every company is doing that technology and business model, you better know what you're good at, because you can't be good at everything. It's too hard.
What we want to be good at is, number 1, CRM. On each one of those wheels, we want to try to be number 1 or number 2. That's the traditional model in our industry, in all industries. That's mostly working. It's not perfect in all cases. We're going to have work. In some cases, there will be struggles. There will be issues. We're constantly reviewing each position on that wheel. Okay? We're going through the clock, 12 o'clock, 1 o'clock, 2 o'clock, 3 o'clock. Each one of those icons, each one of those product lines, that's our core strategy, is the clock. If you look at the clock, that core strategy is what we are executing, and that's our only strategy. We have no other secret strategy that we're keeping from you.
You can look at that, for those of you who are advising us on acquisitions or where we're going in the future or trying to understand how to pitch us things or whatever, just look at the clock and say, "You're weak here," or, "You're strong here," or, "You need to do this or make this happen," because that wheel, that is our vision for where we want to go to get to not just 20, but 30 and 40, wherever we're going. That, we believe, is going to take us there, that these customers all want that, and that a key part of that is the community. The community and the product, the community and the platform are tightly integrated, and we have to execute both, and that listening to that community is going to be so key going forward to us.
That's it. Yes, it's cloud, everybody's cloud. Who's not cloud? Fine. Now, what's your position in the cloud? Where are you number 1? Where are you number 2? If you're going to try to do everything, well, that will be interesting. Plenty of companies, by the way, will get up onto the stage. You go to these conferences, and they'll say, "Well, yeah, they can't do it, because we've got the whole suite. Aha." It's not just one company, but the thing is that once they say that's not how companies buy. There's nobody over there that's saying that. They want to know what's number 1 or number 2 in each and every thing, and in some cases, they want this or they want that. They want to have flexibility.
We want to be able to work with them, and we want to be able to do one more thing. I didn't do this in the keynote yesterday, but it's on the slide if you go back and look at the slide. We're going to do it from the small business to the enterprise. That's unusual. We have something called Essentials. If you haven't been to the Essentials booth on the trade show floor, make a point of it. This is a major strategic focus of us. We're doubling, tripling, quadrupling down in small and medium business. We have this amazing new model called Essentials. It's incredible. It has incredible traction. I won't go through all the numbers that we have, but we're very excited about the early results of it.
We want to do the whole wheel from Essentials to Enterprise, so that not only are we number 1 and number 2, but we're doing the number 1 and number 2 from Essentials to Enterprise. On that one slide, and it says Essentials on there, and I forgot to pitch it. That's the whole vision. If you go into the trade show floor, you'll see as you walk in, there's the IBM booth on your left and a couple of things, and just before you get to our main campground, you'll see a large booth on Essentials. It's strategically important to us to get that right, and we have a new model because we have to onboard more people into our core. Our core is stronger than ever, as evidenced at Customer 360. We have more capabilities, but we don't want to say goodbye to small business.
We want to more deeply embrace it through companies that we've been able to acquire over the last several years, including RelateIQ and others. We're able to take their technology and then provide a next-generation onboarding experience for small business into our core platform and let them have every opportunity to expand and grow, and that's Salesforce Essentials. From Salesforce Essentials to Salesforce Enterprise, we want to be number one CRM. Okay. Is that clear? All right.
All right. Terrific. Thank you, Mark, for taking my question. Sarah Hindlian from Macquarie. You've long been a champion for a number of causes, children's health and diversity, and many other things that I think are really important, you just said you really can't do everything and control everything.
You've been a champion for these really important things, and you've done a lot to make Salesforce more diverse.
Thank you.
You look across this room, many of these people are your customers.
I agree. We should fire half of them. Well said.
Well, it's just not very diverse.
Oh, sorry. They heard us.
You know what I mean, Mark?
Okay. Right.
You can control Salesforce-
Yeah.
You can't control your customers, and this is certainly not diverse.
Right.
When you started six months ago.
Our community is more diverse.
Well, most places are.
I know.
I think, you started six months ago talking really seriously about ethics and technology around the Fourth Industrial Revolution.
You want me to come in and talk about ethics in the financial industry? We're going to have a long meeting today.
I know. I'm asking a lot, Mark. Listen, I'm asking you because you can control Salesforce, but you can't control the world. When you're unleashing this really powerful and thoughtful artificial intelligence out into the world, what about that keeps you up at night? How do you think about that? How are you going to make it ethic for how your customers use it? Ethical, really.
I think that the number one thing, and I think it's a great question, and I'll tell you why, which is that first and foremost, at Salesforce, we so strongly believe that business is the greatest platform for change, and I think that's what you articulated. We really believe this is so important. At this time in the world, it has to be. Whether we are working on our public schools, because if our kids are not coming into the Fourth Industrial Revolution with all of us, we're in trouble. That's why we're in the public schools. Every one of our executives has adopted a public school. You can ask them what their school is. I've adopted a public school. I will bring you there. I will show you what I am doing.
