Ladies and gentlemen, welcome to Investor Day at Dreamforce. Please join me in welcoming Senior Vice President of Investor Relations, John
Cummings. That was a very nice introduction. Thank you, Andrew Zilly. Good afternoon, everyone. I'm John Cummings.
I'm the Senior Vice President, Investor Relations here at Salesforce. Welcome back to Dreamforce. 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? So one of the things you'll notice today is we're going to do just that.
So, first of all, thank you. Thanks, everyone, for being here. We really appreciate it. Appreciate your support. And in the spirit of kind of this idea of being a little shorter than we were, that was one of the pieces of feedback.
So we'll kick off here momentarily with Mark Hawkins and David Havlik to talk about our financial review, give you an update of where we were from last year in terms of our growth trajectory. Then we'll have Bret Taylor come and join us for a conversation about product, product strategy. And you can ask some of the questions you may be burning after the keynote from yesterday from Mark and company. And then Greg Schott will be here, the CEO and General Manager of MuleSoft. And then 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. So you'll see that from the team. So for those of you who gave that, we delivered. In events like this, we may make forward looking statements, and these forward looking statements are subject to risks, uncertainties and assumptions. And all those assumptions can be found on our Investor Relations website, www.salesforce.com/investor.
So with that, let me bring up Mark Hawkins, our President and CFO, to kick things off
for us.
Thanks, Mark. Hi, Sean. 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. And 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 5th Dreamforce and it's just an honor to be here and to share this information with you. So today, I want to talk about durable growth powered by a growing competitive advantage. And 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. And that's helping with our durable growth.
But 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. And that'll be a great update and I think will be helpful to you to understand including all the accounting changes. And then we'll wrap up with some Q and A. So that's the plan.
But durable growth powered by competitive advantages is definitely what I want to talk about. And last we spoke, last year at Dreamforce, we put up this $20,000,000,000 to $22,000,000,000 target for FY 'twenty two. Well, the main thing I want you to know is we're in execution mode, very much in execution mode right now. And 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. But clearly, the position is even stronger than last year, and we have a lot of confidence in our ability to execute on that. And if you look at that chart, you can see clearly we're in the mode of executing in the current year.
But just in a few weeks, you guys, I'll be giving preliminary guidance for FY 2020. So we're going to take one extra big step closer to that target. But I want you to walk away knowing we have confidence in this and we're in execution mode on that. So that's the beginning of it. I think this gives you a great sense of execution.
Let me I'm going to spend a couple of minutes on this and then we'll go deeper. But right here, we've been for years balancing durable growth and also the expansion of operating margins. 5 Dreamforces ago, I told you we'd be expanding our non GAAP operating margins. 5 years in a row, we're expanding non GAAP operating margins. We've taken Doctor 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. And in November, when I speak about non GAAP organic operating margins, excuse me, in February, the normal protocol time, I will again, you should expect a 6 year of expanded operating margins on an organic basis. So we know that it's durable growth and operating margin and cash flow expansion.
And you can see the cash flow side too is very near and dear to me, and I know it is to you as well. I think 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. And 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 Havlik and his team do a great job of helping us with the processes as we go through these decisions. But we're executing a plan. 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, but we're very much in execution mode at this point. So the thing that, of course, there's a couple of 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.
And 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. And we're in the pole position as number 1 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.
And these are those. They found a place in enterprise software where they could really make a mark. And 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 full position. The other thing I said about markets that are helping us in durable growth, this will help for years to come, has to do with the digital transformation.
And 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. And 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. And this chart explains that by IDC, they talk about the 10 areas of need that CIOs have and I would contend CEOs have and that is around things they need to properly digitally transform. And that's great. But what's more interesting about that is with MuleSoft, we now have 7 of the top 10.
We are the 1st 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. So I want to make sure you see that from a market standpoint. That's what we see. But the second part of the story I want to really spend some time on, which is this growing competitive advantage.
And 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. But 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. So you just have to come to Dreamforce to see that. I know you know that. But one of these these values have literally guided us and guided our thinking, our prioritization and how we operate.
And 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. But 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. I've seen many 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 a 1,000 decisions a day for us at every level of our company and every part of our company around the world. And we agree with Forrester's comment here that the only sustainable advantage is somebody who's deeply, deeply engaged and understanding with the customer. And we are.
They are in the center of everything for us. And 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. But 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. And the combination of that, we've done that. And we've done that driven by feedback from our customer, including the MuleSoft story is quite a great example of Brett Taylor going around the world and getting prioritized feedback on what's most important, coming back, finding out integration is number 1 and we bought MuleSoft.
We are driven with technology to do it purposefully for our customer. And that advantage, we've been leading and you saw 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. But 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 2 together, guess what, you create purposeful products that our customers are asking for. And this is one of my favorite charts because this tells what's really happening in the world today. This is the build out.
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. And 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 3 60 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. And that gets amplified with AI. And I know you get that. So we've been guided by the customer. We have built out our coverage by the customer guidance and that is really helping us.
But 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. And you can see a number of the different functionalities and features that we're providing were literally direct feedback from a customer. You should build this or you should buy this. And we have acted on that.
And also if you go deeper, you'll notice that Einstein is showing up everywhere where all of our clouds are becoming more intelligent. And when you saw Ching Ching'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.
But the other thing I would 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. And this is a 3rd party update. And what I like about this, I'll just point out a couple of points. One is we're either number 1 or in hot pursuit of being number 1 in every one of our core markets, 1st.
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 rate. 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. Again, we're continuing so then 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 2,006 when we had a $700,000,000 total addressable market total addressable market. We're at $140,000,000,000 and a fast growing market. We're in the pull position and 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. So 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 4 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 4 big engines are getting more and more balanced. We have 4 big balanced engines that are driving our durable growth going forward. This is encouraging. But 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 put 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 grown 100% at over $100,000,000 business. We like that.
You look at field service greater than $80,000,000 growing 800%. If you look at Heroku, you look at analytics growing 80%. 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 3 60 degree view. So we have the one of the just it's the strength of the capabilities and the completeness of the capabilities that is really driving the advantage.
But this is another advantage in part because we have a great M and A team and in part because we have a great product development team and you'll be talking to Brett later today. But 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 that digital transformation, this literally modernizing of their digital capabilities with the customer is going rapidly. And 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. And the reason that's particularly encouraging is when you go to multi cloud, you spend 10 times as much.
And guess where the customer is going with 3 60 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. But 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.
And it's not just our data. It's not just that we already have the most complete CRM data in the world, but 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 has 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, when you make a customer successful in that advantage, you get to leverage your entire installed 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. And think about this as an incremental new business and 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 4th biggest software company in the world and we're picking up all that new business. That's great. And why is it? Because we have the best offering in the marketplace. You can see it in the data.
But my story about customer success is when you look at the rest of the business that we sell into our installed base. Take it down to the lower chart about expanding. Half of the business that we sell into the installed base are new products. So when they've asked us to build out the offering, they buy it. That's a very, 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 were very successful. This is an advantage. It's helping us with durable growth in the biggest CRM installed base in the world. So that brings it back to facts. And I put this in front of you and I updated that other chart that we've shown before and I know a couple of you really like to have that update and I try to give that to you.
Here, every time I'm in front of you, I show this chart. There are 3 very important points on this chart. This is all about the facts from the 3rd 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.
And 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 is 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 And that is evidence, fact evidence that our competitive advantage is growing and growing and growing.
And this is helping us keep in mind in the hottest market in enterprise software, we see that, we feel that. The third point is probably as important as anything is we have a lot of room to grow in a $140,000,000,000 TAM market. That will help us with durable growth. We're really pleased about that. So 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. And this talks about the number of customers that we have that are greater than $1,000,000 per year in business. And as you can see, that's growing across the way. But what I really like are 2 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 and that will help us in the future. If I look at a view from the top, I'd like to show you this to you periodically. And 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. And 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. But 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 and that is really powerful because our vertical initiatives are working, our vertical investments are working and that is going to prepare really propel durable growth for the years to come as well.
And so let's look at the traction in the verticals and this again is information you've never seen before. But if you look at this, speaking the language of the customer customized. For example, in financial services, when we've done sub and x, 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. But you can see a 3x improvement and lots of room to run. This will help us with durable growth for the future. And 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, 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 just to tackle that. We're also making other kinds of investments internationally. But 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. And so we have a lot of room to run internationally. This will help us for years 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 making them successful. And 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 2 things that we're proud of a lot of things very humbly thankful for things that are on these charts awards and that type of thing. But there's 2 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. And just take a look at the market share data. And 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. And 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.
And 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 as close to that level of quantum. We're applying it and we're racing to $140,000,000,000 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. But if you like this scale, I really want to speak to this as the CFO, trailblazers.
I want to make sure the finance community really understands what's happening here. What a trailblazer is, I'm simplifying 2 things. It's a customer evangelist or an ecosystem evangelist. And what we had done and those that saw Mark's update at Dreamforce here, now we have over a 1000000 trailblazers that are growing rapidly. And 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. And they're using Trailhead, which is an enablement capability to scale up themselves and scale them. Think about that.
They're learning skills to make Salesforce more productive and they're helping their company. That's powerful. But now I want you to think about having over a 1000000 of people like that 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 and P 500 company having that. So they pulled out this example just as one of many. There's a guy named Damian O'Farrell. He was trying to help them actually convert to Lightning adoption. So 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 happened in a 1000000 times. So they get more value from their investment. That's what's happening. That is a very, very unique advantage.
That is powering us through. And 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 just want you to kind of fully grasp that.
If you look at the ecosystem advantage, this is also extending our value and our reach. And the thing I like about this is if you look to the left, our partner is 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. But notice to the right of that, they have 150% increase in partner badges. So 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. And then 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. And this is expanding our competitive advantage. These are a very short list of people. And when you go to the expo and you see Apple next to AWS, I just asked you how many companies do you see that happening. And then 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. 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 and you can go through each and every one of them and Brett will be here to talk more. That's enhancing our ability and our competitive advantage.
And so what you began to see is in addition to a great market, in addition to that helping us and being a tailwind, and in 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. And then you can see this growing set of lists of competitive advantages. You can pick your favorite around the circle, and these are some of them. But 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 of $5,000,000,000 We told you, we declared, I remember being on the stage when we said we had ambitions for $10,000,000,000 we were there. We talk about the $21,000,000,000 to $23,000,000,000 We're in execution mode on this. And when we do, we're confident we will yet do it again and we will be the fastest to $20,000,000,000 to make history again. So on that note, I want to thank you and I'm going to turn that right over to David Havlik.
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 and Dreamforce really is all about connections. I spent yesterday meeting with customers and talking with them about the opportunities in the 4th Industrial Revolution.
And then I was able to connect with many of you last night, and I'm very happy to be with you here today. But Dreamforce is also about amazing experiences, and 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 and I was walking through the campground and a bear jumped out from behind a tree and the bear gave me a huge hug. And for the first time in a decade, it wasn't John DiFucci.
So it was a great amazing experience for me. So 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? Yes.
Okay, great. All right.
