Morning. If you want to go ahead and take your seats, we'll go ahead and get started. Good morning, everyone. I'm John Cummings. I'm the Senior Vice President here at Salesforce in charge of investor relations, and on behalf of the entire investor relations team, Andrew Zilli, Anna Saliba, and Rose Salzwedel, I want to welcome you to Dreamforce 2016. Thanks so much for coming. We're delighted to have you here. As you probably looked around, you checked in, you may have seen a few bears, not the sell-side kind, but that's all part of Trailhead. Trailhead is an experience to help our customers, people new to Salesforce, learn about the product, how to get deep into Salesforce, and how to learn and experience Salesforce in a new way. We're really excited about that. In that context, we've laid out a day that's very similar to that.
We wanted to sort of embrace that Trailhead theme and do something sort of fun and educational, and hopefully, that's what you get out of not just today, but this entire week here at Salesforce. Our agenda this morning will be to start with a business overview, with Mark Hawkins, our CFO, and David Havlek, our Executive Vice President in charge of finance. We'll break for lunch, which will be upstairs on our fourth floor. After lunch, we have a product Q&A session led by Alex Dayon, who's our President and Chief Product Officer, and a number of his team members. After that, we'll have Keith join to talk about our go-to-market strategy. We'll do a technology panel later in the day with Parker Harris, our Chief Technology Officer.
As you saw, or hopefully you saw, we'll have Marc Benioff here in this room tomorrow at 3:30 P.M. as sort of an extension of today's session to talk about strategy, vision, and so forth, and get to a number of questions that I know many of you are eager to ask him directly. Don't forget, too, later this afternoon, we'll have drinks here, just outside at 5:00 P.M., and hopefully, you can stick around for that, and we'll have a number of members of the management team joining us for that as well. As you know, in forums like this, we may be making forward-looking statements, and those forward-looking statements are subject to risks, uncertainties, and assumptions, and all those risks, uncertainties, and assumptions can be found in our most recent forms on 10-K and 10-Q filed with the SEC.
With all that done, I hope you guys have a great week, and look forward to being around to answer any questions that you have. Hopefully, we'll dive into this, and you'll take away something new and learn about sort of Salesforce's vision to scale to $20 billion and beyond. With that, let me invite up to the stage Mark Hawkins, our Chief Financial Officer, who will kind of take you through that.
Okay. All right, Mr. Cummings. No tie today. You're looking sharp. Okay. First of all, welcome to Dreamforce. It's super awesome to have you here. We're delighted that you invested your day with us. We hope you invest a lot of the week with us. I hope some of you can join us for the U2 concert, the benefit concert. We've designed this to be very informative and very productive for you. We've heard from a lot of you, and we try to factor that into the feedback of this presentation. Of course, you're going to see Marc Benioff tomorrow. We've worked hard to make that happen as well. That should be another good session. Let's get into this. Scaling to $20 billion and beyond.
For so long, people have said, "Hey, could these guys get to $10 billion?" I just want to ask you guys, the first time you heard us say $10 billion, what did you think? Okay. Well, that is clearly line of sight today. We're going to talk about that. That's going to happen. We're going to show you more detail on that. Now I want you to raise your sights because we're raising our sights to $20 billion and beyond. One of the things I'm going to show you today is the presentation that will give you confidence on our trek to get to $20 billion and beyond. For us, it's very exciting. It's very motivating. We see that path very clearly.
We're going to talk about our competitive advantage and our strong core business, and how that's going to help us to get to that $20 billion and beyond. Let's jump into it. There is no place better to start my presentation than the revenue growth margin framework. People ask me about this, you guys, this I call my compass. This is the single guiding financial principle in our company. I have shown this and trained every employee in Salesforce on multiple occasions about this is how we make trade-offs because we have a one, two, three priority for financials. Number one is we grow. We're a growth company. Top priority. Number two, we expand our operating margins while we do it, number three, we drive the commensurate amount of operating cash flow to make this all come together. That's what we do.
We're right in that middle column on this guiding principle, this compass that we keep using to drive back towards. That's where we're at. I want to share with you some things that are important. You know our guide that's happened at the time of the earnings call, at the high end was 25% growth. That's right in the middle of that column, in that gold column, that's where we're at. By the way, important point to share with you today, something I think is important to call out, is I see us there for the foreseeable future. You're going to hear more about that, I want to make sure you hear that from me today.
One of the things I'm going to talk about also is around the unit economics in the mid-30s, and if anything, there's upside to that at mature volumes. We're going to unpack that a little bit and give you more detail in terms of how we see that. David is going to do that in a presentation that very nicely describes why we have even more confidence in that over time. That's the right place to start. Let's embark on the journey, the scaling exercise. The thing I would say to you is we're on this right path as we begin this journey. When you think of that framework, take a look at this slide, and let me just unpack it one bit at a time.
If you look on the left side, you look at the revenues going from $4 billion and the estimate right now into the range that we gave at the guide, you can see the company just dramatically going up. That compounded annual growth rate in that short period is roughly 30%. I already mentioned in the current year, our guidance at the time of the call was 25% for the year. The third raise of the year. We have a strong core. One of the things I would say to you is that's on the right path. Let's look at the trend line that's there. Before we do, there's one big thing that's going to happen.
When you think about that trend line, you see us jumping our profitability again and again and again, nine quarters in a row of operating margin expansion while we're the fastest growing software company in the world in the top 10. While we're taking market share. It's not easy to do all those together. We're doing that. By the way, I am personally proud of the fact that we've raised our operating margin over 400 basis points since FY 2014. Do we have more work to do? Of course we do. Are we operating and driving and using that compass with the framework? You can see it in the numbers, you can hear it from me and our management team. By the way, that's going to result, this year, we're going to have a first ever in the history of the company.
We're going to deliver $1 billion of non-GAAP operating margins this year. That is part of what this compass and this framework is helping us do. Let's now pivot to the right side of the column, let's look at the operating cash flow. When I got here, we were talking about where we aspire to get to $1 billion in operating cash flow. Well, we certainly did that. You can see our guide this year says we're going to eclipse $2 billion, that'll be another first for the history of the company. We're on the right path with that framework, that path has landed us to be an amazing fourth biggest software company in the world. What I love about this slide is it talks about clearly we're going to hit $10 billion. We believe it. You believe it.
In fact, when you look at the Street consensus today, it is over $10 billion. I have another important point to share with you today. We will be a $10 billion company next year. Not going to get into all the details. I am not going to pre-do the guidance, we will be a $10 billion company next year. We will get more refined as we do the guidance in a few weeks here. Why can I say that? It is because we have a strong core, and you are going to hear more about that. What is stunning about this chart is not only the fact that we clearly have this We are kind of at base camp, if you will, in the scaling to $20 billion. We are going to eclipse this $10 billion number next year.
Our sights and our opportunity is so much more, and you can see it, you know it, and you are going to hear more about it. One of the things I love the most on this slide is take a look at the growth rates of the top five software companies in the world. You hear a lot of moving parts. You see a lot of different things. I would say when you have the facts, you pound the facts. Not all bad. That is a consensus. Let us take a look and go further and say, the first thing you would ask me is logically, "Okay, Marc Benioff, what gives you the conviction that you are going to get to $20 billion and beyond?" I will tell you what gives me the conviction. Over $100 billion TAM. I am in the sweetest part of the enterprise software space.
It is a double-digit growing TAM. Let me call out something. When we started the company in 1999, we had $700 million in TAM, according to Gartner. According to Gartner, right now, we have $70 billion going to $105 billion in just a couple short years. That is a market, and we are extremely well-positioned in that market. By the way, important point to call out and to underscore, it is with the products we have today. That is the opportunity in front of us to get to $20 billion and beyond. Having been to the $20 billion and beyond club multiple times, we have a great opportunity to execute on. That is where we are at. The logical question then would be, well, okay, this is great. It is a great opportunity. How are you faring against the competition? My favorite slide. Consistent, persistent market share gain.
This is my third Dreamforce of getting up and showing you, yet again, taking market share. Forget the conjecture, forget the marketing spin. We are taking share. Third-party. You get it. You subscribe to it. We took 150 basis points, and what I really love is what is happening persistently. Not only are we taking share, people are falling behind. They are falling behind substantially. When I look at Microsoft, people ask me about that sometimes. They look at FY 2011, 5.7%. Hey, great company. We admire all these companies. 4.3%. This is not my data. This is the market data. There is a reason that this is happening. You will hear it. You talk to people unvetted. You will talk to partners. You will talk to customers. You will see so many people here in this week. Why is it happening? It is because we have a competitive advantage. There is no question about that.
You can see that market share is like blood pressure. It's feedback to the system, and the customers are voting with their dollars. Why do we have a competitive advantage? There's three aspects that I'm going to share with you. I'm going to unpack each three of these. The first is, of course, our product strength and innovation. No shocker to you, but I want to unwind that completely, share that to you. A large and loyal installed base. By the way, you're going to see customer advocacy like you haven't seen it in a long time when you come here and go mix with all these folks. I'm confident of that.
Then I'm going to talk to you explicitly about a world-class team and culture and what we're trying to do to create that kind of experience that helps propel us to that $20 billion and beyond. Let's unpack this one at a time. It's not a shocker that we're a trailblazer, because that's been our origin. We pioneered cloud SaaS delivery, but that's not where we stop. We were first to the cloud, quick to social enterprise, quick to mobile. Running your company on your phone is a reality today. We know it. You know it. We're in front of it. Our applications are there to help you. IoT at the enterprise level, we help some of the biggest companies in the world today, and we're just getting started.
AI with Einstein, you're going to hear a ton more about. We know a lot about innovation. In fact, we get innovation award after innovation award. The point to call out here, objectively, is I know there are people on that chart that I just showed you in the top five that have a dream to get to where we are, where we were 17 years ago. They have a two or three-year transition model to get to where we were 17 years ago. We are driving an advantage, and we're going hard with innovation because we know that this innovation, if it's pointed to the customer, and that's what it's all about, we know good things will come. By the way, good things have come.
When you look at our product leadership, our cloud apps are the undisputed leaders in the Magic Quadrant, every single one, up and to the right. Absolutely, it correlates, right? Taking market share like crazy persistently. You look at the Magic Quadrant ratings of our products. You talk to customers firsthand on the problems we were solving for them to connect with their customers in a whole new way. It all hangs together. By the way, again, this undisputed leadership in product has resulted in us. Recently, we've got a lot of innovation awards, but recently we got the Innovator of the Decade across all industries. That just motivates our engineering team because they are purpose-driven to help our customer.