It starts and ends, in my opinion, with public education and these children and their education. When I'm out, well, you just saw me yesterday. It's in my keynote, my message to every customer. When I'm looking in their eyes, I said, "What are you doing for public schools?" That's my first question. We've got to bring them along, and we've seen phenomenal results. A multi-thousand % increase in women in STEM education in the K through 12 public schools. Amazing. Okay. A multi-thousand % increase in people of color in computer science in our public schools in San Francisco and Oakland. We are seeing higher attendance rates. We are seeing higher math grades. We're seeing improvement. We are now at $50 million invested in San Francisco and Oakland public schools. Our short-term target is $100 million.
It's not just money, it's also we have our people in there. You can ask them about the volunteerism and the mentoring that we're doing. I just encourage you for your companies, to tell your CEOs, by the way, I'm telling your CEOs also. This is not like a secret that I'm just keeping in this room. When we're meeting with the CEOs, half of every discussion I have with the chief executive officer is on these topics. First of all, public education. Second is gender equality. Gender equality is equal opportunity, equal advancement, also pay equality. Are we paying men and women equally for the same work and preventing sexual harassment? We've seen that in our industry, in every industry. Are we looking at gender equality? Third, LGBTQ equality.
You've seen us go to Indiana, not just Indiana, not just in the U.S., but other countries. You can look at our Pride, you can look on social media, you'll see us marching all over the world for LGBTQ equality. You'll see diversity and inclusion. That is, we've increased our percentages of diversity and inclusion. It's a major focus for us. I have a chief equality officer reporting directly to me. I believe it's a critical part of having a company for the future is having a focus on equality, not just quality. That means that we have to increase the percentages of every category, every race, every religion, every gender. We want to make sure that we have full diversity of thought in our business, okay.
These are very, very important to me, things that I have been extremely passionate about, will continue to be passionate about, the environment. We just had this amazing climate summit here in San Francisco. I don't want an ocean that has more plastic than fish. Is that what you want? You know what? If we have these incredibly powerful businesses, what are you going to do, delegate it to the government? Come on. We know that we have to do it. It's up to everybody in this room and every room and every company. We're going to have to get involved. We're losing one acre of forest every second, yet we need the forest to suck down the carbon, or we're going to have this huge carbon issue. We already have it, the planet's getting hotter.
Our best antidote against the carbon are the forests, we're doing rapid deforestation. I so strongly believe in all the companies that you follow, the technology companies. We can find a way through technology, Fourth Industrial Revolution, and hopefully, this will help us to yield some amazing results. New entrepreneurs who are taking a risk. The models that all of you invest in, the things that we believe in, and the capital society, the things that we all follow and have dedicated our whole lives to, if this model will not save us, then nothing will. Because we know it's not going to be our government. It's going to be the models that we're all the entrepreneurs that are in every school, in every nation, in every country.
Look at this example of this kid I met, 17 years old when I met him, or 16 years old, and now he's 21 or 22 years. He came in, and I watch him on social media. It's where I saw him, and he said, "I've got this device. We're going to get all the plastic out of the ocean." Whoa, big idea. He's in Neelie's hometown. She's from the Netherlands. She lives in the Netherlands, and I'm starting to communicate with him. He's getting a little older, and he's getting a little wiser, and he's smart, and we had him come and talk to Salesforce, and it's like, well, the kid is unbelievable. Now, entrepreneurship, what a concept. All of a sudden, we're like, "Well, let's give him some more money." Now, $35 million in, now he's like 21 or 22.
I don't know how old he is exactly. Now he's launched this thing into the ocean. He's going to start hauling plastic back. He gave me my birthday present was he gave me a duffel bag made out of ocean plastic. Fantastic. I'm like, is this model that I so strongly believe in and spent my whole life in, and you have too, that through technology and risk-taking and through entrepreneurship and through money, all of the things that we believe in, which is why we're all in this room because we care about it and have studied it and evangelize it. If this will not save us, then nothing will. I do believe in those entrepreneurs. Look at that.
Look at those people who can get the plastic out of the ocean or to stop the deforestation or those who are going to give us the technology that is going to improve the state of the world with Artificial Intelligence and robotics and everything that we have at our fingertips. Technology is never good or bad, and neither are entrepreneurs. You know that, and you can see it every day. You all know the stories. It's what you do with the technology, and it's what you do as an entrepreneur that matters. That is the gambit for them. Well, not only the question is, one, is this about making public education better? Is this about gender equality? Is this about diversity inclusion? Is this about improving the environment? On and on. Is this about improving the state of the world, or is it not?
Are we only about making money? If for all of those people, exit the room now, because we don't have time for them anymore. We don't. Everyone knows it. You can see the numbers. Not for us. Look at around the room. It's over for us. It's for our kids and our grandkids. Who cares about us? I don't care about anybody in the room in terms of, we have a few years left. What about all the kids that are coming? That is why we have to focus on that now, and that is the message that I've tried to give in the keynote yesterday, which is now is your time to do that.