So I'm going to spend the next 20 minutes or so talking a little bit about how to measure our success on that journey that Mark talked about, a journey to $21,000,000,000 And then we'll talk a little bit about how we're managing the business and how you should think about it. And 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 marketing 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. And I want to talk about the 606 revenue change, I want to talk about the 340 capitalized commission change and also 20,601, not the changes themselves, but how those changes are impacting the metrics that all of you are using to measure and manage your business. So let's jump into it on 60 6 side of things.
And I'm going to start with this slide. This slide shows the deferred revenue number or the sort of this is a concept slide, shows the deferred revenue number and the unearned revenue number. And 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 606 accounting standard requires us to recognize revenue in a slightly different way. And in some instances, we actually pull revenue forward. So essentially, if you look at on the right hand side, we pulled a bit of revenue forward into prior years. And so that revenue is a bit higher, and the offset is a slight reduction in what was the deferred revenue number, and that essentially is now the unearned revenue number, okay? But this idea that it's our booked and billed business hasn't changed, okay?
From a materiality perspective, this slide shows our fiscal year 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 $7,000,000,000 number in our Q4, we're talking about a delta of about $100,000,000 Again, that $100,000,000 was recognized earlier. So the UR number is a bit lower and our prior year's revenue was a bit higher.
Importantly, we exited our Q2 2019 with approximately $5,900,000,000 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. Now importantly, many of you look at this number on a quarterly basis, and sometimes a picture is worth a 1,000 words. This chart shows our sequential change in 1st quarter deferred revenue or now unearned revenue, and unearned revenue numbers are obviously in the dark blue boxes. And 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? And the reason for that is we have the compounding effect of our business. Our invoicing is becoming a little bit more seasonal as we co term deals in Q4, but it's really this rising water level of amortization, which is much more linear. And that rising water level is washing out that incremental invoicing in the Q1, and you can see that washout is becoming more deep over time. If you look at the same numbers for our 2nd quarter, you see a very, very similar trend.
If you look at for the Q3, again, you see a very, very similar trend. So the 1st 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. And then, of course, all of you expect that number to jump up in the 4th quarter, Okay? So 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. And lastly, I just want to remind you that we will only be guiding this number for 1 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 obligations. I want to talk a little bit about that.
In a 605 world, we gave you a Doctor 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. And 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. But 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.
So this is a really important incremental insight for you as you're looking at our business. And if you look at over on the right hand side of this slide, dollars 21,000,000,000 of total RPO as we exited our 2nd quarter. Approximately $10,000,000,000 will become revenue in the next 12 months. That gives us this predictability. And you can see we've also provided you a couple of 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. Now the $21,000,000,000 number was actually up 36% year over year. This is important. RPO number was up 36% year over year, but our business wasn't up 36% year over year, right?
The metric was up. So I want to talk a little bit about how the metric is recorded and how the accounting works a little bit. And to do that, I want to give you a hypothetical example of a customer. And 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. Okay. So this is a hypothetical customer, dollars 60,000,000 3 year customer, dollars 20,000,000 a year.
We bill them annually and we did this deal at the end of the first half of the first year here. So I'm showing you halves and not quarters. So all of you know how this works. We shoot out an invoice for $20,000,000 right? And then we begin the process of amortizing off that revenue, right?
So the UR number goes from $20,000,000 to $10,000,000 as we've amortized off that half. And we re invoice, it goes $20,000,000 $20,000,000 across the page. Does that make sense? You guys are all ready to do accounting at Salesforce? Okay.
The RPO measure is the total value of the transaction, right?
So in this case, we had a
$60,000,000 transaction. So we record we have $60,000,000 and we waterfall that off $10,000,000 each half until it amortizes obviously down to 0. Now you notice a little bit of lumpiness in these measures, right? And this is very, 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, $20,000,000 each half until you get to the end of the contract, of course, when it waterfalls off, okay? So the current RPO measure is a bit more predictable, a bit more consistent and doesn't reflect some of that lumpiness. And obviously, you know this, the revenue number is also very, very consistent and predictable. So the top two lines there are a little bit more lumpy and the bottom line's a little bit more steady. Now stick with me, because now we're going to renew this contract.
And just like if we were re signing Tom Brady, we wouldn't wait until the last day of his contract. We 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. So let's say this customer was going to renew in the first half of the third year.
And the customer said we love Salesforce, all that success Mark talked about, dollars 80,000,000 4 year renewal, again, dollars 20,000,000 a year, so no change, a little bit longer, And we're going to do this deal also at the end of Q2. So we would drop another invoice just as we would have had we not done the renewal. So there's no change to UR. In fact, you've noticed no change to any of the numbers on that renewal except for 1. You notice the RPO measure jumps from $20,000,000 to 80,000,000 dollars to $60,000,000 change, and there is no new business here, okay?
This is very important to understand. This is simply a renewal, okay? No change in any of the other measures, but the RPO number changes. Now let's say the renewal period changes. Say the renewal happened in the second half.
This is where it gets really interesting. Okay. So if this renewal happens in the second half of the year, notice now what happens to all the measures. Now the UR measure, if you were doing a year over year compare, had you not done the renewal, you would have had a flat $10,000,000 versus $10,000,000 But now you're going to see that number double to 20,000,000 dollars The RPO number, which would have been down by $20,000,000 had you done a year over year compare, is now up by $50,000,000 So $70,000,000 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. So notice now because we're renewing it, the current RPO would have declined by $10,000,000 and now it stays flat at $20,000,000 And here's the best part. 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.
And it's very important that you understand that. And we talked for a long time about the timing and duration, etcetera, of new renewables can have an impact. So understanding the components of growth is something I know is very much on your mind. There's 4 things that are going to become revenue in the next 12 months. You might write this down because there's 4 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 Doctor announced the UR. The second is what's booked and unbilled, but going to be revenue in the next 12 months.
You didn't used to know that, did you? You used to get a backlog number, but you didn't really know that. But now with the CRPO, you kind of do. So now you know that second piece. The 3rd 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, right? As you get to the end of a contract, if you're 6 months in, there's 6 months till the end of a contract, there's 6 months that's still left that's sort of not recorded anywhere, right, because we're hoping to get that renewal done. So if we only have 6 months on contract, we'll only have 6 months in our numbers.
So we talked about how timing, duration in 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. And the other thing is, remember, and we've said this very consistently, we would rather book a good long term economic deal in the 1st week of the next quarter than book a bad deal in the last week of this quarter to make one of these measures.
Because remember, we're recognizing revenue on a daily basis. We'd rather give up 2 or 3 days or 5 days or 30 days or 90 days of bad revenue to get 10 years of really good revenue. And I think it's really important to understand that that is a very key philosophy for how we think about the business. Now 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 is actually in the back of the room here. And 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 ongoing revenue? And then 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. But 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. Okay. I just want to make one more comment on 606. I'm going to change gears a little bit.
And that is there are certain times in 606 where we actually, because of the standard, recognize revenue ahead of invoicing. So our traditional business, we invoice business, record UR, amortize it off, right? But 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 1, 2, 3 deal, 100, 200, 300, but we're recognizing revenue evenly at $200 per year because that's what the standard has us do. But in the 1st year, we're going to recognize $200 of revenue, but only invoice $100 So if we invoice $100 with $100 of UR, we don't have enough UR to fully amortize. So 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 1st year, the contract asset grows to $100 So we get $100 of UR, dollars 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. So when that second invoice drops at $200, we net the $100 contract asset against it.
So 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. Again, this doesn't change our cash flow. We still are invoicing 1, 2, 3, but as you're evaluating our cash flow, it's important to understand this.
For the MuleSoft license business, this is even more pervasive. So this is an example of a similar $600 deal that's $300 license and $300 maintenance. So the $300 license we recognize upfront, and then we recognize the rest ratably over time. So in this deal, we are actually taking $400 of revenue in the 1st year, right, but against the $200 invoice, and that's why we paid a $200 contract asset in the 1st year. So 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. And so you guys are evaluating our cash flow. It's important to understand that.
And 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?
Okay. Just quickly, I'm not going to spend any time on this. The commission standard ASU 3,040,040 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 4 years on new business, 2 years on renewal and we're amortizing a bit more.
Again, this is per the standard. This isn't different across companies for the what's capitalized. The capitalization period is a bit different across companies, so I encourage you to understand that as you're evaluating sales force against other companies. On the 2016-one mark to market accounting for strategic investments, we've had a great year, as have most of you, investing in software. And so we have recognized 0.4 $3 of gains on our GAAP results, dollars 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.
So 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 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.
So 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 terming in Q4 offset by a higher water level. This time, instead of being amortization, higher water level is cash expenses. So as you're modeling cash flows, please be mindful of that as well.
All right. The accounting is like that's all the accounting I have for you guys today. So I'm going to now move to talk a little about managing our success. And this is actually my favorite time of the presentation and you guys will all be disappointed if I didn't say we're going back to school. So we're going to talk a little bit about last 3 or 4 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 an attrition and how do we model those things? Last year, we talked a little bit about long range planning, and I used 3 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. Then 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.
So if you recall last year, I talked about the camper. Camper was a company that was growing from $100 to $170 roughly over 4 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, right, from 20% to 10%. So if I apply subscription economics to this and I say, let's apply a cost to book of $2 cost of sort of 40% and attrition rate of 10%, can build simple P and Ls for this company. And 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 of things about this company. Firstly, they start at 5.5% margin, okay?
And they have a tremendous amount of model leverage, right? Their subscription economics didn't improve, but because their business is decelerating from 20% to 10%, their margins move from 5.5% to nearly 23% in just 4 years. Unbelievable amount of model leverage. It's the magic of deceleration in our business, right? 2nd thing to take note of is you'll note that the marginal return each year declines.
So 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. So you get more profitable, it gets tougher and tougher to get. You see that with this company, okay?
So I encourage you guys to go through the math after the discussion today. If I 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. So they were growing that $20 by a constant amount. And they were growing from 20% down to 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 percent. If you recall, last year, the 1st 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, but not quite as much. So this company traded off a little bit of margin for a little bit more growth, but you see the same second derivative marginal return declining, right?
So 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, year out 20%. And that's, as Mark Hawkins just talked about, that's our goal. That's what Salesforce is trying to deliver, year in, 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, this is a company that shows 0 model leverage, 5.5% every single year. So you guys can go through this math, but it's very important to understand this dynamic. And you can see just how sensitive it is to the bottom line. So with that, I want to talk a little bit about how that applies to us.
Mark's already showed you this slide, dollars 21,000,000,000 to $23,000,000,000 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 $21,000,000,000 RPO number. 80% of the next 12 months is already done.
But more amazing, 60% of 2 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 returns 2 years out were already done.
That would be pretty cool.
So we start out with this top line. And to that, we begin to work through our planning process. So this is what my planning team does, and my planning team is all here. So they're going to check my work. So 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.
Hopefully, I didn't push
the button 6 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 of book and cost to start flat, we get a little bit of model leverage, and that's good.
It 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 Street. So 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.