Speaking of our customer, everything that we're doing, all the innovation that we're doing, is guided by this true north of having a strategy focused on the front office of taking care of the customer and helping them connect in whole new ways. That phrase really means something now. When you look at what happens when people are not modern in terms of how they connect with their customers, they're falling behind in a market that's rapidly changing. Omnichannel, all the things that people need to do, it's changing dramatically, and we're in the forefront. We're in this secular space in a very good position. By the way, we haven't innovated only internally. We've also done M&A. Let's talk about that. Our M&A strategy is simple. It's very clear.
We buy companies to augment our current clouds or to really accelerate new product initiatives, and that's what we've done. There's an amazing set of companies here that have helped us do what? To apply technology for what? To help our customers connect in a whole new way. That's what we do. We're very disciplined, we're very discerning. We have a number of board members here that are in review committees. All that you would expect from a world-class Fortune 500 company, and that is helping us because this, together with our organic focus on the customer, yields what? It culminates in an incredible CRM platform, the smartest CRM platform in the world. In this model, this engine has changed the world. It has absolutely changed the world and continues to change the world in software. You know this. I know this.
We were first with the multi-tenant model. We've layered in IoT capabilities. We're layering in Einstein capabilities. We have Lightning, Force.com, Heroku, AppExchange. We are a platform-first company that has apps on top of it that are world-class. Let's see how these world-class apps have done. How have they translated commercially? Let's take a look. This is kind of interesting. If each of our clouds were an independent public company, get this. If each of them were an independent public company, and I'm only showing the subscription revenue, we would have four out of the top 10 pure-play cloud software companies in the world. It's even better than that, actually, because if you look at the fact that Veeva runs on Force.com, we would be powering five of the top 10 clouds in the world with that model.
Yet we have competitors on that list that are trying to get to where we were 17 years ago in a few years. That is a competitive advantage. That is why the share gain is happening. That is why the TAM is so attractive. That is why the opportunity to scale to $20 billion and beyond is absolutely in the grab with persistent innovation, persistent customer focus, and execution. That's our opportunity. Let's go and say, look, the innovation doesn't stop within our walls. We have an unparalleled ecosystem. By the way, I hope you get to meet all the partners. We have over 400 partners here. You're going to see an incredible ecosystem. You can talk to them unvetted. We have an AppExchange that's the biggest enterprise AppExchange in the world. That's yet more innovation coming to bear to help our customers.
We have 49% of our new business deals where we have a great SI or a partner involved to help us. We have people investing heavily in certifying their people by 30%. Of course, they are. It's a huge opportunity. Everybody's getting away from the legacy. Everybody's going to the future, and you can see who's positioned with the innovation for the future. The innovation didn't stop inside the walls. It's all helping our customer and expanding our opportunity. I hope that's really clear, all the way from TAM to market share to why we're winning and that. That technology advantage is undisputed, and the product advantage. Let's go to a large, loyal installed base. Look, I'm going to start with something from a. John talked about Trailhead, and you're going to see a lot about the branding, but think about this financially.
I just want you to think about this. The virtuousness of we create this fun way to engage to do what? In Trailhead, one of the aspects of Trailhead is everybody that's a system administrator or user of Salesforce as a customer can get online, and they can get certifications. They can get badges, Trailhead badges, that they put on their LinkedIn resumes. To do what? To make them more successful, to make them heroes in their customer companies. To do what? To make Salesforce a better value and to get more value. What do you think that does to stickiness? What do you think that does to success? What do you think that does to ROI projects? That helps. You know what? We are maniacally dedicated to these people. Do you see the virtuous circle? We're helping them. They are heroes. There's a better result.
There's a better business ecosystem. They're advocating for us, and we're advocating for them. I ask you, when you're at Dreamforce to see if you get the same kind of advocacy on any of the other people on the list that we're competing against. That'll be something you can check out while you're here. Customer focus and loyal install base is something, but that other thing pencils out. When I look at customer loyalty, the first thing you want to do in a subscription business is you absolutely want to have declining attrition, dollar attrition. I think we have been able to deliver that. When you look at this, you look at from Q2 2011 to Q2 2017, our attrition rate, dollar attrition rate's down dramatically. In fact, the rate is down 45%. What does that tell you?
It tells you we have more and more satisfied customers, more and more stickiness is happening. By the way, we have the opportunity to take that down lower. Let me quantify that from a CFO perspective. Because of that rate change, just over that period, I have $500 million more of recurring revenue because I'm satisfying customers. I share this with every employee, all employee broadcasts, and I talk to them and say, "I want you to think about me as the customer success CFO. I want you to satisfy that customer to no end, because when you do that, what happens? Good things happen in our business." In fact, it does. We have a lot of customers. We have 150,000-plus customers. Let's talk about it and how we're doing across the pyramid, if you will. We have 150,000 of them.
It's a very important growing asset. What I want you to know is like 60% of our business basically goes into existing install base, 40% for new business. If you take that 60% and you break it down, 70% is add-ons and upgrades because they love the product. It spreads virally. You know this. You can ask any of the customers when you're here during the week. We sell them new products. That is the definition of land and expand, and that is the best motion that we have in the company because the products are so good, and they help sell themselves once we get in there. 150,000-plus customers, that's exciting. That's an asset of that loyal install base that's helping propel us to this $20 billion and beyond. Let's take a look at the pyramid I talked about and how we're doing.
If you look on the left, you see our top accounts that we're doing more than $1 million of business with. That's exciting. It's almost tripled since the timeframe of Q2 2013. You know what? It's jumped 30% in the last year. That is a good sign. By the way, if you pivot to the top of the pyramid, you say, let's take a look at big relationships that are $10 million and beyond. That's jumped 47% in the last year, from 57 to 84. We like those dynamics. We like that feedback mechanism, that customers want to expand bigger and bigger relationships with us. You're probably saying, "Marc, I got it, top of the pyramid, mid-market, but what about SMB?" Let's talk about SMB.
In fact, SMB, our business in SMB, I don't know if you know this or not, from Q2 2013 to Q2 of 2017 has nearly tripled. Tripled. You can see, by the way, you can see that with the elongation of those bars. What I really love is that blue section, that 22%, because that's the portion of our business that's attributable to customers in that space that are doing more than $1 million a year with us. We are growing across the pyramid. We are growing with an incredible opportunity with our install base, the relationships get deeper and deeper. One of the things we can see is just this incredible success where we land, we plant seeds, we expose, let great products sell themselves. What I love about this chart is our portfolio helps drive within the install base and beyond.
Here you can look, this is at the tip of the pyramid. A couple of years ago, we talked about 13% use four clouds or more, now it's jumped up to 75% are using four clouds or more. By the way, that's at the tip of the pyramid where we just get penetration and there's tons of dollar TAM in front of us, we let it go viral. That is our single best-selling motion because of the strength of the product. I hope you can see the power here of the large and loyal install base.
By the way, one of the things I do want to comment on, we're going to have people in here speaking, including Keith, our whole vertical strategy is just even more opportunity with our install base, some exciting things are happening and some new logos that we created already, over 100 new logos in our two verticals that have come up just since we launched in Q1. Really neat stuff that's happening. Save some questions for Keith on that. Let me now pivot to the third part of my presentation, it's around what makes this possible. What makes us go from, in 17 years, to the Fortune 500? What makes us be the fastest growing top 10 software company in the world? What makes us get to be number one and persistently taking share and having competitors like Microsoft, Oracle, and SAP falling behind?
What kind of environment does that? What kind of environment gets a tradition of innovation that's unparalleled? What kind of environment creates the best products undisputed in the Magic Quadrant across the world? This is the kind of environment I want to talk to you about because it's been very thought about that this environment and our core values are a competitive advantage, we are investing to make that happen. That's the point I want to share with you from a financial perspective. We are a different company. You only have to go around Dreamforce, you only have to look at Trailhead slides to know we're a different company, it'll be more and more so as you go throughout the week.
We see this as a competitive advantage, another part of that competitive advantage, not just the technology model, which is undisputed, not just this incredible loyal install base that's an advocate for us, our employees love to be here, they're the ones that are going to power us to $20 billion and beyond. I think this is really critical. You can pick your favorite quote. We have four values that we talk about that are really important values, some of them are very different than other companies. I want you to know that those values are picked and chosen to get together the best environment possible to attract the best and the brightest in the world. That's what it's all about. We're unique. Speaking of unique, we've made investments, we've made statements on equality for all.
That's one of our values, women's leadership, the environment, 1-1-1. I'm not going to spend a lot of time with you other than to have the context that all this adds up to what? Is to be the destination employer of choice. We can attract the best and the brightest in the world. We've been listed as the most admired software company in the world, 100 best place to work, all these kinds of things. We got lots more work to do. That's not the point. The point is this has been very purposeful to be able to create the best environment, have a social impact that inspires our employees, wants to bring the brightest and best because we're having the right impact inside and outside the company, we're able to be a magnet.
These are just a few of the visionaries and leaders that are joining our company as of recent, there's just so many more. I hope you can see the point. The point is that our culture, we view as a competitive advantage. To wrap up my section, I look at scaling to $20 billion and beyond, having been there twice before. We have a clear and present opportunity, a clear and present path with the products that we have today. We have a $100 billion TAM and double-digit growing. We have the best products in the world. We have a track record of innovation that's unmatched. We have a large and loyal install base, and we have a customer-focused culture to perpetuate results and scaling that mountain to get to $20 billion and beyond. That's my update.
I'm looking forward to now turning this over to David Havlek. David's going to talk about the benefits of scale and strong economics. David?
All right. Great. Thank you so much, Marc.
Absolutely.
Can we give our CFO a round of applause? All right. Very rare that a CFO gets applause, that's awesome. Nice job, Marc. I'm really excited to be here. This is my 12th Dreamforce. Dreamforce is such an exciting time for Salesforce employees. I think I talk about this every year, it's a chance for us to reach out to our customers, to thank our customers. It's a chance for me to reconnect with all of you. I want to thank all of you for your support as well, it's also a time of reflection. As I reflect back on my 11 and a half years at Salesforce, I remember my first year, Salesforce was a $300 million company. We were aspiring to deliver our first $300 million year.
As you all know, we're on a journey now to deliver the first $8 billion year. We've really grown up, and that's really the thesis of my presentation today, is to talk about how that scale is really impacting the business and actually creating some real meaningful benefits, and also how it's affecting our economics. I'm going to structure my conversation around three areas. First, I'm going to talk about how it's impacting our ability to deliver on the P&L, to deliver the profitability and the growth you all expect. Second, I'm going to talk a little bit about how it's impacting some measures that you all follow very closely on the balance sheet and cash flow. This is a bit of a return to last year, but it's really, really important because we're really seeing some changes on our balance sheet and in cash.