If the business of business is only business, that the business of business is not just about improving the state of the world, that business is the greatest platform for change, and that we can use technology to make the world better, that is wow. Everyone needs to look in the mirror and go, and what page am I on? You can decide. You can be over here, or you can be over here. When you get back to your CEOs, shouldn't just be me in their office. Don't wait for me to come because there's only two CEOs in this company. Takes a long time to get to all those companies. You have more access than I do. You should go and talk to them and say, "We can do this. We can do that. We can adopt a public school.
We can take plastic out of our company. We can decarbonize our company. We can have gender equality in our company." You can do it. By the way, when you do just four or five of those things, it's pretty magical. Also, you're a lot more attractive as a best place to work. Oh, by the way, we're the number 1 best place to work in the world, according to Fortune Magazine. I think that's not because we have free food in our kitchens because we don't offer free food. It's not because we have a five-star chef. That's not the number 1 issue for recruiting anymore, but it was 20 years ago, or 10 years ago. We couldn't get the award because they said, "You don't have a five-star chef.
That's what everybody wants." Now everybody wants to go improve the state of the world, and they want to go volunteer, and they want to get out in the world and make it better. That's what millennials want. They have purpose. They have fire. Everyone in this room has it, too. Look around the room. There is a lot of passion in the eyes and the hearts of every single person here. I know it, most of these people. You have to get out there and evangelize it, and you have to make the change. You cannot wait for anybody. You certainly cannot wait for your government leaders, and you maybe not be able to wait for your business leaders or your NGO leaders. You can do it, and then when you do it, others will follow.
This is my personal experience, and that is my message to the community next door. We can do this together. That's my position. It's easy, and I hope that when people leave the conference, that each one thinks about one thing that they can do to make the world better. Thank you for the question. Okay.
Mark, I want to be respectful.
Besides, I have nothing to say about that issue.
I want to be respectful. I know you've got some other commitments. I don't know if you've got time for another question or if you have some closing remarks or it's up to you.
I can end. I don't care.
You?
Anyway, I can end.
If anyone else would like to ask a question.
All right. Thank you, everybody. I'm getting kicked off the stage. We'll see you tonight. Metallica. Janet Jackson is here. She's a surprise performer, and we're thrilled that you're here. Please make yourself at home. It is like a family reunion. It is like having all of you are part of our family, the rich part. Thank you very much.
Thanks so much, Mark. Thank you so much. Okay. We're going to just have just a few minutes while we wait for Keith. I didn't want to kick you off the stage, Mark, but thank you for that. I think the bonus will be smaller this year. That might help the margin, probably not. Anyway, why don't we just take a couple of minutes and we'll wait for Keith. If you all have time, I know we're running a little bit behind schedule, like 45 minutes behind schedule. If you can stay, I'm sure it'll be worth your while. Thanks.
I bet I called you a rocker the other day. Well, he just told off sometimes I say. I ran my mouth off again too much of what did I say? Well, you just blamed it on me but it's all okay. We'll all float on okay. We'll all float on okay. We'll all float on okay. We'll all float on anyway. Well, I bet you, Meg, you do care every last time without him. Those words ain't just to learn, don't try to forget. Bad news comes, don't you worry, somewhere it lands. Good news will work its way to all them plans. We both got fired on exactly the same day. Well, we'll float on, good news is on the way. We'll all float on a ship. We'll all float on a ship. We'll all float on, all right already.
We'll all float on now, don't you worry. We'll all float on, all right already. We'll all float on, all right. Don't worry, we'll all float on. All right, all right. We'll all float on, all right already. We'll all float on, all right. Don't worry, even if things end up a bit too heavy. We'll all float on, all right already. We'll all float on, all right already. We'll all float on. Oh, please don't worry. We'll all float on. Even if things get heavy. We'll all float on, all right already. We'll all float on. Oh, don't you worry. We'll all float on. We'll all float on. Last night, she said, "Oh, baby, I feel so down." Oh, it turns me off when I feel left out. I turned around, "Oh, baby, don't care no more." I know this for sure.
I'm walking out that door. I've been in town for just half empty. I'm finished now. Oh, baby, I feel so down, and I don't know why. I keep walking for miles. The changing people, they don't understand. No girlfriends, they can't understand. Your class, yours, they won't understand. Sometimes buddies ain't ever gonna understand. Last night she said, "Oh, baby, I feel so down." Oh, it turns me off when I feel left out. I turned around, "Oh, baby, gonna be all right." It's such a great big lie, as I left that night. Yeah. Oh, people, they don't understand. No girlfriends, they don't understand. Your friends, theirs, they won't understand. Me, I ain't ever gonna understand. Last night she said, "Oh, baby, I feel so down." Oh, it turns me off when I feel left out. I turned around.