And in our fiscal planning process this year, our long range planning process, I'm super happy to say that we have built that It allows us to 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 and maybe small tuck in acquisitions, etcetera, but they're important to the long term or they may be areas that do drive growth. And in those instances, we're able to sort of raise our guidance. And here's one of those areas right here. We are durably investing in sales capacity growth.
So this is a sort of build of Mark's earlier slide, 21% headcount growth, 23% sales headcount growth, again, consistent another number that's consistent with the durable growth. All these numbers are very similar, and we're doing that by growing our G and A headcount a little less quickly. So to sort of wrap up this section, we are delivering durable top line growth. Mark talked about it and 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 and A.
In fact, this year, at 25 to 50 basis points, our organic number is still 125 to 150 basis points. So as long as we're delivering this kind of durable revenue growth, we've been delivering pretty consistent operating margin expansion. That's probably how you should think about the business. One other takeaway on this slide, as I just said, big M and A is really the wobbler here. But you might note that as we've grown and gotten bigger, we're able to do some pretty big M and A and continue to grow margins.
And that wasn't the case in FY 2014 when we acquired ExactTarget. So just to close and wrap up here, Mark showed you this slide to start. We're in a path of $21,000,000,000 to $23,000,000,000 dollars Mark showed you this huge opportunity that we're addressing, and nobody is 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. And so it's really important you understand it. And then hopefully, you've got also a little bit better sense about how we manage a subscription business at Salesforce and how you should think about it as well. So with that, I want to thank you for your attention and your time. And I'm going to invite Mark to come on back up here, and we're going to open things up to your questions.
Let's give
it up for David.
Let's go back. I went too far. Sorry, you guys. It's not Brett Taylor actually, sorry. Exactly.
So one thing I do want
to take the opportunity right now on is before we get started with questions is make sure don't get out of the room without thanking John Cummings and his team, Andrew Zilli, our royalty and the entire finance team. So John and team, thank you. You've done a lot of good work.
I would just sort of add not just the best IR team, but also the best dressed IR team.
There we go. There we go. Indeed. Okay. Questions, please, and we'll team will bring the microphone.
Thank you, John. Mark Murphy with JPMorgan. 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.
You had this but 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. And 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 points, 15 points lower, just to try to get through that comp? Or is the environment so healthy this year that we don't necessarily need to think about it that way?
I would say a couple of 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 of the revenue.
And I think David showed really importantly how that is very critical. But I think Mark's question is more directed to RPO, whereby we don't guide that. It is a good business environment, for sure. And 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, to achieve that. So that would be my starting point.
David, anything you want to add?
Yes. I mean, 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 is back here, and I asked them this question, how do we do this better?
And there's just no way to forecast some of those things. So I would encourage you to look at the more stable measures. I think the CRPO number is a great measure for you to give you sort of a sense of the trajectory of our business.
I do think Mark too, it's great. Totally agree, David. I think the 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.
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 cash operating cash flow, free cash flow, or it could be the valuation metric? I guess how should we think about that relative to the guidance at the fiscal 'twenty
Sure. I think there should be some level of correlation, Kirk. There's always things that are wildcards 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.
But generally, I think the idea of that correlating with revenue growth and to some degree, profit, I would agree. David, do you mean?
Yes. I mean, the only sort of wobblers are we've done some M and A and that impacts our interest income and our interest expense. And equally, our cash taxes will become more profitable, becomes more of a headwind for us likely over time. But ex those things, we think that you should expect our cash yield to fully improve over time.
Yes, it has to a degree.
Yes, this is Terry Tillman from SunTrust. Mark, I love the slide on the add on products. 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.
And 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.
Yes. 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, and it was not a tailwind at all or a headwind at all in Q2. And so you saw a little bit of a differential growth rate year on year on sales call.
But again, strong growth, we achieved our 1st $1,000,000,000 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 and then you do a plus one, you add an additional functionality. And it was like the cherry on top of the cake when you were growing the sales caught 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.
So listen, we really appreciate what you
put up there and also just appreciate the fact that you recognize that we're going to try to figure out what new subscription ACV is, 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. So I guess I'm just wondering, we're still going to try to do it. Would you suggest like could you suggest something that like if we looked at trailing 12 months, would that smooth things out a little bit better?
Because we don't want to like we're going to we understand longer term, most people in this room are investing in Salesforce longer term if they're invested in it. And the quarter is a little bit weak on new subscription ACV. Just want to know it though because short term turns into long term. But maybe it's because of the timing here. And if we look at trailing 12 months, would that just be a better way to do it?
Just wondering and then I have a quick follow-up.
I mean, I'll start and I'm going to jump in. 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 the quarter because the nature of our business is we'd rather give up a few days of revenue to get a good deal, right? And 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 measures a better number to look at.
But remember, the CRPO number doesn't capture the attrition. So I talked about those four things. CRPO captures the first two. I want to explain what the 4 are again, but it captures the first 2, build and unbilled, next 12 months. It doesn't capture the attrition.
So 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. But I wouldn't get hypnotized by any individual quarter's number because of this philosophy of always book good deals. Yes, book good deals, renewals. Good deals are we would rather wait 90 days and book a good deal than book a terrible deal and get 90 days of bad revenue to make a number.
And it's why, by the way, we don't say, here's our bookings number. That will cause us to change our behavior.
To David's point, I know people get but we just want to reiterate, when you say that, 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. And I think it really supports the economics of what David is saying here.
I think it's one of the things that's very unusual if you look at our history, and I encourage you to do this. There's times on our earnings call where we will say, and 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 1st week of the quarter or the 2nd week of the quarter, except with us. And if you go back in history, it's happened many, 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. And if we've talked about anything over the last 4 years, it's the long term economics are really what matter most. They do and
the competitive position that's going to drive those.
Appreciate that. And by the way, it used to happen at Oracle when Keith Block was there, but doesn't anymore. Just a quick follow-up, you showed that that ramp deal, which I think is really interesting. And 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 $100,000,000 or the forget the numbers were the $100,000,000 the 1st year and then they get an extra $100,000,000 the second and extra $100,000,000 or do they get paid on the average of $200,000,000 or do they get paid on the 3 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?
Let me start with that and David feel free to jump into it. I think for 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 parts of the sales force. But if somebody generates new business for a year, then they get paid on that new business and they may get a kicker for multi year as well. And then if it steps up again to a 2nd year or a 3rd year, depending on which part of the sales force they're in, they'll get paid when the new business arrives.
So I think, for example, if you did $1,000,000 worth of new business, you're going to get paid on $1,000,000 If the next year you built on that annuity, and now as that account you grew that to a $2,000,000 business, you're going to get the difference between the $1,000,000 $2,000,000 as an increment because you're generating that new business. And there's lots of exceptions depending on what part of the sales force you're in, but that's probably a salient point for you. John, I hope that helps.
Yes. We pay them on each of the 100s, 100, 100, 100, right? And why do we do that? Because as a customer, the economic value is 300 at the end, and it's going to renew at $300 So don't let the revenue recognition hypnotize you about the economic value, right? The economic value is $300 a year deal.
And when we exit that deal, that's what the customer is thinking. I'm going to renew at $300 And that's what we're incenting our reps
to drive
you. Hey, guys.
Alan Griffin from Piper. I wanted to ask, you guys showed a slide where you continue to accelerate growth in the largest of deals, dollars 10,000,000 $20,000,000 ARR. How does that 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, I mean, as you would guess, the bigger the deal you get, you should get some kind of scale, some kind of efficiency from that standpoint. But again, we're investing in those accounts too to go for the long play and 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 and cost of book because we're really trying to develop that account wall to wall over the long term. So, but I would say in general, we get some level of efficiency.
Yes, we
absolutely do. So you should
think about cost of book in all our measures as a rate versus mix analysis. If I was to improve cost of book in every one of my sub segments and the mix was to change to more international, to more emerging clouds, to more, then the aggregate may not change. And 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. So there's absolutely efficiencies that we have.
Yes.
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. Phil Winslow, Wells Fargo. Going back to the cost of book idea here, one of the slides you put up there was, you have 60 2 percent of customers are still single cloud and obviously there's a lot of room for upsell there. When you think about the just the efficiency of upselling a newer customer 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 cross sell multiple clouds, how much more efficient is that than let's say in that new cloud to your customer?
And then also sort of the flip side of leverage, sort of churn, Obviously, if churn comes down, cost of renew is 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?
I think a couple of things here. The more multi cloud we have, the less attrition there's a difference. The more times people use our app exchange, our attrition is lower. It just makes it stickier, if you will, Phil. So 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. And so that's those would be two elements of what you touched on.
Yes. We don't have hunter and farmer reps. And that's kind of where you're going, right, is we don't think about it that way. So 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.
And 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. I think the most important thing, though, Phil, is just trying to really 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 the biggest cost to serve variable, one of the biggest cost to serve variables is your subscription gross margins.
That's correct.
If I look at scale of
the company and I go back 3 years, 5 years, 10 years, you actually haven't seen any leverage. In fact, it's been more deleverage 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 5 or 10 years?
We're 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 demand where whatever you could see publicly that their gross margin for the subscription was different than ours. So when you put things like that together, by definition, you start to get a mix issue here that's having an effect here. But fundamentally, I would say our core gross margins have been very stable. But when we're weaving in new companies and snapping in things such as that, it certainly 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, but if you net out some of the M and A, I think it's relatively stable.
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. And so it's a good number. The mix issue that Mark talked about is very real, not just with M and A, but also with as we expand into other geos.
And remember, our model requires us to be the most trusted, secure, available, secure, available service in the world, and we are willing to invest into that to make
sure that that's the case.
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 ProServe mix is down a little bit. You probably noticed that too. And for everybody's benefit, that actually when that mix is down, that actually has had a slight uptick on our gross margin. So there's some netting out of those effects. And that's because we have a fantastic SI community that's really served well and we want them to serve well.
So I hope that helps.
Great. We're going to we'll go with you, Keith. We'll take our last question for Mark and David right now. Mark and David will be around after after Mark and Keith are here and you can have additional follow-up questions for them at the end of the day in order to keep us on time. We're going to have to keep you guys off.
Thank you both very much. And we'll take our last question from you, Keith.
Excellent. Thank you guys for hosting us today. And thank you for the new numbers. We always love new numbers.
When talking about the I want to
make sure I understand these numbers right, the multi cloud versus single cloud customers. And you said that, 38% of customers are multi cloud out of the 150,000 base. If I ran the math on that, that means multi cloud customers on average are about 160,000 per year in ATV And 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? Or are they different types of customers? Is that all the SMBs that really aren't going to get bigger? Or 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 in SMB today as a mid market or GB tomorrow, which is an enterprise someday. And companies that are successful kind of grow up and through that.
So that's one natural motion that happens. But we also see at all levels and all customer sizes, the interest for 360 degree view is growing. And I would you're going to get exposed to everybody here, just sample that. But 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
and talk about how he thinks about planting seeds and growing them with multi cloud. So with that,
I think perfect.
Yes. Thank you and welcome to Brett Taylor for sure. Is that John? Thank you. Thanks so much.
Thanks, Chris.
All right. I'd like to welcome to stage Brett Taylor, our President and Chief Product Officer. Brett, thanks so much for joining us for a conversation. And maybe just to sort of 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 of days for you?