I want you all to really internalize that as you walk out today. Lastly, we're going to talk about long-term economics and how Salesforce thinks about long-term economics as we travel through the life cycle of a company. Let's jump into the P&L. As Mark said, this is our growth margin framework. This is our compass. This is our guide. This helps us make decisions every day. This is a starting point for the P&L. Obviously, as Mark said, we're very confident that we can stay in this growth, this center column, for a very long time, this 20%-30% for the foreseeable future. I'm going to talk about how we're going to do that later in the presentation.
I really want you to be thinking about profitability and how our scale is allowing us to deliver that 1 to 300 basis points in the near term. I'll touch on how our scale, again, is letting us drive towards that mid-30s operating margin in the long term. It's very important to think about this in context of our scale. Let's just get started with that. This slide shows our revenue performance over the last seven years, and you can see it's been a pretty remarkable journey. Seven years ago, in FY 2011, we delivered $1.6 billion in revenue, and today we're, as I said, coursing towards the $8 billion year. We're more than five times the size we were just seven years ago. What's most remarkable on this slide is that orange line in the middle.
That line shows our constant currency revenue growth. It's kind of remarkable when you look at that line to see how steady it's been. At $1.6 billion scale, we were growing at a rate of roughly 28% in constant currency. Through the first half of this year, that growth rate remains relatively unchanged at 27%. You see for the past couple of years, we've been delivering this very steady growth. This has created an amazing foundation, not just to build towards that $20 billion that Mark talked about, but also for us to make decisions and pull levers to deliver the profitability that you want. The next slide really shows that. This slide shows our margin performance over the last several years, but it also shows our headcount additions. This shows our incremental net headcount additions for the last six years.
You can see we've broken it into organic hires, which is the light blue lower part of those bars, as well as inorganic acquisition hires. You see we've added a lot of people at Salesforce, and it's been a bit lumpy. What's exciting is as we've scaled in the last three years, we've been able to make a lot of investments in the business and continue to deliver that margin expansion. Mark talked about nine consecutive quarters of operating margin expansion. Obviously this year, we've made some acquisitions to help fuel our growth going forward. We've done that in a way that's been completely invisible to you in terms of our margin performance. We've made small tweaks in our organic hiring to be able to fit in some of that inorganic hiring and again, deliver that margin.
We've also made the biggest acquisition in our history, as you all know, the acquisition of Demandware. Even in the face of that acquisition, we're still able to deliver 70 basis points of operating margin improvement. This is really important, and it's really a function of our scale. If you turn back the clock three years ago, we made a similar size acquisition, ExactTarget, which was very important to our business, and you guys have all followed the success of that asset over the last several years. If you'll recall, and as you can see on this slide, when we made that acquisition, our margins actually declined a bit. That was because we didn't have the scale to be able to do those kinds of things.
Our scale is now giving us the flexibility to be able to make investments in head count, to do M&A, and to do the things we need to do to grow the long term while still delivering to all of you the profitability that you expect. Our scale is also letting us absorb and manage our way through uncertainty at times. This slide shows FX over the last year. FX has been a little bit volatile, particularly for the GBP, which as you all know, we have a bit of exposure to. With Brexit, the GBP obviously has weakened fairly meaningfully. In fact, this morning, Mark and I were just talking about how the GBP is again down, and I think it's $1.27 today for those of you keeping score on the GBP.
This is very important because again, even as we've managed our way through this, you haven't seen it in any of our results, right? We've been able to deliver that strong top line and deliver the profitability that you all expect. This is very important because as you know, we are making investments internationally. Salesforce today is 70% U.S. and 30% international, which is a little unusual for a company of our size. Represents a huge opportunity for us, and you can see we're making some investments primarily in these nine countries. We're investing in data centers, we're investing in people, and you can see our constant currency revenue growth is now internationally growing faster. International is going to become a bigger part of our narrative over time. It represents a huge opportunity.
Because of that, I wanted to spend a minute, and because I know it's on all of your minds, I've received many questions over the last 90 days since Brexit, on the topic of FX. What I'd like to do is just spend a couple of minutes talking a bit about the mechanics of how FX impacts our business. This slide shows just a very quick high-level lay of the land. We have four regional hubs today: San Francisco, London, Tokyo, and Singapore. We have exposure to three functional currencies today. The US, obviously, we're in US dollars, Europe, the great British pound, Asia Pacific, we're functionalized to the US dollar, and then in Japan, the Japanese yen. Of course, we bill in many currencies. This slide doesn't reflect all of the currencies we bill in, but it shows you a couple as an example.
The key takeaway here is three functional currencies, and what I'd like to do is sort of walk you through, in a little bit of detail, how the mechanics of that works through our numbers. And to do that, I'm going to use that blue box, that European blue box. We're going to use Europe as our example. So let's say we have a customer who's on the continental Europe, and we bill them in euro. The moment that we bill them, we immediately translate that to a functional currency, right? We hang it up on the balance sheet, and at that moment, we're exposed to that day's spot rates. That's what we call transactional FX exposure, and obviously, that can change over time.
Obviously we hang that up on the balance sheet, and then, as you all know, we revalue the balance sheet at the end of each quarter at the quarter-ended FX rate. But during the quarter, we're recognizing revenue through the quarter on a daily basis, and we're exposed from the functional currency rate, in this case, from the GBP to the US dollar, on a daily basis. And this is what we call translational FX. So transactional FX, i.e., the billing currency to the functional currency, and then translational FX from the functional currency to our consolidated currency, obviously the US dollar, are both impacting both deferred revenue and revenue. So as you think about your modeling, it's very important to understand both of those things.
We've talked about on our calls that this year, the company in total has headwind to revenue in an amount roughly equal to $100 million-$150 million. It's primarily translational headwind for us because again, we have a functional GBP. But if you think about moving forward to next year, assuming rates stay unchanged, and that's probably not going to happen, but for the sake of this example, we'll actually get some transactional benefits and then continued translational pressure. And over time, the net of the two will sort of net out. So it's important to understand both of those effects as you begin to think about modeling both deferred revenue and revenue. On the expense side, we have exposure as well, and we have exposure in this case to the local currencies. And again, those are translating back on a daily basis as well.
From a margin perspective, what that means is we have revenue coming in one currency, and we have expenses coming in another. Depending on how those rates work, some quarters we have a bit of margin pressure, and other quarters we have a little bit of margin favorability. Again, because of our scale, we're able to manage through that variability and deliver very consistent results to you. Our scale is really letting us manage our way through some of this complexity, but I wanted to share this with you because I know it's on many of your minds, and many of you have asked me personally to help understand how this works. Okay. Hopefully that makes sense. Great. My CFO says it makes sense, so I'm good. All right.
I'm going to end with a discussion of long-term economics, and I'm just curious by a show of hands, how many of you were here two years ago at this event? How many of you weren't here two years ago? You guys can raise your hands higher than that. Come on. Okay, there's a few of you who weren't here. You guys are at a bit of a disadvantage. Of the people with their hands up, how many of you weren't here last year? Okay. This is important because this is our favorite time. For those of you that are new, this is going to be our favorite time. I'm going to come back to that. Hold that thought. I'm out of sequence here. Let's talk a little bit about deferred revenue before I get to my subscription economics section. Deferred revenue.
This is our favorite measure. You can see today we have $12 billion of deferred revenue on and off the balance sheet today, roughly $4 billion on the balance sheet, and this is obviously a measure you all follow very closely, and it's something that gives us great confidence. You can see that 80% of our annual revenue is under contract when we start a fiscal year, and 95% of our business is on contract when we start a quarter. This is, again, how we're able to deliver that predictability and that consistency that you all expect, and it's the thing that helps me sleep better at night because Mark Hawkins sort of tasked me with delivering on the operating margin growth framework.
As we talked about last year at Dreamforce, as we scale and get bigger and bigger, there's several effects that are beginning to change the seasonality of this measure. If you guys will recall last year, we talked a little bit how our measures are becoming a little bit more seasonal. Our business isn't becoming more seasonal, but these measures are becoming more seasonal. I want to talk a little about that. As we compound each year more and more Q1s and more and more Q4s, we're stacking up more and more business, and this compounding effect is beginning to have a meaningful impact. I'm going to show you that in just a second.
We're also, as we get larger, in many cases, aggregating contracts for customers, making them all coterminous in the same quarter, particularly in Q4, that's creating a bit more Q4 seasonality in our deferred revenue. All of that's being offset by this sort of rising tide of very consistent amortization. This is very, very important because it's changing the seasonality of the deferred revenue measure, and I want to share that with you, and this slide hopefully gives you a sense of that. This slide shows the sequential growth in deferred revenue for the first fiscal quarter for the last 13 years. For those of you that have followed us for a long time, you can see 13 years ago, 12 years ago, et cetera, you expected sequential growth in deferred revenue, and we delivered. Something happened in 2009.
2009 was the first quarter ever in Q1 where we didn't add deferred revenue sequentially. For those of you that followed the stock at that time, the stock traded off, I think, that day 15% or 20%, because up until that period, we'd always sequentially added deferred revenue. You see a very, very clear pattern here, and now, of course, you all expect Q1 deferred revenue to decline. If you look at Q2, you see a very, very similar pattern. 13 years ago, huge adds in the second quarter, and then you can see it sort of over time, this very, very consistent pattern. Now for the past two years, for the first time, we're now seeing that number equally, and that's because of this rising amortization again, and we're not compounding and stacking up enough in Q2 to sort of offset that rising amortization.
You see this very, very clear pattern. Same thing for Q3. The gray bar here is actually our guide, again, you see a very, very clear pattern. For the fourth quarter, you see a very, very similar pattern. Pattern maybe doesn't look so exaggerated here, and that's for two reasons. First, as you all know, we went to annual invoicing in 2012, and that's muted this trend a bit. The real reason this trend doesn't look so pronounced as the others is just because of the scale of our fourth quarter. Today, our fourth quarter is when all of you look for huge DR bills, and last year, we ended with more than $4 billion in deferred revenue.