Oh, baby, don't care no more." I know this for sure. I'm walking out that door. Yeah.
Okay. Welcome back. Thanks for your patience today. Thanks for hanging in there with us. We'll give you all just a minute to take your seat. Meanwhile, while you're doing that, I'll invite Keith Block, our co-CEO to the stage to conclude the day for us. There's a lot of great energy in the room now for you, Keith. This might be my last Dreamforce.
Is the seat warm?
No.
With the recession? Yep. All right.
Without further ado, I'll turn it over to you, Keith.
Thank you. Hi.
Hi.
Thank you for staying. What's going on? Where's the coffee cart? What do you guys want to talk about?
Well, we can start right here.
Hey, Keith. Alex from Piper. Last year, you talked a lot about repurposing $1 billion, I think, into the organization to drive some greater efficiency around the market motion. I just want to ask, can you contextualize some of the changes that you've made, the impact that it's had on the business, and maybe what your thoughts are going forward?
Yeah, I'm sure Mark or David probably covered this already, we talked about finding $1 billion over the next few years and using that as a growth engine. That effort still continues. It's actually been folded into our LRP, which I think is a smart thing. David and Mark have done a great job with that. When I look across the landscape of the company and the opportunities, this is really an opportunity to find efficiencies in the operations in several fronts. One is really something we've referred to as the workforce plan. I'm assuming the guys took you through that today, which is really all about the allocation of resources and doing it in a smarter way. Not that it hasn't been done in a smart way, but that's certainly one. IT modernization is another.
We're a little bit like the cobbler's kids, we've grown so fast. In many ways, unprecedented size and scale in terms of our growth. You've seen the numbers, you all know the story there. There's an opportunity there. We're a well-run business. We can be a better run business. There's a productivity opportunity there across every element of the business. That's one of the things that we're looking at. I think we're well on track, and I think we're making some smart moves.
Hey, Keith. Kirk from Evercore.
Hey, Kirk.
It's pretty obvious that you guys have a real mind share advantage around digital transformation right now with CEOs. As you think about how do you press that advantage, what are you thinking about how you double down on certain areas in terms of bets, whether it's getting even more verticalized from a sales perspective, going international in a bigger way now that you have partnerships with a lot more of the data center providers? I'm just curious, you have a lot of momentum, you obviously have commitments to the community about margins, you just talked about repositioning, repurposing some of that spend. When you think about the things, look, we should double down here over the next two or three years, I'm just curious what those might be.
Other than the underpinnings of innovation, which Bret and Srini and Parker and the team have done a great job with, because at the end of the day, we have to have a relevant solution that's there for the market. I think we've actually done a terrific job there. We've had these three growth levers for the past five years. One is obviously the speaking the language of the industry with our customers. That is just a no-brainer. You go talk to any CEO, you need to understand their language. You have to have a vision for the future, and we've done a really good job at that, and we've made those investments, and we'll continue to make those investments. Whether it's in the go-to-market assets or deep content or continuing to fill out the portfolio with the industry products, which have been a home run.
The second one, as you know, is international expansion. In the last quarter, you saw a continuation of growth, 32% in EMEA and 28% in APAC. There's just a lot of room to run there. Obviously, the ecosystem, the SIs, the ISVs, I don't know how many of you had the opportunity to talk to the partners. I know a lot of you had the opportunity to do that, and they can't scale those practices fast enough. There is just tons of opportunity, and it really is I know every time I get the opportunity to stand in front of this audience, but I'll say it again, it astounds me at what's going on. It really is something that I've never seen in my career.
I don't know if anybody has really seen this in this industry where the CEO has become the chief transformation officer, and that's incredible. Mark was on stage with Ulrich Spiesshofer today. I was with him this morning, and he was talking about his next generation of digital transformation. Not his first generation, his next generation. I was with the CEO of a European bank this afternoon, same conversation. I shared the stage with Dion Weisler from HP, same conversation. This has created huge, huge momentum. The opportunity is there, and I think we need to continue to focus on these growth strategies, these planks that have worked so well for us. I'm very, very high on EMEA in the international markets. Miguel Milano is a great executive. He's doing a terrific job. Koichi Sonoda, another outstanding executive in Japan. Our public sector business is booming.
Our business here in the U.S. is doing well. We're rolling right now, and we're grateful that we're in that opportunity. We're creating the market, we're making the market, we're separating from the competition, and we just want to keep the ball rolling here.
Hi. Jennifer Lowe, UBS. When Mark was in here earlier, he talked about the Customer 360 view and the aspiration that Salesforce would be number one or number two in each of those categories. Looking at some of the customers that you know in verticals like retail or hospitality, which haven't been target verticals for Salesforce yet, there are pieces in that wheel that maybe are being done with partners currently. Is being number one through a partner sufficient, or do you think ultimately Salesforce will have to service those directly?