Yes. So my priorities this year, I had sort of 4 key themes from an R and 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. But 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 and 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. And 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. And the last 2 are completeness, which is just making sure our products are number 1 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, filling out that functionality. So all of our clouds are really filling in those gaps, which is really meaningful for us.
So those customers that start with that first cloud have the best experience possible before they make that journey to be a multi cloud customer. And the final was empowerment and Trailhead. I think this is a big theme in the keynote yesterday. I think there's 2 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.
And 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 sort of drive success in each of our projects. Because as I know, if you talk to customers, we're only one part of that solution. The partner with them is the other part and Trailhead is an engine that's both creating jobs, helping society and also creating this amazing partner community around our products.
So those are the 4 themes. I think the highlight for me is probably Customer 360 and Einstein Voice. If you didn't see Ching Ching Liu do that demo, watch it online. She's amazing. It was probably the highlight of the demo for me.
And happy to answer any questions you have.
Hi, Jen Loe 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. So the demonstration yesterday, I think was a great example of that. When Ching Ching 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 CRM with the understanding of the voice. As I think she quips, voice recognition is not quite a commodity, but it's getting there.
But actually understanding what you mean and the intent behind it is where the magic is. The most remarkable part of that Einstein voice is we can extract structured intent from unstructured speech. And we can do that because we have the data about your customers in Salesforce. So 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 and you combine that proprietary data with sophisticated technology and I think that's really where the value in artificial intelligence comes out. And so, 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. M. Has 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. And where 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. So what's progression you think customers should be able to expect in terms of having an impact on their business?
Yes. So I think there's sort of multiple layers. So 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 3 clouds we see as a really strategic combination. If you imagine you're a retailer, how strategic it is to combine those customer experiences and it provides out of the box point and click ways of providing the most valuable integrations between those experiences.
So I'll give you a couple of 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. And now we're making it easy, simpler and cheaper to do so.
But 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 this is 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. And so one of the things that I think if you talk to the team around Customer 360, 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 and 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?
And so I really feel like just like Einstein, when we announced it 2 years ago, it 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. But you should really think of it as a starting point as opposed to a big reveal and then we walk away. This really a platform that we'll be building on in a lot of subsequent dream forces.
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 2?
Sitting around in circles? Yeah.
Is that even a possibility? Yes.
I mean, we like to say with our customers, it's about going from unknown to known to customers to loyal customers. And we really want our platform to be that end to end solution from unknown to loyal. And I do think that one of the things we if you look at the evolution of Salesforce and I've only been here for 2 years, so I can take credit for things I didn't work on. But we started in a very much a B2B mindset with sales automation and we added service and we added our platform. And over the past sort of 5, 6 years, we've added all these B2C capabilities organically and inorganically.
And I think what I see is our opportunity strategically as being the one CRM that does both, both the B2B and B2C, unknown and known. And if you look at our strategy coming together and products like Customer 360, 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 like you can buy their products in Target.
So if you look at their business model, a B2B business model, but they're also a brand company, right? And they have direct relationships with the consumers of their brands. And 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. And 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.
And so 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 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's in a store, that's not an Adidas branded store or they buy it through the Adidas app to let you wait in line for the next shoes, you can have a single view of that customer across those touch points. I think that's the we're really the only CRM that does that and that's really where we're trying to sort of build our core competitive advantage.
Raimo Lenschow from Barclays. Going back to the 360, can you talk a little bit about to the implications that MuleSoft or that what being MuleSoft is bringing there? Because it looks more and more strategic now that we know 360 is there and then we think what MuleSoft brings to the table, it seems like it's a perfect fit. And we were one step ahead of asking questions around that, but double click on it.
Yes, I mean this was definitely a part of the strategy this year. When I think of integration, I think of it in 2 ways, really reflected in Customer 3 60 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. And you hear a lot 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.
And that's really what's driving the growth of this company. So that's one area and that's really the 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 1 integrated experience. The other side of that there is recognizing, Mark talked a lot about this and 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.
And 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? And then 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 3rd party and legacy with MuleSoft and 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. And 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 customers and how important it is in digital marketing. And 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, etcetera.
And then you have the walled garden properties like Facebook and Google who have obviously achieved significant scale off of their ID graphs. And 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. So 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?
Yes, 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 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 2 completely separate systems.
And so you can end up having 2 different relationships and with the same organization as a consumer and getting fragmented relationships. And so 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 these different geographies, we want to help you create a single view of customer across those. And then to answer your question about privacy, I think this is the 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, so 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.
And I think we believe that as the premier CRM, we can really help our customers navigate that complexity. And 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. So we have a lot of teams working on this. And if you're hearing in my voice, we've turned this from okay, we're going to meet GDPR requirements to let's be a partner to our customers who are navigating this complexity and we think it's something that we can become great at and we already are, I think better than our peers at.
Hey, Brad. It's Pat Walravens at JMP. So I'd love to hear what you make of this, the open data initiative that Adobe, Microsoft and S to be announced. And is it
a coincidence that it's come as the same
Likely not a coincidence. Yes, 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. But we so 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. So it's exciting to see sort of integration become such a sort of the topic du jour in our industry. And I think the other thing to note is that we've been really focused on sort of doubling down on the strategic partnerships to where we're seeing our customers want integration. So there's a lot of announcements to Streamforce, but you probably saw we announced a relationship with Apple on Monday.
We announced a partnership with AWS on Tuesday and a partnership with Google today to directly sell Google Analytics. I want to call it the AWS example because it's really I think plays to what I'm hearing for customers on this integration front. So this partnership with AWS essentially integrates Salesforce and Amazon Web Services at the infrastructure level. So 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. So as a CIO, you can actually start to conceptualize Amazon Web Services and Google as one security context, which is really differentiated.
So 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 and it's really a question on the boundaries of where you think Salesforce should play and where it shouldn't play. So 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. But it seems like you want to keep the value in your environment.
And I'm just trying to understand, maybe you could help us with your 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?
Yes, it's a great question. First, you'll hear from Greg later, but just to state without ambiguity, we're really committed to MuleSoft being a neutral integration platform. We think it's vital when a customer choosing integration platform that it works with every system. So 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. So 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 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 and you have we call it swivel chair integration. You have 2 screens with 2 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. So as an example, if you connected 3 on prem point of sale systems to make a mobile commerce application, and 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. So 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. And 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.
Derrick Wood at Cowen. I wanted to ask on analytics. It's your 3rd biggest TAM, but I think maybe more obscure in terms of how you're going to market. So 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?
Yes. So 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. And 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. And 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. And 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 with their end will tell you it's their dashboard to their entire marketing sort of experience. For us, if you look at it strategically, like 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 like their return on investment and where to invest dollars next time. You combine that with our suite of marketing products and we really wanted 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. So that's the way to think about it.
Thanks. Brett Graceland with KeyBanc Capital Markets. Question for you, as we think about Customer 360, talk a lot about MuleSoft and the role there, but another component that we hear a lot and I think just 900 sessions over the next couple of days is lightning. And obviously, you have customers like Autodesk that can do it in 60 days, but this has been a multi year journey. So maybe give us an update, where are we at relative to installed base that actually has migrated over?
Do you think we're going to 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?
Yes, it'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. And now we've entered into the world for those customers who not migrated over yet.
It's largely sort of the change management of shifting from one experience to another experience. And you're seeing that, I don't believe we're disclosing the lightning adoption numbers, so I have to be vague and I apologize for that. But 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. So this year was actually probably the year's most rapid Lightning progress since I've been here.
Tom Roderick with Stifel. Thanks for joining us. I want to go back to MuleSoft's question again. You got a lot of questions here around is it actually speeding time to market and time to multi cloud for customers. But 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 sales force the opportunity to go out and be more aggressive with M and A knowing that you can stitch these platforms together?
I've never had anyone tell me that we weren't aggressive in M and A. So thank you for that. No, the so yes, it's interesting. I was a product of M and 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. And MuleSoft has this world where everything's an API, everything's a service.
And 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 and 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. But it does mean that we have, I think at the architectural level, a much more opinion away about how do we integrate these for our CIOs and our IT development staff? How do we actually bring this concept of sort of API led connectivity and an API led point of integration for our customers and partners who are sort of weaving these together.
But I don't think it sort of changes the fundamental business logic around why we would build versus buy.
Great. I think, Brett, I
know you have to go to an admin keynote in a few minutes. So why don't we
throw a couple of questions? A1000 admins waiting for me.
Yes, we don't want
to keep them waiting. So Hey, Brett. Alex Zukin from Piper. One question I wanted to ask you is 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 Datawarma on the analytics side for B2C. How do you think about the content layer? Is that a build by future strategic direction? Any comments that you'd have?
Yes. 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 what I think I hear customers really putting a lot of their focus, which is on the intelligence. The content 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. And so if you look at our B2C strategy broadly, it's very focused on Einstein, very focused on intelligence and this concept of a personalized journey.
The core of our marketing cloud is this journey builder. The idea of it is how do you provide personalized journeys at scale? And where at scale means you've got hundreds of millions of consumers, so you can't 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 you is impossible or was not possible without modern large scale intelligent services like Einstein. So 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 want to bring it up because that's where I hear customers having the most pain and seeing the most opportunity in improving their marketing.
Great. Brett, thank you so much for coming. Appreciate your time. Thank you so much. I really appreciate it.
Thank you. So we're running a little bit tight on time today. So we're going to do is we'll take a break right now for how long, it's 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. All right. So 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.
So Greg, welcome. Thank you so much for spending time with us. You're the man of the hour I think today. So any case, yes, turn it over to you.
All right. Thank you. Some of you know MuleSoft. We've worked together over years, and some of you are probably just coming up to speed on it. So for those of you who know the story, I apologize.
I'm going to give a 2 minute primer on MuleSoft, and then we'll get into the meat. So we all know this. Did we get that? Okay. The mission of the company is fairly straightforward.
It's to help organizations change and innovate faster by making it easy for them to connect the world's applications, data and devices. It's actually a fairly straightforward top level mission statement. Once you click one level down into that, things get incredibly complicated, and that's really where the opportunity is for us. As organizations continue to grow, there's with all the cloud apps, now an average enterprise has 1100 cloud apps. MuleSoft, 3 or 4 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, 1100. 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. And so 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. And what they do is they let's see if that builds out correctly.
Back it up 1 if you could please. We back that one. Back it up one.
What they sorry, is 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. And what happens over time is the project gets done, but you end up strangling the business. So you start losing, it's really expensive, it's really fragile, it's really insecure, and you start losing control of your business with all the spaghetti code.
And it is a massive cost problem too. Companies spend approximately $700,000,000,000 a year doing this, dollars 30,000,000,000 a year in software and the rest in writing custom point to point integration code. And this kind of from a and we don't 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. But when we were doing the math for our S1, at our current penetration rates, where we currently were, if we just extrapolate it out by company size, at that moment in time, we had a $29,000,000,000 TAM projected, and we were probably single digit to maybe 10% to 15% penetrated at most of our customers. So we think the TAM is many tens of 1,000,000.