Just to give you a sense of the scale, those numbers on the bottom show what a 1% sequential change in deferred revenue mean to our business today. It's $28 million. 10 years ago, it was more like $1 million. Q4 is really when you expect to see that. Very, very important seasonal pattern. It's important to understand that as you guys think about this measure, I know you're all modeling off of this number. Obviously, deferred revenue is a liability offset by a receivable asset, you would expect the same to be true for cash, of course, that is the case. I'm going to talk about that in just a second. I showed you guys this slide last year, and it shows FY 2006, FY 2011, and FY 2015 deferred revenue.
You see again here, the peaks are getting higher and the valleys are getting a bit lower. If you add last year, you see a continuing of that trend. Again, lower valleys, taller peaks as you think about deferred revenue. As I just said, the exact same is happening for cash flow. You should be thinking about cash flow and deferred revenue both as getting meaningfully more seasonal, even though our business underneath isn't. It's really about that compounding and the rising amortization level. Now I'm going to get to the part of the presentation where I really wanted to get to, which is long-term economics. I guess I was ahead of myself, so I apologize for that. This is my favorite time of the presentation. For those of you, I want to ask you all to raise your hands again.
You're going to be a little bit disadvantaged at this point because we are going to go back to school. I love this part of the presentation. You might note my office hours are a little bit less than they were last year. I've been very busy, sort of in the basement. Mark Hawkins keeps me very busy in the basement, so I don't have a lot of office hours. If you have questions outside of that, of course, you should address them to John Cummings. For those of you that were here the last couple of years, you remember two years ago, we introduced this concept of lifetime economics. We talked about cost to book, cost to serve, and attrition, and how they affect the long-term economics of the business. We introduced this concept sort of from a framework perspective.
Last year, we built on it, we talked about how focusing on growth versus focusing on margin can have sort of profound impacts, as well as short-term decisions can have long-term impacts and vice versa, we talked a little bit about some of those trade-offs. Today, we're going to talk about how subscription economics apply to the business life cycle. To do that, I'm going to use the S curve, which is, if you work for me, you know this is one of my favorite charts. I don't know why I love the S curve.
The S curve describes the business as we move through the life cycle, you can see in the early stage of a business, when a business is accelerating, what we're going to talk about today is how the economics of a subscription business drive meaningful natural margin pressure in a business, it's why early-stage cloud subscription companies, in many cases, are very, very unprofitable. At maturity, there's some natural leverage in the model that comes from deceleration. Salesforce is in the middle. Salesforce is in that middle column as we talked about from the growth margin framework, we intend to be there for a very long time. Because of that, we're able to deliver both top and bottom line. I'm going to talk a little bit about how we think about that and how we intend to stay in that middle column.
To do that, I'm going to return to a customer we used last year, which was the Acme Cloud. This chart shows growth rates on the vertical axis, and on the horizontal axis, it shows time. Just to be clear, the time is not moving left to right. It's just relative time. Okay. At t equals zero, the Acme company is growing at a rate. I'm going to ask a question now of the audience and see who knows. I see Mark, you're in the front, and some people. Heather's in the front, so I may call on you guys, actually. For this company to accelerate its revenue growth, what needs to happen in new business relative to revenue growth? Anybody want to take a shot at that? It's kind of like we're in church a little bit.
Nobody wants to take a shot at that? Sarah, do you want to take a shot at that? It needs to go faster, right? New business needs to grow faster than revenue for this company to accelerate. If we move from t0 to t1, new business needs to actually grow faster. It looks something like this, right? The way to think about that is we actually call that business velocity inside of Salesforce. We say when the velocity, which is described as the new business growth divided by the revenue growth is greater than one, you actually have acceleration. Makes perfect sense. Equally, when that velocity is less than one, you have something that looks like this. Pretty simple. If the company's moving from t1 to the right, this is a company that's actually decelerating, right?
If Acme Cloud is to accelerate, new business needs to go faster than revenue, and to decelerate, it needs to go a little bit slower than revenue. All right. That makes perfect sense, right? It's going to get more exciting from here. This is the 301 class after all. All right, we've talked over the last couple of years about cost to book. If we think about cost to book as the cost to go get those bookings, and if we assume the cost to book is flat. In other words, the cost to acquire doesn't change. The cost to get a dollar of new business doesn't change. By definition, we can say if cost to book is flat, sales and marketing expenses should move at the same rate as the bookings expense or as the new business expense. Does that make sense?
I see some heads in the front nodding. Does that make sense? Great, because there will be a quiz at the end of this. Since I got this out of sequence, that's the least I can do in return. Okay. Let's go ahead and replace that line with sales and marketing expense. We can replace that bookings line with sales and marketing expense, I think you can see where I'm going here. In a company with acceleration, the sales and marketing expenses are actually growing at a faster rate than the revenue, right? Again, this is assuming a constant or flat cost to book. As a result of that, you get this natural pressure in the business. It's unavoidable. It's just part of the model. Equally, as you would expect, you get this natural leverage for deceleration, okay.
This is a very, very important element. It doesn't mean that you need to have better efficiency in cost to book. It means there's this natural play that exists between the growth rates of your new business and your revenue and what it means to sales and marketing expense. The example I'm giving you here is a flat cost to book, right? There's some natural leverage related to bookings. Of course, there's also some leverage you can get in other places, right? We all know that you can get incremental leverage by doing better on your cost to serve, right? If you can grow your other expenses at a rate slower than your revenue, then you're going to get some incremental leverage on top of that, right?
There's some natural leverage that comes with selling, and there's some choice leverage that comes in some of your cost to serve areas, right? This is just an example to give you a sense of the construct that cloud companies are working with. For Salesforce, where we're given this dynamic and given this leverage, we make some choices, right? The first choice we make is to go back to that growth margin framework and let a meaningful element of that leverage go to the bottom line because we've committed to all of you that we'll do that. We deliver the profitability you all expect. The second thing we do is go invest in more businesses, go invest in more growth. That means new clouds, that means new geos, that means new verticals, right? That means more innovation.
You're going to hear about that over the next couple of days at Dreamforce, and that's why you all come. By laying on S-curve on top of S-curve, new business on top of new business, we're able to extend our growth and create, in a way, this virtuous perpetual growth engine. It's really been the driver of why that revenue growth line I showed you to start has been so flat. We're taking some of the leverage and delivering it in profit, and we're taking some and reinvesting it back in the business. Underneath it all, it's really important to understand as well that we're managing to that long-term economics number of mid-30s, right? We're really cognizant of the fact that as we lay these businesses on, they're all going to have different economics numbers in and of themselves.
As a portfolio, we're still driving towards that mid-30s number. This is where we started our presentation today, and it's where we're going to end. That is to say, I hope you got a sense about the fact that our scale today is allowing us to deliver the P&L, deliver that long-term growth, stay in that 20%-30% range for the foreseeable future. We have levers in place that allow us to deliver that margin that you all expect in the near term, and equally, the economics and the way the model works give us every confidence that we will be able to deliver the long-term margin that we've committed to as well in the mid-30s. With that, we are done.
With that, I'm going to go ahead and bring Mark Hawkins back up on stage, and we're going to take some of your questions.
Great. Well, let me just start and say, let's give David a round of applause as well. Here, come on. Awesome member of the Salesforce team. Question.
Back there.
We're going to have somebody run. Okay, here we go. Please.
Thank you, Mark and Dave. It's Keith Weiss from Morgan Stanley. In thinking about the margin framework, you guys have been very acquisitive year-to-date, made some really interesting acquisitions, and some relatively large ones. After Demandware, you came in and said, "Hey, listen, this is within the margin framework. We could withstand that." There have been two more $700 million-plus acquisitions that have taken place. Does the margin framework still hold, and are there gives and takes we should be thinking about? Is there other investments that you're giving up in order to do these acquisitions and stay within that margin framework?
Sure. A couple things. One, the framework holds, yes. We're absorbing those within our framework of thinking about the business. Again, the framework is like a compass that we keep driving back toward, but yes, it's comprehended within what we're thinking about with our framework. Yes. We're committed to this. David, I'm trying to make sure to answer it directly.
I would say, the way you should think about the investments we're making is an accelerator, right? Every day, it's a build versus buy decision. When you think about some of the things that we've acquired, it's really just accelerating our innovation. As I talked about from a headcount perspective, we're fitting in inorganic headcount additions relative to organic. A lot of times, we'll add some people-
Yeah
We'll slow down a bit on our organic hiring. I actually think it's causing us to go faster because your question really should be thought of in context of build versus buy. I think we've found a really good balance of being able to deliver both.
I think that's a great addition there, because effectively, we talk to people who say, "Hey, there's a certain amount of funding that we have. Do you want to accelerate through M&A, or do you want to accelerate organically?" That's all comprehended together. David, I think well added. We're having the mic runners here, guys, otherwise we would
Yeah, you have to be on-
Yeah
webcast.
Over here.
Yeah.
Thanks for the presentation, guys. Kirk Materne, Evercore. Mark, when you think about the long-term margin framework, and you think about these S-curves that you're layering on, do you look at that by cloud? Meaning, if we were to see Sales Cloud on its own, would that be a good representation in terms of where margins could go for a business that is still growing, but at a little bit more mature growth than some of your other clouds? I'm just trying to get a sense of how you guys think about that-
Sure
by cloud, and the investment trade-offs you have there.
Sure. Certainly, we think about it, Kirk. It's a great question. We do look at it by cloud. We first think about it aggregately, and then we certainly try to think about it by cloud as well. I'm glad you referenced Sales Cloud, because what I like is the Sales Cloud with the innovation is in the teens in US dollars. You can see the power of investing in. Really, I think David did a very nice job of showing that S-curve and the power of reinvesting as such, and keeping that cloud moving forward is a great example, Kirk, of calling out. I think we think about it by cloud, we think about it in aggregate. Okay?
Can I just add one thing to that?
Yeah, please, by all means.
I think it's really, really important to understand that the economics for different businesses are different, right? One of the questions we get is, well, what if your cost to book goes higher? If our cost to book goes higher for a business and our attrition is lower, then the lifetime economics are fantastic. Different than maybe another business with a lower cost to book and worse attrition dynamics. Think about it as by cloud, by region, by what we call segment inside of Salesforce in terms of how we sell it, and then by industry. It's kind of like a Dungeons & Dragons game, actually, with a lot of sides. We're trying to sort of manage all those pieces, and they all have slightly different dynamics.
Exactly. Thanks for the question, Kirk. Please.
Hi, it's John DiFucci from Jefferies.
Hey, John.
Back here.
Can't wait till you get off that stage, David. I'm going to give you.
You're going to give me a hug?
You can come up on stage if you want.
You want to give me a hug? You want to give me a hug?
Okay, great.
It's a bear hug, right?