I can't look at you and say that we will have 100% completeness in every product that we have, right? If I told you that means innovation has stopped. The innovation doesn't have to be 100% us. It can also be part of our partner ecosystem. You could make an argument that there are 25 vertical markets, and within each of those 25 vertical markets, there are actually four, five, six micro segments, okay? If you just take the broad category of manufacturing. What is manufacturing? Is that discrete? Is it semi? Is it semi-fab? Is it process manufacturing? We're not overextending our reach. There are industries and solution areas that we think are important, that are strategic, that are ripe for disruption in a positive way, that we think can bring significant returns to our shareholders and more importantly, our customers.
We're not going to try and be all things to all people. We're not going to dilute the focus. You see that happens in so many companies, where they dilute their focus, and they lose their way. We are a very partner-friendly company. There are companies out there that are not so partner-friendly. Thanks. You want to share that with the rest of the audience, they might need that, too. Thanks, Blake. Whether it's transportation or hospitality or whether it's retail, which is, I think everybody understands, is getting hugely disrupted, there's opportunity. If we can establish great partnerships to drive success for our customers, we're all in. Karl?
Hi, Keith. Karl Keirstead at Deutsche Bank.
Hey, Karl.
Keith, even the best of companies get a little bit of pushback from your customers. Before you, Mark told a great story about listening to customers around integration pain points, and how he was super keen to address it, ultimately bought MuleSoft. When you're going around Dreamforce listening to customers, are you picking up any remaining one or two pain points that get you reflecting on, "Hey, team, we've got to address them to make Salesforce even greater"? What would those be?
Well, the great thing about this company, in my opinion, is we do listen to the customer. I didn't hear what Mark had to say, but I'm assuming he would say the same thing that I said, which is essentially that most of the great ideas that we have are from the customers. The whole concept of integration of MuleSoft, that was all about our customers. Now you can't have a conversation with an executive without talking about the importance of integration and the digital transformation. I think the Customer 360 announcement has resonated. That came from our customers. Really, it's a question of faster. There are areas that I'm sure in the product where a customer will say, "We'd like to see more of this." I'm sure that there are areas in terms of accelerating success and adoption.
We have customers who would say, "We'd love to see more of that." I think the day that we stop listening is the day we're going to have a problem. There's nothing glaring that I would say right now that I've heard from any customer that is something that I would consider to be a strategic risk to the company.
Hi, Keith.
John.
John DiFucci from Jefferies. We heard a lot about a lot of Salesforce's products today. Marc talked about the clock and the customer in the middle.
Oh, he took you through the clock?
Yeah, he did. Well, he threw it for us in his mind.
Awesome.
By the way, he said that the best ideas don't necessarily come from the key. He actually said the best ideas came from him. I think that's what he said. Anyway, one thing we didn't hear a lot about.
It's nice to see you, John. It's always great to hear from you.
He actually did a great job, the one thing we didn't hear a lot about today was Salesforce Platform.
Especially when he was going through the clock, I'm like, "Well, where's the Platform?" The one thing, we heard a lot about MuleSoft.
Yep.
The one thing I always thought since you bought MuleSoft is the Trojan horse to that was to layer MuleSoft across the Platform, to have it just part of the Platform. That would differentiate you in such a unique way, and it would make it very, very powerful. Platform today may be the biggest opportunity you have that you haven't already exploited in a major way. I'm just wondering, am I just way off thinking about something like that, or is that something that might make sense, or is it something you guys have already talked about?
This is the sort of stuff that we talk about. Some of it I think it's really positioning. Okay? If we took a survey, and I would love to do this right now, what is platform? Right? What is your definition of platform? Or not you specifically, but everybody will have. It's kind of like asking the question of what's artificial intelligence? What's everybody's definition of artificial intelligence, right? We do see MuleSoft as a strategic asset. We do think it's hand in glove with our platform. It's a little bit of that infrastructure play, but up-leveled. Again, if I think about the conversations that we're having with MuleSoft, or with customers about MuleSoft and integration, it surprised me. I'm going to be very candid with all of you. It absolutely surprised me in terms of how strategic this has become.
I think I said this on the earnings call. I think it was the day of the earnings call, I get an email from the CEO of one of the largest banks in the world saying, "I'm going to bring my entire executive team out here to talk to you about data and integration and how important that is to me." How many of you have been in a conversation with a CEO of one of the largest financial services institutions in the world, a CEO, who's sitting there talking about data and integration? Maybe they have the data conversation, but the integration word was a bit of a surprise, it just validates the sort of thing that we see. To me, I think broadly of platform as many things.
Platform could be analytics, platform could be Heroku, platform could be Lightning, platform could be part of MuleSoft, or Anypoint. I think it really is about nomenclature and semantics. I think the bottom line is that it is an assembly of solutions that can drive success for a customer, that has to do with extending the applications, it has to do with the analytics associated with the applications, it has to do with the integration of those applications. I broadly, in my head, I think of that as platform.