It's not just the cost though, it's the agility, and that's even more important. Not only saving companies $700,000,000,000 in pain, but it's all the how to get them to go faster and be more agile in this environment. So, a lot of folks asked 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? And 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 went before pre Siebel, the CRM market was tens of 1,000,000, Siebel, it was 1,000,000,000 and you might have said, well, CRM market is going to grow 15% a year at 1,000,000,000 You look at it in Salesforce with the cloud unlocked tens of 1,000,000,000 in market opportunity around CRM. It 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 product on top of this where none could have been built out before. So the way to think about it is, 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 mid 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. And 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. And some people ask me, okay, but if you have the APIs, can't they just talk to each other? And I don't want to get into the technical aspects of it, but technically, the APIs can't talk to each other. 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 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. So what we tell our customers is you need to go build out an application network. And 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. But 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 midsized organizations are starting to build out these application networks. And if you think about a computer network, computer networks came started getting built out in the early 90s and 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, and we just kind of still just kept buying more Cisco routers and switches. And now we've got a we're 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. But we kind of stopped there, right?
We stopped at where Cisco left off, which is just the computer network, and that was the end of standardization was there. So now I can go to 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. And 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. So 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. So when we go to one of our bank customers and they say they've built 8,000 applications, it's not because that bank needed 8,000 applications to run.
It's because everything is built in silos and they didn't have visibility into all the other stuff that's been built. We provide this ability for everybody inside the organization to see all of that work that's been done before and start to reuse it. And that's when you start seeing the clock speed of business speed up. So that's who we are.
I'll just give you 2 minutes
on the acquisition. We had been partners with Salesforce for years. We've been customer of Salesforce. Salesforce has been a customer of ours. Mark and I had talked for some period of time just about trying to figure out how to do more together.
And 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. And when Mark and I met back in February, when we started talking about this, he was saying, we see digital transformation. Salesforce is now thinking about digital transformation of industries. And I was saying, well, we think about we are the engine for digital transformation. We're at the core of all that digital transformation.
So putting the 2 companies together felt like a really amazing strategic fit. And I can answer more in the Q and A, but it has turned out to be exactly that. We knew 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's going to go. And as we've gotten in and as we've seen it, and Simon Parmet is going to join me in a second to talk about how it's working in the field, we are seeing that kind of traction.
We're seeing how well it's working with the industry analysts, with our customers. Everybody understands the power of this, and it's just working. It's just been amazing to watch.
So I want
to bring up Simon to talk a little bit about what we're seeing in the field.
Okay. Quick glimpse 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 sales force teams.
But 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. And 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, big way as well as the other applications and core initiatives in their environment. So MuleSoft has very, very well and very quickly moved into the center of the story, both with the customer and the internal narrative within Salesforce. And 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 sales force customer is going through and what their challenges are in being able to realize not just the value of what they 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 5 months post close, but we established a tremendous amount of early traction with Salesforce.
We did all of the planning we possibly could in the relatively short number of days from announcement to close, but we did as much planning as we possibly could. And on May 2, really did hit the go button in a big way. And I'll share a little bit more about some internal observations on that one. So in the 4 formal months, June, July, August 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. And that's split roughly fifty-fifty 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 $1,000,000,000 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. And it was, again, a very good positive upside surprise that Salesforce already had conversations engaged with those buyers. So that has accelerated our joint engagements as well. And then the international piece is we're simply saying about 31 percent of that pipeline in international regions, meaning non North American regions, very, very consistent with MuleSoft's existing business as well as Salesforce.
Again, the takeaway there is we have gone very, very broad within the Salesforce ecosystem in driving MuleSoft into the marketplace. Place. So we've taken a very, very broad and aggressive approach in enabling and activating the Salesforce sellers and partner network, and it's worked extremely well. And 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.
And 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. And 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 significant number of joint wins under our belt. But 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 historical excuse me, historical behavior of prior cohorts.
So 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. And with pipeline, it's currently looking like 2x. So slight improvement for a blended rate of approximately 1.9x. So we're seeing faster movement to close.
So we're seeing increased velocity and we're also seeing obviously increased close rates. 2 big drivers, C level engagement. So 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 that type of conversation. So we're getting increasingly to the right audience and even more so, we're having the right conversation.
And that was the biggest upside surprise for me on this slide was the 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. But what I was thrilled by and was not sure coming into the engagement was how much uptick we'd see around digital transformation. And it signals to me that the sales force 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 and A, just a few takeaways. 1, 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. But the big 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. And that strategy, I believe, is paying off quite well.
And the receptivity, not only in terms of pull, but the customer's understanding of why this combination makes sense has been very, very positive and very, very strong. So if you'd like to join me back on stage, we'll take some questions. And Andrew has a mic, so I think we'll do it that way.
Thanks. This is Rex 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. And you all were sort of a horizontal API platform. And I'm curious just about how powerful it's been to Marriott sort of more of a verticalized sales force that can speak to the challenges of integration by vertical and how that sort of 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 vertical the sales force vertical teams up to speed on vertical integration specific, that's going to be 6 to 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. But we're going to see a lot of traction as a result of it. 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
Yes.
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 is doing with salesforce.com to advance a lot of different activities. But 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.
And so while the customers ultimately decide, your competitors may influence outcomes that suggest maybe working with MuleSoft less over time. So 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?
Yes. I mean, we were selling so they're legacy pretty creaky products at Oracle and IBM, and we're selling against those for years. And frankly, the customer is in charge. We have not that has never been an issue for us where the customers I mean, 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. There's we all know there's some of those buyers out there.
But for the most part, people, the customer forces open APIs, the customer requires that everybody 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. 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 API ified open environment, which is also helping that cost. Yes.
Thank you, Andrew. Mark Murphy with JPMorgan. Great to see you again. So the old thoughts, 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 fifty-fifty, the new bookings mix, I think, had gotten to around fifty-fifty. I guess I'm just curious, so becoming part of Salesforce, is that actually going to accelerate the cloud mix that you've got on the new bookings 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 sales force customers where maybe they have big on prem assets that they want to pull into the Customer 360.
So just where do you think that's going?
Yes. I think, Will, 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 that some of the net adds that we're seeing in the pipeline are ads that are going to be more Salesforce centric than before. But we're going to continue to see the reason we were still fifty-fifty and is there still going to be those 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 to start on prem and then they 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. But 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 100 Salesforce clients now with active opportunities in the pipeline. And as
you saw from the graphic, the majority of those are large enterprises. Those large enterprises, 3 or 4 that I can cite has closed in the last couple of weeks, have very large sales force estates with big, big legacy debt and legacy investments and they need to deploy in a hybrid environment. So 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. And so 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.
So 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 have given us, very helpful to appreciate the lift that you are 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 are seeing. But if we were to look at it from the other perspective, by having Mule as a component of a sales force 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?
Yes.
It's pretty exciting when you hear that because hearing our reps talk about they're talking about how you don't hear reps talk about how incredibly busy they are. And that's just I love hearing that. So they're busy and a lot's coming their way and that's great. And then what's really exciting on the flip side is you'll hear sales force 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.
So it is changing those conversations. We don't have, don't think we have metrics yet in terms of how it's and it will be a hard one to measure the incremental lift we see, but certainly anecdotally, I'm hearing all the right things from the reps.
What I can say is it's the primary use case. So 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.
But 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 sales force seller around this pain, which tells me it has been around a while and 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. And 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.
Raimo Lensch from 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 and
Absolutely. That right there is probably one of the most important questions that I think anybody should be asking. So, first, we got to work on some terminology. So, 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 you've seen it today, I'm assuming, that the concept around Customer 360 is about unifying customer ID across Salesforce clouds, okay?
That is not MuleSoft technology that's being worked on and was worked on before the acquisition. And it's part of core Salesforce, it's 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. So 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.
But we're trying to be intentional so that people can understand. In fact, that's why we structured it the way we did it. So 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 $3,000,000 $4,000,000 $5,000,000 $10,000,000 ACV deals.
The minute we start becoming a tying together some sales force clouds, that's interesting, but 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 Brett 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 in the sales force in the market if we're not endpoint agnostic. And 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 customers need Salesforce to do to power those clouds and power that customer transformation. So 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, it's Simon. John DiFucci from Jefferies. So 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. And it's taken a long time, exact target, demand where others.
Given that your title, Greg, is CEO and General Manager of MuleSoft and Simon's President, Field Operations of MuleSoft, doesn't say salesforce.com up there anywhere. And it's given you've seen some benefits here, but I just wonder like how 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. And I think Brett was up there earlier and he said, they're committed to MuleSoft being a neutral integration platform. And in order to do that, maybe that persists forever.
I'm just curious what the long term goal is. Yes.
Great follow on to the question. So, yes, it's interesting coming into a company that had been through 60 acquisitions prior to ours, and there's all kinds of 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. And 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. And so ours was the opposite. It was breathtaking how fast it went.
But that was those are the parts that we said going in were going to happen. So the G and A functions, HR, legal, real estate, Talent Acquisition Group, Finance. We knew those were going to invest. Those went in almost instantaneously. And then what was just mind boggling was 2 weeks post close, and as Simon mentioned, it was a very short period before the close.
It was a record. 2 weeks post close, we were passing leads. And so the speed at which it happened was unbelievable. But what's but where John, where I'm feeling confident, as Simon said about, number 1, you've got the customer saying, this needs to be neutral. Number 2, the size and scale, the ability to grow.
I think Keith and I are talking about how do we turn this into a $10,000,000,000 business. That's the stake that we're putting in the ground. This can be $10,000,000,000 let's go figure it out. That and I think as a separate business unit makes a lot of sense, right? And the thing that Simon didn't mention that's been so cool is even though we have similar same buyers, it's different budget.
So it is infrastructure budget versus line of business, sales budget, marketing budget. So we're going after, even though it's great because we're there together, but we're going after different budget pools. So as far as I have the exact same questions, you say to yourself, is it going to be 2 years, is it going to be 5 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 is different, but you look at YouTube and Instagram and there's examples, LinkedIn and Microsoft, there's examples of companies where those stay, get all the goodness of being together and get all the firepower being together, but also get all the goodness of having that. And we need it from a neutrality standpoint.
So this 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, 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 one comes with each acquisition comes with a slightly different strand of DNA and 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. So it's been very much a joint solve around how we do this.
Over to the right.
Thank you. Terry Tillman from SunTrust Bank. Dollars 10,000,000,000 in revenue sounds like a nice ramp for your business. That would be good to see that. We like that.
A couple of questions. First, is there anything with the much bigger resource base of sales force 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? And then secondly, what are you doing or what can you say about retention of your salespeople and what are you doing to retain them as you move further along through this integration? I'll take
the first part. So the yes, there's 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 community cloud capabilities and what we can do around APIs for those. So it is starting to happen fairly early. There's going to be a lot of work around MDM that both sides needs, both MuleSoft and Salesforce need to keep working on.
So there'll be a co investment there. So yes, 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.