Yeah, indeed.
Anyway. It's not a bear anymore. We're neutral.
Yeah.
Anyway.
Thank you, John.
The question is, we're always trying to figure out how to measure your top line, and I know there's a lot of discussion around bottom line, too, and how the model works. We try to measure something we call new subscription annual contract value. We look at the revenue, we calculate billings, and we come to what we think is a logical answer. However, we also realize there's a lot of nuances to that, and timing of renewals, things like that, where we're not going to get the exact number all the time. I'm just wondering if you ever considered actually just giving that new subscription ACV or growth number, something like that. Oracle actually does, so there's somebody out there that does do it. They call it ARR.
Just curious if you had that discussion, especially now that there's a lot more questions around it after last quarter.
Right.
Thanks.
Sure. I think one of the things, John, that we're always looking at is always trying to continue to look at what we do, how we measure the business, how the world's changing, and how we disclose as well. That, I think is a very good and fair question. I think people right now understand how we're focused on measuring the business today, including we talk about revenue, we talk about, as David very nicely called out, both a billed DR and an unbilled DR, so people can see the entire business that we have coming eventually, which will make its way to revenue. I take your point, and there's always opportunity for considering different things. David, anything you'd add there?
Yeah, I think it's important to understand. I think it's a great question. Firstly, anything Oracle does is something that we probably wouldn't do. We'll take a look at it, right? They're not exactly the model of best practices, but okay. Putting that aside, sorry. If Ken Bond is listening, I apologize. I can say that, you can't say that.
Yeah.
I think it's really important to understand, if you think about the software business, what do software companies do? They chase new license revenue at the end of a quarter. It doesn't matter what, because they want to give you guys a number, and then they got this get well program called software maintenance. That's because they want to make that licensing number. Well, we don't have a get well program. We'd actually rather get a good deal done on the first week of the next quarter rather than chase a really bad deal to make a number. We don't want our sales team driving towards some number that we publish, because in the end, we're managing this annuity over many, many years.
If you think about, I know you all want more disclosure, but think about the behavior it drives inside of a business, and we don't think that necessarily would drive the right behavior.
Yeah.
I'd just add that.
Yeah. I think it's a great addition. Thanks for asking, John. We have folks right up front here.
Hey, guys. Kash Rangan from BofAML. Two questions. One, the $20 billion aspiration for revenue against the TAM of $100 billion, does it include just the products that you have today, or does it contemplate acquisitions? Secondly, look at the cost to book. Is there a trend that your newer businesses that are subscale have higher cost to book? How are they trending relative to the core Sales Cloud?
Let me take the.
I'm going to hand it over to Brent, because Brent has the next question.
Sure. Let me.
Wow.
Let me take the first, and then David, if you want to do the.
Yep
the cost to book. For the $20 billion and beyond, that is with the current clouds that we have, the current product set that we have, effectively. We do not need to go find another cloud to get to $20 billion and beyond. I think, the math of the TAM of $100 billion, and when you look at where our consensus is right now is $8.3 billion-ish for this year, you can see a clear line of sight to that, Kash. It's a great question. Happy to clarify that. David, on the cost to book, you want to?
Yeah. Obviously, all our businesses have different cost to book dynamics, and I wouldn't necessarily think about it as small businesses have high cost to book and big businesses don't. You think about even the Sales Cloud, as we look to get very, very strategic inside of the biggest companies in the world, we're trying to become a strategic advisor, and you're building more and more resources behind that. There are even instances in mature businesses where cost to book can move up or down. The key for us is we're managing a portfolio of those things, right? We do it in the construct both of delivering near term as well as the long term. The answer is yes, they're different, but I wouldn't think of them per se as just small is big and big is small.
Yeah.
If that makes any sense.
Brent.
Thanks. I think the biggest question we're all trying to reconcile is, this pace of M&A, you've spent $4 billion just in the last few months.
combined with the slowdown in the core business and what happened last quarter. Just trying to understand, is this pace of M&A happening because what you're seeing in the core organic? Is it happening because you see some assets that have been mispriced?
Yeah.
I was just trying to understand how to reconcile those two.
Sure.
Maybe they don't have anything to do with each other.
No, I'm happy to answer that. David, feel free to chip in, I think at the end of the day, when you talk about the $4 billion, of course, roughly $3 billion of it is Demandware, which is something we've been looking at for years. Super happy to fit in, totally fits within the wheelhouse of CRM. That's something I think a lot of you've expected us to do for a long time, I couldn't be happier to have that, Brent, just to be really clear on that one. You're absolutely right. There's other things that we've added on, one of the things I think is that you look at opportunities in software's been consolidating for 30 years, it never happens linearly. It happens in bursts, and people come to approach you. We have a plan.
We're very happy with our core. As you know, we've raised our top line for the third time in a year, slightly the last time. We're going to the future. We have a strong core business, we also see opportunities when things change, when people change, and companies change, and they come to us, and we see how that can fit in. We think about, can it help us with what? Can it help us with innovation to help our customers be more successful in the space that we're in? In the case of the ones that have come up, they have, and I hope everyone's seen, we announced Krux, a DMP, I think fits just very nicely into what we're doing. It tucks in perfectly with our Marketing Cloud capability as an example like today.
I think that's what I would say about that, is I see this as an opportunity to build on a really strong business. That's what I would say. David, above that.
I think that's a good answer.
Yeah.
We've reached a scale where we can do these things now. The world has changed in terms of valuations and things like that, we can go ahead and go faster and go take on some of those assets. As an aside, if you look back over the last couple of years, I would just add, we hadn't really done very much M&A for two or three years.
Right.
Sort of had a big year when we bought ET, then we digested. The world has changed, the time to go is now.
That's what I would say. Yeah. Please.
Raj Sasiali as me.
Yeah.
Historically, the company's had a very strong balance sheet. The recent acquisitions, some of them have been using leverage, as well as stock. Just wanted to try to understand, what's the leverage framework that you feel comfortable with? Given the company's strong, larger, you do have more flexibility, trying to understand that.
Sure. It is one of the things, we even have board members here today, they know that we always are talking about the capital structure, and I think you said it, Raj Sasiali, at the beginning, which is we're a company with a strong balance sheet. We're a company that wants to have a strong balance sheet, and that's important to us. You can see what we've historically done, in terms of our balance sheet. There's no big sharp turns on that. In terms of our thinking around that, we reevaluate that, like every presentation that I've ever done as a public CFO, we need to address capital structure with the board in an ever-changing world.
I think we are a company that's a Fortune 500 company that believes in having a strong balance sheet, and that's what I would say, I don't know a lot more to say about that than that. David Havlek, anything you would add on that?
No, I think it's good.
Yeah.
Yeah. Terry Tillman with Raymond James. I guess, what did you learn from the ExactTarget acquisition that you can apply to the Demandware acquisition in terms of whether it's fleshing out revenue synergies, cost synergies, et cetera?
Maybe a report card on where you are with Demandware. Obviously, understanding it's still early.
Sure
Maybe some early low-hanging fruit around synergies. Thanks.
Yeah. Very great question. First of all, I'm pleased with ExactTarget. I think it's really penciled out nicely for us. I think by any definition, you can see some of that in the revenue that we're disclosing, but in general, we're very happy with that, and we feel like that's going to go in the ranks of a really, really good M&A as we continue to look back on that. That would be the first point I would say. I think the second point I would say, and by the way, save this question too, Terry, when Alex is here. I think we would say for sure that we would have gone faster in terms of integration. I think we're absolutely taking that learning from ExactTarget. There was a lot of different dynamics that were going on at the time, but I think we would integrate even faster.
I think that's a lesson that we're going to profit off of. Okay.
Hey, Mark Murphy with JPMorgan. I guess I'll just bring up directly LinkedIn and Twitter.
Okay.
One of the elements that they have in common is they are a huge, vast proprietary data set.
They are.
Part of what I wanted to ask you, if now is the appropriate time to be contemplating large-scale transformational M&A, potentially, is it relating to potentially the concept that those large data sets, that the value of those is increasing in front of the wave of artificial intelligence? I think we haven't heard yet about Einstein.
Sure. You're going to hear more about Einstein. I hope you get a chance to attend that. I think one of the things, Mark, I'd say, obviously, that's a discussion we can have directly with Mark tomorrow, and we can go deeper into that question, because I think it's a very fair question. I think the thing I would say, too, is, obviously there's. I'm glad you brought it up, Mark, because it's the thing I'm sure people are thinking about. There's a lot of conjecture about a lot of things in the marketplace, and there's no shock to any of you that obviously we comment on this conjecture about different things and that type of thing. Certainly, that's a question that's very fair to ask, Mark. I think your question about data in general is interesting. Data's important.
I think Mark can give you more elaboration on that in general. I certainly don't want to go into anything broader than that, would be what I would say. David, feel free to jump in.
I'd say it's probably a great question for tomorrow.
Yeah.
It would be a tomorrow session with Mark. It's probably a great question for Mark.
You'll hear it unfiltered. I'm glad you asked it because I'm sure people are wondering.
Hi, Phil Winslow from Wells Fargo. Just have a question on churn rates. Obviously, that chart that you showed, you showed immense improvement over the past several years in churn. Wondering if you could walk through sort of what you've done to bring it down, you made a comment, Mark, about going forward, you hope you can bring that lower.
Yeah.
What are the next things you need to do to bring that lower, what's sort of a right and long-term target for you guys?
Sure. One of the things, Phil, that helps bring it lower is multiple clouds, I think, more attached. One of the things that helps it be lower is more AppExchange installations when people have more and more of their solution coming together. One of the things that helps is we have an incredible customer success group that has something called an early warning system. One of the things that's different, having been in all sides of software and technology, what's different is, if we sell something to a CEO, we make a business case for them, we want them to be wildly successful. By the way, we don't own that data. We fiercely protect that data.
If we pick up, Phil Winslow, that we're not seeing the normal patterns for API calls and storage things, and enough activity that we would expect would be consistent with the adoption of that capability, the CEO's not going to call us. We're going to call that team. We're going to bring people in, and we're going to figure out, what do you need? How can we help you? How can we support your success? Because when they do that, over the long term, the more that adoption happens, the more the success happens, the lower the attrition rate happens. We have an amazing group of people led by Maria Martinez. They just do an absolutely first-rate job on that.
That coupled with the more of the entire offering that we sell, I think the better the experience is in total in terms of lowering the attrition rate. That's what I would say.
Hi, thanks. Walter Pritchard with Citi. Early in the year, you came out with the Lightning Edition to the product, added more value, and raised the prices.