Keith, Heather Bellini with Goldman Sachs.
Hi, Heather.
I had a question just following up on MuleSoft, because that's something we've all heard a lot about over the last couple of days. Can you share with us, based on the customer conversations you've had over the last few months, how do you think about MuleSoft as a multiplier effect for these large customers that you already have a big footprint with? I guess just looking out further, just given the opportunity, do you think there's a chance that bringing MuleSoft on could actually accelerate the overall growth rate of the company over time?
I'll give you two stories. One is that, a story of, again, because you know I love financial services, a large, large, one of the world's largest, not the same one I just talked about, financial services company that we don't have much of a footprint in, but MuleSoft does, and they actually have a very strategic relationship. That customer did not want to spend a lot of time with us. They were a big Microsoft shop. All of a sudden, they're talking to us. That's an example of MuleSoft bringing Salesforce into the equation. The other trend that I'm seeing is that MuleSoft is actually fairly well penetrated in a very small way, but not in an enterprise way.
Again, I was in a conversation this morning with a customer, I said, "Well, you're a MuleSoft customer, how are you using it?" We call higher in the account in many cases. It's more of a strategic relationship that MuleSoft has been historically able to do. That allows us to up-level conversation, talk about enterprise agreements, talk about an enterprise strategy for integration. I think we're starting to see that traction. We've only had the company for, what, 90 days or so, right? The conversations are really, really good. I'm not changing any of our financial forecasts, of course, when I'm up here. Do I think that there's some upside because of what we do with MuleSoft? It's early, it's very, very positive.
I think we can do more in the MuleSoft install base than they've been able to do before historically. I think there are areas where we're going to get in and have a conversation where perhaps Salesforce wasn't in before and MuleSoft was.
Right. Derrick Wood at Cowen. Mark was in here earlier talking about doubling or tripling down on the SMB market with Essentials.
I think most of us think of you guys on the march, moving upmarket into the enterprise. This is something a little newer in terms of a focus. I'm trying to get a sense for what the priority is around investing, then what you're doing to optimize customer acquisition downmarket, and maybe what parts of the portfolio you think are low-hanging fruit to move downmarket.
Well, I don't really look at it as a move downmarket. We've always been downmarket. The company started almost 20 years ago downmarket, right? We did a great job there, and there's plenty of opportunity, and we started to move up. That was kind of the missing link. I think it is a rededication of our focus in the SMB space, and there's a lot of good reasons for it. Number one, there's a lot of innovation that happens in the SMB space. If you can innovate in the SMB space, some of that can scale up. Essentials, I think, is very important. Think of it as a petri dish. The SMB space, there's a lot of lessons learned around agility, ease of use, customer experience. Those have become, in this fourth industrial revolution, those are important buzzwords or buzz phrases.
We want to make sure that we're staying in touch with what's going on there because there's a hotbed of innovation. It's always been a space that's been successful for us. We've got some technology that we think is really cool that can be used down there. We don't want to leave the SMB behind. That's not a good idea. We want a balanced portfolio in the business. That's why you see the focus on Essentials. Actually, I want to make a comment. I think it was last year at this time that in this session, I actually talked about a new focus on SMB, but I didn't want to announce it because we weren't ready to announce it.
Hi. This is Keith Weiss from Morgan Stanley. Thank you for spending some time with us.
Hi, Keith.
I want to talk a little bit about sort of the competitive environment. You notice our assignment also is trying to oversimplify sort of companies and markets and the like. One of the conversations that we have a lot is kind of the alignments that we're seeing in the marketplace. And it goes like, you have Salesforce and Amazon teaming up against Microsoft and Adobe, and that's the competitive dynamic out there. Is there any validity in that? Is there any validity in the way that we're looking at the market of those types of alignments, or are we just really taking too simplistic a view of how the market works?
I will tell you that I have the privilege and honor of working with somebody who has great vision. Right? Who was up here before me. Just as important is a lot of our direction is from our customers. I know it sounds hokey, if that's the right word. For example, if a customer says to us, "We use this technology, and you have this technology, and wouldn't it be great for us if you work together?" That's something that we listen to. Customer success is so important to our business model that we do a lot of things in the name of customer success. I think there's probably a lot of game theory around the "Game of Thrones," who's working with who's got the relationship with who. Of course, there's a strategic nature to that, right?
We have a strategic relationship with Google and AWS and IBM, and we have integration points with Microsoft, and we work well with Dell, and it's all good. We have to do this for our customers. You don't want to provide the market with a situation where people are locked out. That's not good for anybody. Our guiding principle has been focus on the customers, and that's going to show us the way, and so far that's worked out for us. I like some of the conspiracy theories.
Thanks, gentlemen. Ross MacMillan from RBC. Hi, Keith.
Hi.
There was a slide earlier that talked about this multi-cloud dynamic around how much revenue you're generating from multi-cloud customers, and I'm sure there's some scale of customer in there when we talk about 40% multi-cloud, 90% plus of revenue.