I always look at retention, that's the lagging indicator. I look at engagement as the leading indicator. And as leaders, we can obviously affect employee engagement. Nothing engages a sales organization. And we, MuleSoft, very similar actually to Salesforce, has 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.
And the current level of pull from sales force as well as from the customers is very, 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. So the level of engagement is very, very positive within the employee base.
The other side of it is obviously compensation, particularly when you're talking about sellers. And the compensation model has not changed. We're looking at 2020, and 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. And Salesforce, in the conversations I've had of late, are very, very aware that MuleSoft, as you mentioned on that path to $10,000,000,000 an important, important growth engine for the business, right?
Growth engine incrementally, but growth engine also in terms of what we can do to drive more and more expansion within Salesforce's clients and Salesforce products. And so 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.
Bill Dannoff, Fidelity Contrefund. Can you give us an example of 1 or 2 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.
You want to go first?
Yes, sure.
I think 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, too much transparency that would be client specific. That was a long standing project that MuleSoft, once we engaged, was able we're 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.
So they refer to the digitization of the bank as their digital journey. The backbone of that digital journey is the API. And every program and every project that they launch now is on the MuleSoft platform, which means it's API led, which means they're creating reusable assets that populate that application network. And 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. And it provides them with visibility that no enterprise, frankly, has without an application network.
You can't path 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 is flowing where, which systems are live, which APIs are being called, by whom, where are their vulnerabilities, where are they not. And 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, many fleets addressing many, many different segments, completely reinventing the customer engagement.
And I think you're all seeing it when you land in an airport and go to rent a car, the entire form of customer engagement is changing to a completely digital engagement. So 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. But 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. And that to me is a 30x improvement.
So the customer velocity to me even trumps the IT velocity.
Hi, 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. The core AEs at Salesforce pass on leads to MuleSoft, Does it go the other way around and they let the core AEs target do they go joint? And how do you see that needing to evolve as you scale the business much bigger?
Right. Good point. So in that planning phase, we had one core principle between the 2 organizations: focus, singularity of purpose around where we put our energy, and that energy was into what we do refer to as lead path, identify both incumbent customer scenarios and prospect scenarios where MuleSoft can have a meaningful additive impact for the customer and get us engaged. And Salesforce had all of the mechanisms in place to be able to do that. So wiring the systems together, it's all done digitally.
So wire and we're using MuleSoft. So wiring all of the systems together to be able to do that was turnkey. And we had that online. Again, Greg, manual lead passing, meaning email, for the 1st 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 4 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 clients, 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. So 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 try to frame the scope of the opportunity around application networks, what's your largest customer spend today? And then 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?
Yes. So, I'm not sure if we've stated what our largest customer is, but we have several north of 5,000,000. I think you could easily see people in the 20s to 30s as we 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 is flowing through.
We have an unbelievable ability to help you run the business. We also because the concept 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 stuffs in 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. So there's a whole bunch of security work
that we're doing on top of
it that will have more margin expansion. So I mean TAM expansion. So there's a lot of room
to go.
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 think talk us through how you see those come together? Because I think you could really break down some big barriers in application extension.
Yes. It's a great one. That's actually if there was one thing that I would say that had been a bit of a struggle for MuleSoft, it's 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. And so you start with a set of tools, and the developers actually give them a 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.
And so because you come from that DNA, you have a little bit of that, what's wrong with colon backslash enter. It seems so obvious. And over time, what we've done is we've gotten better and hired a lot of UX teams and have gotten better to have, we have web based, now we have web based, UX. So we've talked about this kind of the triangle, the pyramid of users and the top was high priests of Java. And 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 2 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 air handling and security issues.
And having an admin say, I'm just going to start deleting data out of my SAP system and moving it from here to here. I mean, you do need some basic fundamental IT controls and IT capabilities. So 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 Brett talks about. So 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. You want to do one more?
Just got one more.
Okay. Last one.
Hey, Greg. I keep closing out here. 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 being something. And I don't think we as investors have heard about Salesforce acquisition having a target like $10,000,000,000 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,
at Asmule? It certainly I mean, time will tell, but it certainly feels that way. I mean, what we've been getting from Keith and Mark is, go, go, go, let's see what we can do with this. It's the opportunity of 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, I'll be really careful. We did not add $10,000,000,000 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, and it's just let's think big and broadly, but this isn't a Mr.
Hawkins certainly did not give me permission to go add 10 to his number.
So all right.
All right. I think that's everything. Just please join me in welcoming me and thanking Greg and Simon for their time today.
Thank you.
We are
going to take another quick little break, and then we will have Mark join us. He is on his way over here. So we have a few minutes, if you want to step outside, and then we'll let you know when it's time to get going again. And ladies and gentlemen, if you wouldn't mind taking your seats, we'll get started in just a minute. If you can take your seats, we'll be getting started in just a minute.
Thank you.
All right. 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. And I really I think it's going well. And 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. So 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.
And then 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, or you can come to Metallica, it's your job, whatever your choice is. All right. So what would you like to do? Questions?
Yes, with cash? Only if you agree to saying cash. Otherwise, I'm not doing the question.
Really? This is what I need. This is
what I need. Cash will be performing tonight at 8 at the bar. We'll be at Metallica. I won't be able to attend because of the commitment I have. But for the rest of you, we do have cash acapella for 2 hours.
So thank you. Sorry, we couldn't get you Metallica tickets. Okay, Kash.
All right. The question for you is congratulations, first of all. Happy belated birthday from yesterday. Company is doing fantastic. It's been 9 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. Just curious how and the list of tech founders that are still running companies as CEOs, Bill Gates is gone, Larry is 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 4 to 5 years to see how your job changes, how you're approaching things differently given all these developments outside and inside?
Thanks.
Okay. Very short question, not that complex. Number let's take the first part of it, which is the economic current economic cycle. I think everyone here follow how many people here follow the economy? Anybody?
So 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. And 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.
And a lot of them are investing in their digital transformations. They know that we're entering the 4th Industrial Revolution. They know they need to get their companies ready for that Industrial Revolution. And 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 kind of permission on a deep psychological level to invest aggressively. And 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 in throughout Europe.
And 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. And 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 would that we could maintain that for some time. But to Kash's point, I've also been the CEO of Salesforce. I've been the CEO of Salesforce through 2 major recessions. And so 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 then 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. And but so 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 in the late in Q1, who knows. I mean, there's like a psychic down the street we could go ask.
There's plenty of people give you $20 and get a better answer than I can give you. But that's what I I'm just telling you what I hear. So that's on our mind. Mark and I talk about that on a regular and consistent basis. We have those kind 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. And so as we've gone through economic cycles, I think that they don't just don't 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. And you can kind of see that if you go back and look now, you have 14 years of public operational data. I mean, it's so resilient. I mean, 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. So 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.
And the number one reason why is because we're focused on not just the trust we have with all of you, our key stakeholders, our investors, but and the trust we have with our customers, with our employees, our partners, but we also are deeply focused on their success. And if you go over to the trade show, you 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? And 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. And 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, on service, on marketing, on community, on analytics, on apps, on platform, on integration, on engagements, on enablement and on and on are all around the ring.
But 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. And the analytics that we did with them, one out of every 4 of them who's on Trailhead and literally almost every single person over there is on Trailhead, 1 out of every 4 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. And 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 allied 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 and 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, 1, provides this kind of democratic platform, but 2, 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 and it is growing and expanding. And that's why literally within hours of us announcing this conference, it was sold out.
That's crazy. So 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.
And when I listen, 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 5 amazing years working with Keith, I said, my relationship with Keith, I said this to myself, is like we're co CEOs. And I came to that revelation on my own. And I said, I just feel like he should be recognized for the outstanding executive who he is, okay?
And 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.
But imagine all of you, but multiplied by across our customers, by across industry groups, CO groups, etcetera. And it's like, woah, I am not a master of multiple manifestation. I can't do it all. But I'm like, wow, this is an incredibly freeing experience that I can say, well, this CEO is available, I can send them to help you. Keith, would you go?
And 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. And we're considering renewing our vows again.
And we're moving forward. So I'm very excited about it. Does that hit all your points? I'm not sure.
Okay. Okay.
All
right. Hey,
Mark. I want to echo Kash on wishing you a happy birthday. The question I want to ask is you had 2 really interesting product announcements that you've demoed during the keynote. 1, the Customer 360, which almost represented the culmination of really long journey for you guys to get a single master data record for your customers and then voice. And so I actually want to ask, which one of those do you think over the next 3 to 5 years are going to have a bigger impact on Salesforce?
Neither.
I think that was 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 the MBM Computing. I really love what's going on.
I don't know if you saw Will. I. Am's keynote today, amazing. And also like 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. Then 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 to keynote out, I'm sure you know that. And Ching Ching is there and she's doing this amazing demo and she's talking into the phone and she's saying basically she's saying, 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 and but we got to make sure we follow-up with the customer and by the way, play me the Doobie Brothers, okay? And that's not what she said, but that's what I said. So then, 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. So and that we're doing it declaratively, that we're making 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 did 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 said, 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 and 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, And then I had a pivotal meeting with a prospect, not even a customer. And in that meeting, they laid out their gambit of their biggest challenge for this customer.
And they said, let us show you, we are this company. I'm not going to go through what industry it is. And this is our IT architecture. Oh, and then we acquired this company, and this is their IT architecture. And we acquired this company, and this is their IT architecture.
Oh, and 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. And I'm like, how are you gluing all of this together? And they're like, we have no idea. And I'm like, we can provide Customer 360, but how are we going to get to all of these different data sources and the integration problem is much, much worse today than at every point in our company in our industry's history because of the evolution of the public cloud, because every company now has their data not only everywhere, but are pulling data as well for compliance reasons, for all these reasons. So then it's like we have to buy MuleSoft.
I have always wanted to buy MuleSoft. I love MuleSoft. I have 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. And so 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. And then, but then I had everybody.
I had them where I wanted them. Then I said, well, look at this. And we went through this customer and then I said, look at Customer 360. But now if you buy MuleSoft, imagine what could happen for us. Think about how great it would be.
And they were, oh, yes, that's right. But then it's even better than we thought. And you can go over there and see, it's like, wow, this is perfect, best of both worlds. And we needed that and we didn't even realize it. So I think there's a lot of opportunity for us making because you can't really get the Customer 360 to be as powerful as you want it to be by being without getting the tentacle of every into every single data source.
And that is now possible because of MuleSoft gives us that vision and extends us. It is not Customer 360, you have to understand. That was a separate completely separate development effort, but it motivated it gave me the ability gave me a stick that I didn't have. And then I just think it's a great acquisition. And it was we can do one really big acquisition like that.
And then it takes us a while to kind of make it work. And in this case, I couldn't be more excited. So that's kind of where we're going. So 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 mean,
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, Mark. Brad Zelnick with Credit Suisse. Mark, I think the Bible talks about 1's 50th year as their Jubilee year as a time of reflection. If we reflect back
Should I lie down?
You can do whatever you want.
If you're more comfortable with it.