I'm wondering if you could talk about just sort of realization of some of those pricing moves into metrics that we might see, like billings and revenue, and how you think about just sort of state of your pricing in the market, given what may be some incremental competition we're seeing out of Microsoft. Seems like they're reinvesting in the market.
Sure. First of all, I think to Walter's point, we did a packaging and pricing change. David, first time in 10 years?
Literally the first time since I've been at Salesforce.
David's seen a lot. When you step back and look at that, I think Walter really positioned it right, is we added some additional packaging, we added some additional functionality, and we priced it. I would say right now, I think that's really unfolding pretty much as we expected. Just to be clear for everybody, Walter knows this, but for everybody, basically, we grandfathered the install base. For people that were install base, think about their customers. They basically got upgraded functionality. Okay? Because we wanted them to have a good experience. When they add on, and they take on new business, we would get more ASP for that enhanced and expanded functionality. For people that were already there, they actually got more real time.
We both took care of our existing customers, and I think they were fine after 10 years for when we added additional value to get additional pricing. I think, David, I think it's pretty much shown up as we're expecting, I think.
Yeah, I don't think it's had any meaningful impact on the measures you guys follow.
Yeah.
I don't think you should think of it as a price increase.
Yeah.
I think you should really think about it as repackaging.
Yeah.
If you go back and look at when we first launched the Unlimited Edition, one of the big value props was mobility. Well, turn the clock forward five years, mobility is something that everybody expects, so it's not really a driving value for us. We really repackaged around what customers were buying. They were buying a lot of à la carte services around our editions. We repackaged the way they were buying, but it hasn't had any meaningful impact on the things you guys follow.
The last thing I would say to Walter's point on the competition, I don't think the competitive environment's meaningfully changed. You can see the persistent trend in market share. You can take a look. You guys are probably subscribed to the same one that we are. That's something to think about.
Uh-oh. Uh-oh. Pound the table. Bring it home, Steve.
Absolutely. Steve Ashley, Robert W. Baird. How should we think about the monetization opportunity with Einstein?
Well, there's two things on Einstein. Again, we will announce, as all these things become GA, you'll see. One of them, Steve, think about an individual SKU capability for the various Einstein aspects that it'll provide to the various clouds. In some cases, think about it being bundled in. You're going to hear more about it as, again, we don't want to steal the thunder, but you're going to hear a lot more about it even this week. That's what I would say. David, any adds?
Thanks, Steve.
Yeah.
We got a lot of questions up here in the front row.
Yeah.
We don't want to forget these bold people in the front row.
Yeah, exactly.
Hey. Ryan Molins from Barclays. Steve, as you go on the journey from $10 billion to $20 billion.
Yeah
We talked a lot about leverage on the sales and marketing side. Can you talk a little bit about the other initiatives you might have to take in terms of organization needs to change in terms of how they are set up? I'm thinking about technology, maybe.
Sure
As another driver for that here. Can you just talk a little bit, the steps you're taking just to kind of change Salesforce and get it ready for the next big thing?
Yeah.
Thank you.
Let me start that. Maybe David, maybe he and I can tag team a little bit on this. I think, if you step back and think about preparing for $20 billion as we think about it, the way to really scale a company, having done this multiple times, is it's not like you address one thing. You have to address the entire ecosystem of your company, basically. When we think about scaling, we have incredible people. Just take Randy Kern, for example, manages our entire tech ops service delivery. He's got incredible experience. He's run a zero before. He knows how to scale a company. Randy will do his magic. Let's just take, for example.
All the things that he can think about from that standpoint. David, I thought you showed a really nice job when you were showing kind of some of the natural leverage we get depending over time as we scale the company. My message to the entire company is that every one of us need to think about how to take it to a higher level, and when you put that challenge out to people, my experience is they come up with really interesting initiatives, function by function, division by division, to support it. What I'd hate to do is get into too much of the detail on that, because if I do, I'll be reporting out to you how we're doing on that. Generally speaking, expect all the company to scale, and certainly, there'll be major initiatives. David?
Yeah. What is the most amazing actually, if you really internalize that subscription economics framework, is we could just literally keep our existing cost to book, cost to serve attrition, and sort of drive to that number naturally over the long term. What's remarkable is we, in many ways, don't have to get more efficient as our business over time, so. Obviously.
Get better, sure
Yeah. Obviously, as Mark said, we are always looking for ways to do better, and there is always ways where you can drive incremental efficiency. We obviously choose whether we let that go to the bottom line or reinvest it back in growth.
Yeah.
Hi, thank you. Sarah Hindlian with Macquarie. A couple of questions I wanted to dig into with you guys. I know you talked a lot about the seasonality in deferred revenues. We have done a lot of work on how billings are really, on a quarterly basis, a poor indicator of future growth. We consistently see when we regress the numbers that there is not a correlation there. As you are talking about the increasing seasonality you are seeing in DR, we have kind of fallen back on looking at billings on a trailing 12-month basis as at least more statistically correlated. Maybe it circles a little bit into John's question, but is there a better metric we should be using to have a little bit of a better capture of what is going on?
Just number 2, really quickly, David, I know you jumped into the cost to book in particular, and certainly, we understand the unit economics. I am just wondering, is there any benefit that you are seeing in terms of the cost to book as you push more customers onto multiple clouds? Are there ways to improve the economics there? I think that should be a nice lever for the business.
How about if I take the first, you take the second?
Great.
Sarah, we agree with your conclusion in the sense that not so much the exact metrics that you use, but the quarterly thing is, I mean, we've been on record a long time as saying that that is something that can be really choppy, to say the least. The thing that we think a lot about, and I'm sure there's a ton of different algorithms, and you guys have an algorithm that you look at, but David and I were talking, we talk to the leadership team a lot. One of the things that goes through our mind a lot is what's happening to the total billed and unbilled DR. Because it's literally revenue waiting to happen. We think a lot about how does that growth rate look?
We look, it's like 28% in the last quarter, that whole pipe of activity there. We talked about our revenue being a 26% constant currency, and that being what it is. We look at that a lot. That's why we disclose that, and we think that's so much more meaningful than something that's super choppy. I can't comment on your specific algorithm. I know you're super analytical and smart and all that. I don't know exactly what you're doing.
You know I am.
When everybody says, "What do you think of my model?" I'm like, "God, I've never seen it. I better not comment." I'm sure there's algorithms that people are thinking about. I'm just trying to be really transparent with you. That's what I think about. David.
Yeah. I would just add, there is no perfect measure.
Yeah.
Right? In fact, I see our Chief Accounting Officer in the back row, he's kind of cringing a little bit, because there are so many ins and outs inside of deferred revenue. There's early renewals, there's renewals that get extended with courtesy renewals, and there's all kinds of dynamics. This is a $4 billion number that you guys are laser focused on to the nearest $10 million, right?
Yeah.
My Chief Accounting Officer was like, "Whoa, there's all these things happening." Unfortunately, there's no perfect measure. With respect to cost to book and multi-cloud, there's clearly leverage for us inside the install base. That's why Mark spent so much time talking about it today, we should start to get that benefit over time. I would say that different clouds do have different buyers, and so it's not like the guy that's purchasing the Marketing Cloud is the same guy that's purchasing necessarily the Sales Cloud. Certainly, as we become more strategic inside of accounts, having multiple clouds gives us an opportunity to be more efficient. There's no doubt about it.
Yeah, it does. Also, when we do a CEO sale, they want to look at multiple clouds, which is really nice about it. They're not functionally driven, Sarah. I think that's an efficiency too, because we can hit them at one point sometimes.
Okay.
We'll work down sell-side alley here.
Yeah.
Hi, guys. Thanks. Alex Zukin from Piper Jaffray. I'll try the M&A question from a slightly different direction. I think if we look at the pace of M&A, you guys have done a great job addressing that. If we think about the context of the recent kind of M&A that some speculated, it's more transformational in nature. As you lay out a $20 billion goal of revenue and a $100 billion TAM, and this may be a better question for Mark, is there a better way to understand your thought process around transformational M&A in the context of TAM expansion, getting there faster? We've talked, you guys have-
Yeah
arguably considered more transformational M&A this last six months than really probably ever in the history of the company.
Yeah.
Just any kind of help there would be great.
Alex, I think, A, you're right. I think this is a great question for Mark. I think you have an expansive thing that you would like to get feedback on, and that's why we've worked hard to get Mark here so that we make sure that we address as many questions as we can and give you really good access. I would say to you, again, transformational, it's always interesting because when you're asking the question, I'm thinking like, "Well, the biggest M&A we've ever done in the history of the company, we've only done 2 big M&A. One of them is Demandware." I think about that transformationally in the sense that it fits into CRM. It rounds out something that we completely didn't have, and it's completely something that's really important to us.
I also get the context of your question, I'm just trying to share with you kind of real-time what's kind of going through my head. I do think you're going to be best served by hearing Mark directly on this one. I really believe that, your question's broader than that. That's what I would say.
Yes.
Yeah.
Agreed.
Yeah.
More questions online.
Hi, guys. Keith Bachman from BMO. I wanted to ask 2 questions along those similar lines. David, you've mentioned a couple different times the framework on margin expansion at scale, if one of these larger deals occurred, there could be some slowdown and a minimum margin erosion. Should investors at least contemplate something that happened 2 years ago where perhaps the margin expansion story was at a minimum slowed for a period of time before it re-accelerated? The second part of the question is, you've talked about the framework, the guidepost, if you will. Some of the larger deals that have been at least thought about, and I don't think it's anecdotal speculation, Mark has specifically said he would have paid more for LinkedIn than $26 billion.
At that level, some capital will be required, but what's not on the framework is any discussion about, there's growth and margins, but nothing on the capital side.
Sure. Yeah.
I'm not sure how at least you would infuse some discussion about what are the guideposts around capital as it relates to some of these transformations.
Sure.
Thank you.
Sure. I guess the first thing that I would say here, on the capital, we haven't published a framework for that. It's never been a topic. Obviously, the whole discussion that Marc's had about LinkedIn raises a question on that. That's something that we can think more about. I think one of the things that you should think about, and you can see with our cash flow, when I talk about hitting $2 billion in cash flow, is that obviously, the amount of cash flow that we have and how fast we grow our company has a bearing on the kind of cash generation we have and what our capability is to finance and/or even pay down any debt we have. We have some debt today. How fast can we pay that down? That's something that we do comprehend.