What are the things that you can do to grease the wheels in customers that are single cloud or haven't made that full
What are the things that the big customers have done, the multi-cloud customers have done that you can take to these customers that haven't?
A lot of this goes back to the conversation around industry and selling a solution, positioning a solution, painting a vision for a customer. That's where we've really invested. Just going back to Kirk's earlier question, we've really invested in this industry focus. If you want to have a strategic relationship with a customer, you go in and you talk features and functions of Sales Cloud and Service Cloud, it's cool, it's compelling, it resonates, it doesn't solve a business problem for a customer, especially the higher you call up in the account. You can tell by the person's attention as soon as you're looking at them, how poorly that conversation's going to go. The notion of multi-cloud is as simple as selling a solution to a business problem.
It's not just selling sales, it's what happens when you provide the Customer 360, what does that mean to a bank? Point to the conversation I had with somebody this morning. What happens if you can actually, in the banking industry, they don't necessarily need more customers. They need to sell more products to the install base. If you don't have a 360-degree view of the customer, if you don't know if the right hand is talking to the left hand, that's going to be really hard. That's where you need the multi-cloud solution. If you speak their language, you'll get that multi-cloud solution.
Hey, Keith. Phil Winslow, Wells Fargo. Actually, to follow onto the multi-cloud question, one of the other components of that slide was that you called the add-ons within the clouds. You have CPQ, Krux, well, your DMP now.
There are sort of those tuck-ins, when you actually add up all those tuck-ins in terms of the revenue they're generating, it's actually pretty substantial right now. So I guess my question is, you've been super successful in the large cloud deals. When I look at that slide, it sort of says, gosh, the volume of deals that are smaller really have moved the needle. What have you learned from those smaller deals? How is that potentially impacting how you think about M&A in the future? Obviously, given the power of cross-sell of clouds, but the cross-sell of add-ons, too.
The whole idea of providing options to the core is a great strategy. If there's value in those options, then obviously customers are going to pay. There's a playbook that Salesforce has run, a long time before I was here. It's called the land and expand, or the seed and grow. You could think of that doesn't just apply to the core product, it also applies to those options as well. So a customer likes to try out CPQ and see how that works out. It's wildly successful, then it moves on to the next phase. We've seen that whether it's a small enterprise or a large enterprise. I was with ABB this morning and talking to Uli. They have one of the most successful deployments of Salesforce I've ever seen. It's amazing.
A CEO of a major corporation looks you in the eye, and he says that, "The return that we expected exceeded our goals." Now, this is a European customer, engineering mentality. They're not exactly handing out compliments, okay? The point I'm trying to make here is that we've been so successful with phase one and the deployment in 18 months, massive corporation, that now they're looking at other products, one of which you mentioned. They want to try it out and pilot it out, then they're going to expand it. The options are great. They provide more innovation for our customers. Obviously, it helps us with our financial results. It's another wave of innovation for customers.
Hey, Keith. Kash Rangan from BofA. How are you? Congratulations, first of all.
Thanks.
On becoming Co-CEO.
Thank you.
Mark was in here earlier, and he asked me to sing. Maybe I should have sung "We Will Rock You," Freddie Mercury's title song.
Isn't there a movie coming out about Queen? No? It's out?
Yeah, it was fine.
Oh, you're not starring in the movie?
No. Yeah, different reference. Congrats on becoming co-CEO of Salesforce.
Thank you.
As you look at industry titans in tech, IBM, Microsoft, Oracle, you've been associated with one of them. As they grew multi-fold to $40, $50, $60 billion in revenue, the distribution approach generally changes. You've been at one of those companies for a long enough time that you've tweaked the distribution many times over. As you look at Salesforce, and clearly we heard a $30, $40 billion, not a target mark, sorry. We just heard that number out of nowhere.
Did they tell them $40 billion? Okay.
I know it's not guidance. As you have aspirations to double, triple the company size, how do you see the distribution model of Salesforce changing, having witnessed these things in your prior life?
I think everything rotates around the customer, and the customer is defined by the industry, the geography, and the segment. It could be an enterprise customer in Europe or in an emerging market. It could be a small or medium-sized company in those markets, and you have to have a different distribution model. I think there's room for improvement with us in the indirect market. We've got a very healthy ecosystem with our ISVs. That's a nice indirect channel. We've got some other partnerships with other companies that we'd like to explore and expand. I think you'll see more of that in our future, because it just extends our reach, and it's smarter. Those companies may be more capable in those markets than we are.
We don't have the infrastructure, we don't have the resources, and we have to go through a cost-benefit analysis that says, "Should we really go direct in this market, or should we go more indirect?" That's part of our LRP. As we think about countries and markets to get into, we have to inspect that. Our selling motion and our selling methodology, honestly, will be dictated by our customers. I do believe, I keep coming back to it, speaking the language of the customer is tried and true, and that's going to survive us all. That motion will not change. The velocity in certain markets, the way that we go to market, direct or indirect, is really dictated by the customers in those market spaces.