If you think back 10 years ago, you were the alternative company, no to software. And 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 every other software company follows. In some ways, if I think about the proverbial dog that kind of caught the bumper of the car, As we look out in the next decade, what gets you excited and now that you're no longer an 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. I mean, a lot of them are paying their own price for that. You know 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 that's the cloud is here, just like you said, it is mainstream. But when we saw that happening, what we said is, okay, cloud is mainstream, everybody's going to have to pick their position. What are you going to be good at? Look, you can't do everything. And there's tremendous opportunity and focus.
Can we focus? That's the question that we asked 5 years ago. Where are we going to focus? And then you saw a shift when we started talking with the customer company. So we went through that customer company phase.
And then we said, no, we're going to be number 1 CRM. This is our focus. And 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 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.
And it was just after Dreamforce. Remember, Dreamforce was November last year. It's only been like 10 months since the last Dreamforce. And I was with these customers, and we had our full architecture and everything, and it was good. But customers were had a bigger vision for us.
And I started iterating on this what I call the clock. So 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 and 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 like 12 incredible multibillion dollar businesses right here. And are we focused on each one of these multibillion 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. So I spent a lot of time on the clock. The first time I presented to my management team, they're all like, yeah, what do you do? This is terrible. It was like it was really like, well, I guess I'm really disconnected from the customer.
Then I started presenting to customers and they're like, oh, no, this is great. Then 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 2 versions of the clock, 1 on and 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. So they're logo at the top and then we make it exactly for them, like you see in the keynote. Did you see there's 2? We always present the generic and then customized for the customer.
And what happened is, is I put it down in front of the CEO or the CIO, or in many cases both. And they always would gravitate towards either the generic or the custom. 50% would go here and 50% would go here. And so then I 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 to conceptualize 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. So they started to see that they need to pivot to their customers.
And 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. 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. And what we want to be good at is number 1 CRM.
And on each one of those wheels, we want to try to be number 1 or number 2. That's like the traditional model in their industry, in all industries. And 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 going to have to we're constantly reviewing each position on that wheel. Okay. We're going through the clock, 12 o'clock, 1
o'clock,
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. So 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. So you can look at that.
And then 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 is our that is our vision for where we are where we want to go to get to not just $20,000,000,000 but $30,000,000 $40,000,000,000 wherever we're going. That's we believe is going to take us there that these customers will all want that and that a key part of that is the community. That 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. And so that's it.
So 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?
And if you're going to try to do everything, well, that will be interesting. Plenty of companies by the way will get up on this stage. You go to these conferences and they'll say, well, yes, they can't do
it as
we've got the whole suite.
And it's not just one company. But the thing is, is that once they say that, 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 they're 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. And 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. So that's unusual. So 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. So on that one slide and it says that it says essentials on there and I forgot to pitch it. That's the whole vision. But if you go into the trade show floor, you'll see as you walk in, there's like 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 Essentials. So from Salesforce Essentials to Salesforce Enterprise, we want to be number 1 CRM. Okay. Is that clear? All right.
All right, terrific. Thank you, Mark, for taking my question. So you've long been a champion, Sarah Helane 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. And you just said, you really can't do everything and control everything.
But you've been a champion for these really important things and you've done a lot to make sales force more diverse. But you look across this room, many of these people are your
I agree.
We should fire half of them. Well, I mean,
it's just not
very Oh, sorry. They heard us.
Know what I mean, Mark? So you can control sales force, but you can control your customers. And this is certainly not diverse. So when we you started Our
community is more diverse. Well, most of
them are.
Yes. I know.
So I think you started 6 months ago talking really seriously about ethics and technology around the 4th industrial. 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 know, I know. I'm asking a lot. I'm asking a lot, Mark. But listen, I'm asking you because you can control sales force, but you can control the world. And so 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?
Well, 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 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. And at this time in the world, it has to be. So whether we are working on our public schools, because if our kids are not coming into the 4th Industrial Revolution with all of us, we're in trouble. So 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. And 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, because we've got to bring them along and we've seen phenomenal results, multi 1000% increase in girls in STEM education sorry, women in STEM education in the K-twelve public schools, Amazing, okay? Multi 1000 percent increase in people of color in computer science in our public schools in San Francisco and Oakland. And we are seeing higher attendance rates.
We are seeing higher math grades. We're seeing improvement. We are now $50,000,000 of invested in San Francisco and Oakland Public Schools. Our initial our short term target is $100,000,000 And 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.
And then I just encourage you to for your companies and 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, we have a lot my half of every discussion I have with the Chief Executive Officer is on these topics. So 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? And we've seen that in our industry and every industry. And are we looking at gender equality? And 3rd, LGBTQ equality.
You've seen us go to Indiana, but not just Indiana and not just in the United States, but other countries. You can look at our pride, you can look on social media and you'll see us marching all over the world for LGBTQ equality. And 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. And that means that we have to increase the percentages of every category, every race, every religion, every gender. We want to have make sure that we have full diversity of thought in our business, okay? These are the things these are very, very important to me and things that I have been extremely passionate about and will continue to be passionate about and the environment. We just have this amazing climate summit here in San Francisco.
I don't want to plant an ocean that has more plastic than fish. Is that what you want? Shouldn't you know what, if we have these incredibly powerful businesses, what are you going to do, delegated to the government? Come on, we know that we have to do it. It's up to everybody in this room, in every room, in every company, we're going to have to get involved.
We're losing 1 acre of forest every second. And yet, we need the forest to suck down the carbon or we're going to have this huge carbon issue. We already have it in the planet's getting hotter. Our best antidote against the carbon are the forest, but we're doing rapid deforestation. But I so strongly believe in all the companies that you follow, the technology companies.
We can find a way through technology, 4th Industrial Revolution, hopefully this will help us to yield some amazing results, new entrepreneurs who are taking risk, the models that all of you invest in, the things that we believe in, in 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 coming out of that are in every school, in every nation, in every country. Look at this example of this kid I met, 17 years old, I met him or 16 years and now he's 21 or 22 years and 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. Like, wow, it's a big idea. And then he's in Neely's hometown.
She's from the Netherlands. He lives in Netherlands and I'm starting to communicate with him. And he's getting a little older and he's getting a little wiser and he's smart and we haven't come and talk to Salesforce and it's like, this kid is like unbelievable. Entrepreneurship, what a concept. Then all of a sudden, we're like, well, let's give him some more money.
Let's give him some more money. Now $35,000,000 in, now he's like 21 or 22, I don't know how old he is exactly. And now he's launched this thing into the ocean. He's going start hauling plastic back. He gave me my birthday present was he gave me a duffel bag made out of ocean plastic.
Fantastic. And 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. But I do believe in those entrepreneurs. And 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
make improve the state of
the world. With artificial intelligence and robotics and everything that we have at our fingertips. But 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. So that is the gambit for them. Not only will they well, not only the question is, 1, is this about making public education better? Is this about gender equality? Is this about diversity inclusion?
Is this about improving the environment? And on and on. Is this about improving the state of the world or is it not? Or 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 that you can see the numbers, not for us. We're 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, because 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.
So 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. And 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 2 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. And by the way, when you do just 4 or 5 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 one best place to work in the world according to Fortune Magazine. And 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 5 star chef.
That's not the Or 10
years ago,
we couldn't get
the award because they said you don't have a Or
10 years ago, we couldn't get the award because they said, you don't have a 5 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 of the world and make it better. That's what millennials want. They have purpose.
They have fire. And 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, But you have to get out there and evangelize it and you have to make the change.
Nobody 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. But you can do it And then when you do it, others will follow. This is my personal experience. And that is what I'm my message to the community next door.
We can do this together. And so that's my position. And 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 got time for another question or if you have some closing remarks or if you
I can end. I don't care. Anyway, I will take a few questions. 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. And
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. Think 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. And then if you all have time, I know we're running a little bit behind schedule, like 45 minutes behind schedule. But if you can stay, I'm sure it will be worthwhile. Okay. Welcome back.
Thanks for your patience today. Thanks for hanging in there with us.
But I'll give you all just a minute to take your seat. And meanwhile, while
you're doing that, I'll invite Keith Block, our Co CEO to the stage to conclude the day for us. So there's a lot of great energy in the room now for you Keith. So this might be my last dream for us.
Is the sea warm? No. With the recession?
Yes. Anyway, without further ado,
I'll turn it over to you Keith.
Thank you. Hi. Thank you for staying. What's going on? Where's the coffee cart?
What do you guys want to talk about?
We can start right here. Thank you. Alex from Piper. Last year you talked
a lot about repurposing $1,000,000,000 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 kind of maybe what
your thoughts are going forward? Yes. I'm sure Mark or David probably covered this already, but we talked about finding $1,000,000,000 over the next few years and using that as a growth engine. And that effort still continues. It's actually been folded into our LRP, which I think is a smart thing.
And David and Mark have done a great job with that. But 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 refer to as the workforce plan. I'm assuming the guys stick 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. And in many ways, unprecedented size and scale in terms of our growth, you've seen the numbers and you all know the story here. So there's an opportunity there. And there's just essentially a we're a well run business, we can be a better run business. And so there's a productivity opportunity there across every element of the business.
And that's one of the things that we're looking at. So I think we're well on track and I think we're making some smart moves.
Thank you. 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 and as you have partnerships with a lot more of the data center providers. I'm just kind of 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. But when you think about
the things, look, we can we should double down here over the next 2 or 3 years, I'm just curious what those might
be? Well, other than
the underpinnings of innovation, which Brett 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. And I think we've actually done a terrific job there. And we've had these 3 growth levers for the past 5 years. 1 is obviously the speaking language of the industry with our customers. And I mean 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 with them. We've made those investments. We'll continue to make those investments. Whether it's in the go to market assets or deep content or continuing to sell the portfolio with the industry products, which have been a home run.
The second one is international expansion. I mean, in the last quarter you saw a continuation of growth, 32% in EMEA and 28% in APAC. And there's just a lot of room to run there. And obviously the ecosystem, the SIs, the ISVs, I mean, I don't know how many of you had the opportunity to talk to the partners. I know a lot of you have the opportunity to do that.
And they can't scale those practices fast enough. I mean, 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. I mean 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. I mean, Mark was on stage with Uli Spieshofer today. I was with him this morning and he was talking about his next generation of digital transformation, not his 1st generation, his next generation.
I was with the CEO of a bank, European Bank this afternoon, same conversation. I shared the stage with Jan Weisler from HP, same conversation. And this has created huge, huge momentum. So 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,
very, very high on EMEA in the international markets. Miguel Milano is a great executive. He's doing a terrific job. Coitus on another outstanding executive in Japan. Our public sector business is booming.
Our business here in the United States is doing well. So we're rolling right now and we're grateful that we're in that opportunity, but 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, Jen Lowe, UBS. When Mark was in here earlier, he talked about the customer 360 view and the aspiration that sales force would be number 1 or number 2 in each of those categories. And looking at some of the customers, the keynote in verticals like retail or hospitality, which haven't been target verticals for salesforce.com yet, There are pieces in that wheel that maybe are being done with partners currently. Is being number 1 through a partner sufficient or do you think ultimately Salesforce will have to services directly?