I'm not prepared to give you a framework on the fly on that, I take your point. You certainly should expect that just as a general course of managing the company, we look at our cash flow, we look at the delivering of our existing debt. We look at the cash accumulation over the course of our long-range plan. We think about all that together. We think about that with the board, there's a very disciplined process. It's not like once a year. It's like all the time, we sit down and talk to them, as you might expect. Then as far as the framework and do we deviate from the framework? I appreciate your question. You're asking, and it's a very legitimate question. It's not something that we're prepared to go down to a lot of hypotheticals. You can imagine.
It's a very legitimate question, I think hypothetically, I would kind of step back away from that.
The only thing I would add is, we've had the framework in place for five years.
Yeah.
That should give you guys some confidence, right?
Yeah.
It's definitely part of every conversation that happens. Obviously, we're managing for the long term of the business. We want to do the right thing for customer success over the long term. I think it's really important to understand that this framework is really becoming part of our DNA and part of our culture and part of the decision process.
If you look at our past behavior, I always think about past behavior as powerful because it's not just conjecture, it's fact. You can see what we tried to show you, is we use that compass to just relentlessly kind of pivot back to be in the framework where we needed to be. As David showed, we had things where we were working through, but then you can see the track and the path that we're on. I think if you think about it as something that we're constantly pivoting back toward to make sure we're in that framework, I think you got a really good sense of where our head's at.
Hey, David and Mark. Jeff Houston with Navidar. Curious if you could talk a bit about stock compensation.
I know it's not included in the non-GAAP.
That's right.
as part of your framework and also with unit economics, as you get into gross margin and sales and marketing, stock compensation does play a big role in that. How do you.
Sure
kind of think about that as the framework as you look at.
Yeah
your compass and also the unit economics?
Yeah, of course.
Yeah, I'm glad you've asked it, Jeff. We have looked at our stock-based comp and talked to a number of you over the last few years, certainly we talked about bringing it down, and we have. We brought it down into a level. Over the years, it was significantly higher, and we brought it down into a single-digit range. It's something that we look at. We have to be competitive in the world and the industry and the space that we're in, we're trying to make sure that we're being judicious on that and very intentional. Our comp committee is very attentive to this matter. Like I said, we have some board members here today that are very attentive to that matter. We're trying to both make sure that we reward world-class and at the same time, and be competitive in our space.
You're seeing our stock comp scale over time, as you would expect it would. When I benchmark and see all these different companies and how as they get more and more scale, it gradually brings their ratio, it kind of brings it down over time. I think over a longer period of time, that will be us. I'm not guiding that right now. Certainly, over the long period of time, I would expect that.
Okay. For one or two more questions here.
Derrick Wood at Cowen. I had a question on the cost to serve. A couple of quarters ago, you announced a deal with AWS to leverage their infrastructure, and I imagine maybe that can help you slow down some of your own data center investments. Is that something that you see over the longer term that can help cost to serve, that can help on the gross margin? Then maybe, can you just give us a framework for what you're thinking around new data center investments versus AWS in the next couple of years?
Sure. Let me, again, we're tag-teaming. What I would say on the AWS relationship is we love that relationship in the sense that it is very strategic. They use us extensively, and we've used AWS for years. It's just that relationship has just continued to blossom. We use it for everybody's benefit, Heroku. We use it for RelateIQ, I think Radian6, but I think there's a few different things that we use it. We've also talked about the notion that how this can help us as we expand our footprint, even internationally in certain areas, we can elect to do that. That can be powerful, by the way, Derrick, because you can get to a point where you have full scale in a country to use a full footprint or can use a partial footprint, and that doesn't escape us, that potential.
That relationship with AWS was really helpful. I think when you get broader about service delivery, it doesn't escape us the optionality of the power of having the ability to do that with AWS and the ability to do that with other people and what that could potentially bring us from a cost to serve standpoint. I think that is something that's exciting to us. David, you go.
Yeah.
Sorry.
We talked earlier about M&A, and in some sense, this is very similar. Our DNA still is go fast, number one, and deliver customer success, number two. Having these new capabilities, whether it's AWS or Azure or some of these Google or even Oracle working on, are really exciting to us because we're like, "Wow, this is an opportunity for us potentially to go fast." I don't know that they're mutually exclusive. It's really about speeding customer success, and it's early days, and we'll see where that goes.
Yeah.
That's how I would think about it.
Perfect.
Hi, Karl Keirstead at Deutsche Bank. If we could just go back to the last earnings call and the DR performance in the July quarter and the 3Q DR guide.
I think that created a healthy debate about.
Sure
what the DR growth is likely to look like for the next several quarters.
Yeah.
With the passage of another month since the earnings call, is there any more clarity you can give us on that, maybe the extent to which the kind of invoicing seasonality that David talked about affected your 3Q guide? As you look into fiscal 2018, the extent to which some of this unbilled backlog might convert to DR and get us feeling comfortable about the fiscal 2018 DR growth?
Sure. Thank you, Karl. I'll talk about some of the comments, and David, certainly the compounding can really give you some deep expertise on that. I think at the end of the day, when you look at Q2, just as a reminder to everybody, yeah, we performed 27% growth of the DR as reported in constant currency, right in the middle of our guide of 26%-28%. One of the things that we talked about with that is that we were affected by foreign exchange, which we reported and showed and disclosed. We're also affected by compounding, which David has done, I thought, just an impressive job of just laying out the patterns. It's hard to see the pattern, and you can bring real clarity to the pattern. I think, David, that was very well done.
You can see that pattern is certainly something that is showing up, and we try to communicate that to you because we think it's important when you're interpreting results. I think you could also see that result when you look at the DR. It's hard to talk about DR without talking about the total picture of DR, which grew 28% in aggregate to an even bigger number. I always think I look at that number, back to Sarah's question, and compare that to the revenue that we posted at 26% constant currency and say, "That's what it is." Yet, also in Q2, we talked about a bit of softness at the very end of the quarter, primarily in a U.S. operation, and Keith was going to be here and happy to. We could go over that again, but that was Q2.
We still, with all that there, 27% constant currency, 28% for the big number. That's what the number was. When we look going forward in the guide, of course, we had to take a look at foreign exchange and take a read on that, we had to take a read on the compounding factor that David had talked about. At the same time, we raised very slightly, again, the revenue for the year, 3rd time of the year, we raised the revenue for the number. I've just told you already, obviously, we don't update in quarter, but I did tell you that we will be a $10 billion company next year, without getting specifically into the guidance. That gives you a little bit of a sense of what we're thinking about for the future, and stay tuned for the guidance that will come.
Karl, I appreciate you asking because that is a topic that was of interest, and I'm trying to give the context we have. David, I welcome, the compounding thing, I think you laid out very nicely.
I think that's fine. We don't, obviously, give inter-quarter updates on deferred revenue, that's much I can only tell you.
Great. All right. Before we close, can I please get Andrew D'Zilva, Rose Salzwedel, and Anna Saliba to come up in front and join John Cummings up in front?
Yeah.
Can you come up here, Anna?
Oh. They're here.
I want to recognize, this is our investor relations team, and we are incredibly fortunate to have this group led by John. They've created this amazing day. They created this amazing content. Mostly, what they are is amazing spokespeople for Salesforce to tell our story to all of you and to relay all of your feedback back to us. I want to recognize all of them for putting on such an amazing day today.
Let me just add, being humble, IR reports to David, I want to thank David as part of that group. David, let's give it up for you as well here.
Great.
Well done.
Great job.
Okay. John, thanks.
Thanks for those thoughts, David. Thank you very much. Well, that wraps up our business overview section this morning. Just a couple of thoughts here. Number one, the presentation that you saw here from Mark and from David will be up on our investor relations website here this afternoon. We're going to break now for lunch. Lunch is up on our fourth floor on the terrace. We'll come back here at 1:00 for a Q&A session with Alex Dayon, who's our President and Chief Product Officer, and you can dig a little deeper into some of the initiatives that David and Mark had touched on. That breaks for now. We'll see you back here at 1:00.
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This is that ice cold. Michelle Pfeiffer, that white gold. This one for them hood girls. Them good girls, fake nasties. Stylin', wilin', livin' it up in the city. Got Gucci on with Saint Laurent. Gotta kiss myself, I'm so pretty. I'm too hot. Hot damn. Call the police and the fireman. I'm too hot. Hot damn. Make a dragon wanna retire, man. I'm too hot. Hot damn. Say my name, you know who I am. I'm too hot. Hot damn. My band 'bout that money. Break it down. Girls hit your hallelujah. Whoo. Girls hit your hallelujah. Whoo. Girls hit your hallelujah. Whoo. 'Cause Uptown Funk gon' give it to you. Whoo. 'Cause Uptown Funk gon' give it to you. 'Cause Uptown Funk gon' give it to you. Saturday night and we in the spot. Don't believe me, just watch. Come on Don't believe me, just watch.
Don't believe me, just watch. Don't believe me, just watch. Don't believe me, just watch. Hey, hey, oh! Wait a minute. Fill my cup, put some liquor in it. Take a sip, sign a check. Julio, get the stretch. Ride to Harlem, Hollywood, Jackson, Mississippi. If we show up, we gon' show out. Smoother than a fresh jar of Skippy. I'm too hot. Call the police and the fireman. I'm too hot. Make a dragon wanna retire, man. I'm too hot. Bitch, say my name, you know who I am. I'm too hot. My band 'bout that money. Break it down. Girls hit your hallelujah. Girls hit your hallelujah. Girls hit your hallelujah. 'Cause Uptown Funk gon' give it to you. 'Cause Uptown Funk gon' give it to you. 'Cause Uptown Funk gon' give it to you. Saturday night and we in the spot.
Don't believe me, just watch, come on. Don't believe me, just watch. Don't believe me, just watch. Don't believe me, just watch. Don't believe me, just watch. Don't believe me, just watch. Hey, hey, oh! Before we leave, let me sing y'all a little something. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. I said Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Come on. Dance, jump on it. If you sexy then flaunt it. If you freaky then flaunt it. Don't brag about it, come show me. Come on. Dance, jump on it. If you sexy then flaunt it. Well, it's Saturday night and we in the spot. Don't believe me, just watch, come on. Don't believe me, just watch. Don't believe me, just watch. Don't believe me, just watch.
Don't believe me, just watch. Don't believe me, just watch. Hey, hey, oh! Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Come on. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Uptown Funk you up. Uptown. Run and tell all of the angels. This could take all night. Pick up the telephone, help me get things right. Hook me up with new revolution. This one is a lie. Sit around laughing and watch her laugh or die. Now, I'm looking to the sky to save me. Looking for a sign of life. Looking for something to help me burn and thrive. Now, I'm looking for complication. Looking to the tired eyes.