Thanks. Walter Pritchard from Citi. Just two quick ones, actually. On advertising budgets, you don't get much direct access to advertising. There's a lot of money spent there. You have Krux, you have a few sort of assets around the edges there, and there's two big players. Just talk about how you're approaching that market, and then curious, somebody asked Marc Benioff about the tax cuts and impact, and he's been very vocal about that fueling the economy. Is there any worry on your end that your salespeople have really taken good advantage of that, and as the tax cuts are no longer a new tax cut next year, maybe things slow down a bit from a new business perspective?
Let me try to answer the second one first. I think it's hard to argue around whether tax cuts have been some level of stimulus, right? I think we would all recognize that. That being said, there's so much momentum. It's not just tax cuts. There is this perfect storm of technology that has converged, okay? When you think about cloud and mobile and artificial intelligence and everything, and it's really coming together. Are tax cuts part of it? Sure. Tax cuts can help stimulate the economy. I think there's a longer-term wave here, and that wave is the convergence of technology. If you're a company in the retail space, what's your strategy? You really have to think about it. This is a conversation we have all the time with any company that is in the retail space.
You talk to any CEO in retail, they better have a strategy, or they're going to be out of business. It doesn't just stop at retail. It's also consumer packaged goods. You're classically a B2B company. Do you want to become a B2B company for life? Good luck, because people are invading your space with new business models. You have to go either B2B to C or B2C directly, and we're having those conversations. This summer, one of the trips that I made over in Europe, I met with a CEO of a company that is in a very interesting space.
Some would say that they're in the healthcare space, some would say that they're in the retail space, they're doing a lot of forward thinking about what the future looks like, because they're concerned about the impact of technology and the level of disruption that they're seeing in that market. That has nothing to do with tax cuts. I mean, absolutely tax cuts. I'm not discounting that. I'm just saying that there's another wave, that wave is called technology and the advancements of technology. The market, every industry is so ripe for disruption that if you're a CEO and if you haven't thought about what your new business model is, if you don't have an offensive strategy, if you don't have a defensive strategy, you're in trouble. I think that is very sustainable for a long time.
The first part of the question was about advertising budgets? Well, look, there are multiple models on this, right? One model is kind of the service model, right? I think you're talking about one of those players or two of those players there and a consolidation in that space. There's also companies that want to do it internally. They're not outsourcing anymore because the technology is more user-friendly. I think broadly speaking, we think about the whole B2C platform, right? What does that mean? We don't look at advertising as just a segment. It's the entire B2C platform. It goes back to my earlier comments about companies that are transforming, that are classically B2B, and they're moving into B2C space. What does that mean to their business model? Are they going to outsource their advertising? Are they going to take it in-market?
Do they have to think differently because they used to be a B2B company? Well, maybe they're both B2B and B2C. We've not seen any disruption in that marketplace. That B2C platform for us, as you know, we've made a number of investments, and it's doing incredibly well. I think they want to go to Metallica.
I think maybe. Any last questions for Keith?
Final one back here.
Hi, Keith.
Hey.
I'm not a cell phone holder. I'm not going to announce myself. No. It's hard to do AI, right, without a lot of data. You guys have a lot of data, but it's the customer's data and it's siloed and independent. You can't really use it to train your models and stuff in aggregate. Is there anything you guys can do or have done to work with customers to try and better position yourselves to really leverage all the data that you guys have, to help the analytics and the AI downstream?
That gets into a whole issue around data privacy, which I don't know if anybody's touched on here. Has that come up today? No, not really. As you know, it's not our data. It is our customer's data. Now you're starting to get into issues around metadata and what can be made available to other people. I think it's going to be really interesting for all of us to see what happens in the U.S. The Europeans took a big swing with GDPR. The U.S., as you know, really does not have a data privacy set of legislation, although I think it's going to happen. In fact, I think Marc has been a huge advocate for it. You can see in the press why it's important with some of the behaviors of some of the other technology companies.
Do I think that there will be a yearning for that? I think there are companies that will opt in, and I think that there are companies that will opt out and individuals who will opt out. I think we have to wait and see. I think the desire, if data privacy is protected, is there. It's kind of a no-brainer, right? I think we have to wait and see.
Okay. Keith, thank you.
John, thank you.
Thank you very much.
All right. Enjoy Dreamforce. Thank you, guys. Great seeing you.
Mark?
Mr. Bach.
You want to-
Thank you, sir. Yep.
You want to take us home, Mark?
Yeah, just one minute, guys. I got all set up here. Thank you for spending the afternoon with us. We really appreciate you coming to Dreamforce. Have a great time at the concert if you're going. Have a great time for the rest of Dreamforce. Thanks again. Take care, guys.
All right, sir.