Well, I can look at you and say that we will have 100 percent completeness in every product that we have, right? I mean that's if I told you that, that means innovation has stopped. And the innovation doesn't have to be 100 percent us. It can also be part of our partner ecosystem. So you can make an argument that there are 25 vertical markets and within each of those 25 vertical markets there are actually 4, 5, 6 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. But we're not going to try and be all things to all people. We're not going to dilute the focus. I mean you see that happens in so many companies where they dilute their focus
and they
lose their way. And we are a very partner friendly company. There are companies out there that are not so partner friendly. So if we can thanks. You want to share that with the rest of the audience, they might need that too.
So whether it's transportation or hospitality or whether it's retail, which is I think everybody understands is getting hugely disrupted. There's opportunity and if we can establish great partnerships to drive success for our customers we're all in.
Hi, Keith. Karl Keirstead of Deutsche Bank. Keith, even the best of companies get a little bit of pushback from your customers. And 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. So when you're going around Dreamforce listening to customers, are you picking up any remaining 1 or 2 pain points that get you reflecting on, hey, team, we've got to address them to make sales force even greater?
What would those be?
Well, the great thing about this company in my opinion is we do listen to the customer. And 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. And now you can't have a conversation with an executive without talking about the importance of integration and digital transformation. So I think the Customer 360 announcement has resonated that came from our customers. And really it's a question of faster. And there are areas 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 stopped listening is the day we're going to have a problem. But 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 DiFucci from Jefferies. We heard
a lot about a lot of
Salesforce's products today. Mark talked about the clock and the customer in the middle and all that.
Oh, he took it through the clock? Yes.
Well, he talked he threw it for us in his mind. And 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. But anyway,
one thing we didn't hear
a lot about Nice to see you, John. I thought it
was great to hear. So he actually did a great job. But the one thing we didn't hear a lot about today was Salesforce platform. And I especially when he's going through the clock, I'm like, well, where's the platform? And then the one thing we hear a
lot about MuleSoft. Yes.
And the one thing I always thought since you bought MuleSoft is the Trojan horse 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. And platform today may be the biggest opportunity you have that you haven't already exploited in a major way. So I'm just wondering, is that something am I just way off thinking about something like that or is that something that might make sense or something you guys have already talked about? No, I mean this is sort of
stuff that we talked about.
I mean some of I think it
is really positioning, okay. So if we took a survey, 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.
It's kind
of like asking the question of what's artificial intelligence, what's everybody's definition of artificial intelligence, right? So, 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 level. Again, if I think about the conversations that we're having with MuleSoft or with customers about MuleSoft and integration, it surprised me.
And I'm going 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 e mail from the CEO of 1 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. Now
how many of you
have been in a conversation with
the CEO of 1 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 and it just validates the sort of thing that we see. So, to me, I think broadly platform is many things. Platform could be analytics, platform could be Heroku, platform could be Lightning, platform could be part of MuleSoft or any point. So I think it really is about nomenclature and semantics.
I think the bottom line is there's just 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. 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. But 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? And 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 story of again, because you know I love financial services, a large, 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. 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. So 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 and I said, well, you're a MuleSoft customer and how are you using it? And we call hiring the account in many cases.
So it's more of a strategic relationship that MuleSoft has been historically able to do. And that allows us to up level conversation, talk about enterprise agreements, talk about enterprise strategy for integration. And I think we're starting to see that traction. I mean we've only had the company for what 90 days or so, right? But the conversations are really, really good.
So do I think there's some I'm not changing any of our financial forecast, of course, when I'm up here, but do I think that there's some upside because of what we do with MuleSoft? It's early, but it's very, very positive. And I think we can do more in the MuleSoft installed base they've been able to do before historically. And 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.
Great. Derrick Wood at Cowen. Mark was in here earlier talking about doubling or tripling down on the SMB market with essentials. And yes, I think most of us think of you guys on the March moving up market into the enterprise. This is something a little newer in terms of a focus.
So I'm trying to get a
sense for what the priority is around investing and then kind of what you're doing to optimize customer acquisition down market? And maybe what parts of the portfolio you think are low hanging fruit to move down market?
Well, I don't really look at it as a move down market. We've always been down market. I mean the company started almost 20 years ago down market, right. And 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. I mean number 1, there's a lot of innovation that happens in the SMB space. So if you can innovate in the SMB space some of that can scale up. So essentials I think is very important. So it's think of it as a Petri dish, right?
The SMB space has lot of lessons learned around agility, ease of use, customer experience, those have become in this 4th Industrial Revolution. Those are important buzzwords or buzz phrases. So 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.
And we don't want to leave the SMB behind. It's not a good idea. We want a balanced portfolio on the business. So 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 were ready to announce it.
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 know as our sign also is trying to oversimplify sort of companies and markets and the like.
And one of the conversations that we have a lot is kind of the alignment that we're seeing in the marketplace. And it goes like Salesforce and Amazon teaming up against Microsoft and Agility 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 of you with how the
market works? I would tell you that I have the privilege and honor of working with somebody who has great vision, right, who was up here before me. But just as important is a lot of our direction is from our customers. And I know it sounds hokey, if that's the right word. But 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. So, I
think there's
probably a lot of game theory around the Game of Thrones, who's working with who, who's got a relationship with who.
And of course, there's
a strategic nature to that, right? I mean 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. Mean 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.
So our guiding principle has been focused on the customers and that's going to show us the way and so far that's worked out for us. But I like some of the conspiracy theories.
Thanks, John. Ross Herr Knoen from RBC. Thank you. Just on the 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 like 40% multi cloud, 90% plus of revenue.
But what are the things that you can do to grease the wheels in customers that are single cloud or haven't made that full leap? 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?
I mean, a lot of this goes back to the conversation around industry and selling a solution, positioning a solution, painting a vision for a customer. And that's where we've really invested. Going back to Kirk's really question, we've really invested in this industry focus. And if you want to have a strategic relationship with a customer and you go in and you talk features and functions of Sales Cloud and Service Cloud, it's cool, it's compelling, it resonates, but it doesn't solve a business problem for a customer, especially the higher you call up in the account. And you can tell by the person's attention as soon as you're looking at them how poorly that conversation is going to go.
So the notion of multi cloud is it's simple as selling a solution to a business problem. So it's not just selling sales, it's what happens when you provide the customer 360 and what does that mean to a bank. What happens if 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 installed 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, really hard. And that's where you need the multi cloud solution.
So if you speak their language you'll get that multi cloud solution.
Phil Winslow, Wells Fargo. Actually to follow on to the multi cloud question, one of the other components of that slide was that you call it the add ons within the cloud, CPQ, Crocs, DNP now, there are sort of those tuck ins. And we actually add up all those tuck ins in terms of the revenue they're generating. It's actually pretty substantial right now. And so I guess my question is, you've been super successful in the large cloud deals.
But when I look at that slide, it's sort of the volume of deals that were smaller really moved the needle. What have you learned from those smaller deals? How is that sort of potentially impacting how you think about M and A in the future, because obviously given the power across all the clouds, but the cross all add ons do?
So the whole idea of providing options to the core is a great strategy. And if there's value in those options and obviously customers are going to pay. But there's a playbook that Salesforce has run long time before I was here, it's called the land and expand, right, where the seed can grow. And you can 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 as wildly successful and then it moves on to the next phase.
I mean we've seen that whether it's a small enterprise or a large enterprise. I mean I was at ABB this morning and talking to Uli. And they have one of the most successful deployments of Salesforce I've ever seen. I mean it's amazing. I mean CEO of a major corporation looks you in the eye and he says that the return that we expected exceeded our goals, right?
Now the European customer engineering mentality, they're not exactly handing out compliments, okay? And the point I'm trying to make here is that we've been so successful with Phase 1 and the deployment in 18 months, massive corporation that now they're looking at other products, one of which you mentioned, right? And they want to try it out and pilot it out and then they're going to expand it and expand it and expand it. So the options are great. They provide more innovation for our customers obviously it helps us with our financial results.
But it's another wave of innovation for customers.
Keith, cash on this would be a hit.
Congratulations as well. Thanks. Mark wasn't here earlier. If you 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 of a Queen? It's out?
No, it's fine.
You're not starring in the movie? No.
Yes, 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 multifold to $40,000,000 $50,000,000 $60,000,000
in revenue, The distribution approach generally changes. You've been one of those companies for a long enough time that you tweak the distribution many times over. As you look at sales force and
clearly we heard a $30,000,000,000 $40,000,000,000
not a target mark, sorry. We just heard that number out of nowhere. And you have And you have And you have
And you have And you have And you have Okay. I know
it's not guidance. But as you have aspirations to double, triple the company's size, how do you see the distribution model of sales force changing? Kind of witnessed these things in your prior life?
Well, I
think everything rotates around the customer and the customer is defined by the industry, the geography and the segment, right? So 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 different distribution model. I think there's room for improvement with us in the indirect market. There is 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 resource 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. So 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. So that motion will not change. But 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 crux. You have a few sort of assets around the edges there and there's 2 big players. Just talk about sort of 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 sales people really take a 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 stimulus, right? I think we've all recognized 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 has really come together. Are tax cuts part of it? Sure, tax cuts can help stimulate the economy, but there I think is a longer term wave here. And that wave is the convergence of technology. And if you're a company in the retail space, what's your strategy?
I mean 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. And it doesn't just stop at retail, it's also consumer packaged goods. So you're classically a B2B company.
Do you want to become a B2B company for life? Because 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 the 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 and 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.
And
that has nothing
to do with tax cuts.
I mean absolutely tax cuts, I'm
not discounting that I'm just saying that there is another wave and that wave is called technology and the advancement of technology. And the market every industry is so right for disruption that if you don't 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. So I think that is very sustainable for a long time. The first one 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? So I think you're talking about 1 of those players or 2 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?
And what does that mean? We don't look at advertising as just a segment, it's the entire B2C platform. And it goes back to my earlier comments about companies that are transforming that are classically B2B and are moving into B2C space. And what does that mean to their business model? Are they going to outsource their advertising and they take it in markets, they have to think differently because they used to be a B2B company?
Well, maybe they're both B2B and B2C. So we have 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.
Thanks, Mimi. Any last questions for Keith?
Final one back here.
Hi, Keith. Hi. I'm not a self fighter. I'm not going to announce that. 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 then you
can't really use it to
train your models and stuff in aggregate.
So is there anything you guys can
do or have done to work with customers to try and kind of better position yourself to really leverage all the data that you guys have to help the analytics and AI downstream?
So 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 customers' data.
And now you're starting to get into issues around metadata and what can be made available other people. I think it's going to be really interesting for all of us to see what happens in the United States. I mean 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 Mark has been a huge advocate for it.
And you can see in the
press why it's important with some of the behaviors of some of the other technology companies. So 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. But I think the desire if data privacy is protected is there.
It's kind of a no brainer, right?
So I
think we have to wait and see.
Okay.
Keith, thank you.
John, thank you. All right, enjoy Green Forest. Thank you, guys.
Great seeing you.
Mark? You
want to take us home, Mark?
Yes, just one minute, guys. I got them all set up here. Thank you for spending the afternoon with us. We really appreciate if you come into 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.