Make my way back home when I learn to fly high. Think about enough impatience. It can wait one night. Give it all away if you give me one last try. This house will be everlasting if you just save my life. Run and tell the angels that everything's all right. I'm looking to the sky to save me. Looking for a sign of life. Looking for something to help me burn and thrive. Now, I'm looking for complication. Looking to the tired eyes. Make my way back home when I learn to fly high. Make my way back home when I learn to fly. Fly along with me. I can't quite make it alone. Try to make this life my own. Fly along with me. I can't quite make it alone. Try to make this life my own. Well, I'm looking to the sky to save me.
Looking for a sign of life. Looking for something to help me burn and thrive. Now, I'm looking for complication. Looking
Looking for a town to ride. Looking for something to help me burn out bright. I'm looking for a conversation. Looking to retire to try. Make my way back home when the birds fly. Make my way back home when the birds fly. Make my way back home when the birds do.
Color me your color, baby. Color me your car. Color me your color, darling. I know who you are. Come up off your color chart. I know where you're coming from. Call me . My love. Call me, call me any, anytime. Call me . My love, you can call me any day or night. Call me. Cover me with kisses, baby. Cover me with love. Roll me in designer sheets, I'll never get enough. Emotions come, I don't know why. 'Cause they're all so very fine. Call me . My love, call me, call me any, anytime. Call me . My love, when you're ready we can share the wine. Call me. Ooh, ooh, ooh, [Foreign language] je vous aime, je vous adore. Ooh, ooh, ooh, [Foreign language] mon coeur est à vous. Call me. Ooh, ooh, ooh, [Foreign language] aime-moi, mon chéri, mon aime-moi. Anytime, anyplace, anywhere.
Anytime, anyplace, anywhere, anytime, anywhere. Call me. My love, call me, call me any, anytime. Call me. My love, call me, call me, call me some other time. Call me. My love, call me, call me anytime you please. Call me. Call me for your lover, your lover's on the phone. Call me. My love, call me, call me any, anytime. Call me. Oh, call me. Ooh. Call me.
I don't want to wonder if this is a blunder. I don't want to worry whether we're going to stay together 'til we die. I don't want to jump in unless I feel something. All the dishes rattle in the cupboard when the elephants arrive. I want to love you madly. I want to love you now. I want to love you. I want to love you madly. I want to love you, love you. Love you madly. I don't want to fake it. I just want to make it. The ornaments look pretty, they're pulling down the branches of the tree. I don't want to think about it. I don't want to talk about it. When I kiss your lips, I want to sink down to the bottom of the sea. I want to love you madly. I want to love you now. I want to love you.
I want to love you madly. I want to love you, love you. Love you madly. I don't want to hold back. I don't want to slip down. I don't want to think back to the one thing that I know I should have done. I don't want to doubt you, know everything about you. I don't want to sit across the table from you wishing I could run. I want to love you madly. I want to love you now. I want to love you madly. Away. I want to love you, love you, love you madly. You sit there in your heartache. Waiting on some beautiful boy to save you from your old ways. You play forgiveness. Watch it now, here he comes. He doesn't look a thing like Jesus, he talks like a gentleman. Like you imagined when you were young. Can we climb this mountain?
I don't know. Higher now than ever before. I know we can make it if we take it slow. That's taking it easy now. Watch it go. We're burning down the highway. Driving on the back of a hurricane that started turning when you were young. When you were young. Sometimes you close your eyes and see the place where you used to live. When you were young. They say the devil's water, it ain't so sweet. You don't have to drink right now. You can dip your feet, every once in a little while. You sit there in your heartache. Waiting on some beautiful boy to save you from your old ways. You play forgiveness. Watch it now, here he comes. He doesn't look a thing like Jesus, he talks like a gentleman. Like you imagined when you were young. What does it say now?
What did it say then? When you were young. I said he doesn't look a thing like Jesus. He doesn't look a thing like Jesus. More than you'll ever know.
Say your prayers little one. Don't forget, my son, to include everyone. I tuck you in, warm within, keep you free from sin 'til the sandman he comes. Sleep with one eye open. Gripping your pillow tight. Exit light. Enter night. Take my hand. We're off to never-never land. Something's wrong. Shut the light. Heavy thoughts tonight. They aren't of the white. Dreams of war, dreams of liars, dreams of dragons and fire and of things that will bite. Yeah. Sleep with one eye open. Gripping your pillow tight. Exit light. Enter night. Take my hand. We're off to never-never land. Yeah.
Now I lay me down to sleep.
Now I lay me down to sleep.
Praise the Lord, my soul to keep.
Praise the Lord, my soul to keep.
If I die before I wake.
If I die before I wake.
Praise the Lord, my soul to keep.
Praise the Lord, my soul to keep.
Hush little baby, don't say a word. Never mind that noise you heard. It's just the beasts under your bed. In your closet, in your head. Exit light. Enter night. Grave upscale. Exit light. Enter night. Take my hand. We're off to never-never land. Oh. Yeah. Yo. Take my hand. We're off to never-never land. Take my hand. We're off to never-never land. For once in my life, I have someone who needs me. Someone I've needed so long. For once, unafraid, I can go where life leads me. Somehow, I know I'll be strong. For once, I can touch what my heart used to dream of long before I knew. Oh, someone warm like you, would make my dreams come true. Yeah. For once in my life, I won't let sorrow hurt me. Not like it's hurt me before.
For once, I have something I know won't desert me. I'm not alone anymore. For once, I can say, "This is mine, you can't take it." As long as I know I have love, I can make it. For once in my life, I have someone who needs me. Yeah. Oh, I feel love.
For once in my life, I won't let sorrow hurt me like it's hurt me before. For once I have something I know won't desert me. I'm not alone anymore. For once I can say, "This is mine. You can't take it." Long have I known there's love I can make. For once in my life, I have someone who needs me. For once in my life, there's somebody I believe sees what's been on my mind. Once I had a love and it was a gas. Soon turned out had a heart of glass. Seems like the real thing, only to find. Mucho mistrust, love's gone behind. Once I had a love and it was divine. Soon found out I was losing my mind. Seems like the real thing, only to find. Mucho mistrust, love's gone behind. Still this dream that I find myself in.
I realize love is so confusing. There's no easy solution. If I cannot live without you, it just ain't no good. You teasing like you do. Once I had a love and it was a gas. Soon turned out she was barely there. Seems like the real thing, only to find. Mucho mistrust, love's gone behind. Love's gone sour, gone down the low road. Leaving you and I can hardly hide. I'm the one who's losing sleep because. Mucho mistrust, we should have made it. Yeah. I hide, oh, love's too sweet to decline. Ooh, oh. Ooh, oh. Ooh, oh. Ooh, oh. Once I had a love and it was a gas. Soon turned out she was barely there. Seems like the real thing, only to find. Mucho mistrust, love's gone behind. Ooh, oh. Ooh, oh. Ooh, oh. Ooh, oh.
Baby, here I am, I'm the man on the scene. I can give you what you want, you got to come on with me. I sure got some good old loving, I got some soul. When I get through throwing it on you got to come back for more.
I don't beat about the words, I'm a man of great experience. I know you got another man, I can love you better than him. Take my hand, don't be afraid, I'm gonna prove every word I say. I'm master pies and love so deep, you can place your ass in my keep. Boys are coming along a dime by the dozen, I ain't nothing but gently loving. Pretty little thing, let me light your candle 'cause, mama, I'm so hard to handle now, just around. Yeah. Hard to handle now. Oh, baby. Baby, here I am, a man on your scene. I can give you what you want, you got to come home with me. I got some good old loving, I got some more in store. When I get through throwing it on you gotta come running back for more.
Boys are coming along a dime by the dozen, and I ain't nothing but just so lucky. Pretty little thing, let me light your candle 'cause, mama, I'm so hard to handle now, just around. Hard. Hard to handle now. Oh, yeah. Move it. Boys are coming along a dime by the dozen, and I ain't nothing but gently loving. Pretty little thing, let me light your candle 'cause, mama, I'm so hard to handle now, just around. Yeah. So hard to handle now. Oh, yeah. Baby. Good loving. Baby. Baby. Oh, good loving. Need good loving. Yeah. Just around. Oh, yeah. So hard to handle now. Yeah.
Run and tell all of the angels. This could take all night. Think of you in devil's hell, begin to think right. Hook me up a new revolution. This one ain't alive. Sat around laughing to watch your life unwind. I'm looking to the sky, baby. Looking for a sign of life. Looking for something to help me burn out bright. I'm looking for a complication. Looking to the tired eyes. Make my way back home when I learn to fly high. Think I'm dying of impatience. It couldn't wait one night. Give it all away if you give me one last try. This half will be ever so slight if you just save my life. Run and tell the angels that everything's all right. I'm looking to the sky, baby. Looking for a sign of life. Looking for something to help me burn out bright.
I'm looking for a complication. Looking to the tired eyes. Make my way back home when I learn to fly high. Make my way back home when I learn to. Fly with me, I can't quite make it alone. Try to make this life my own. Fly with me, I can't quite make it alone. Try to make this life my own. I'm looking to the sky, baby. Looking for a sign of life. Looking for something to help me burn out bright. I'm looking for a complication. Looking to the tired eyes. Make my way back home when I learn to. Looking to the sky, baby. Looking for a sign of life. Looking for something to help me burn out bright. I'm looking for a complication. Looking to the tired eyes. Make my way back home when I learn to fly high.
Make my way back home when I learn to fly. Make my way back home when I learn to
Baby, everything is all right. Upside, out of sight. Baby, everything is all right. Upside, out of sight. A poor man's son from across the railroad tracks. Only shirt I own is hanging on my back. I'm the envy of every single guy. I'm the apple of this fine girl's eye. We walk stepping on the town for a while. Money's short and my shoes are on the style. It's all right, my clothes are new. Out of sight because my heart is true. She says, "Baby, everything is all right. Upside, way out of sight. Baby, everything is all right. Upside, way out of sight." "You're a beauty, you're a pearl of a girl," I guess that's what you might say. I guess old folks brought her up that way. On the right side of the tracks, she was born that way.
A great big old heart was what they gave. She says, "No one is better than I." I know I'm just an average guy. No football hero or a movie star type. Got hips that pop and twist to beat, I'm a poor man's son. Can't give her the things that money can buy. I'll never, never make my baby cry. It's all right, what I can't do. Out of sight because my heart is true. She says, "Baby, everything is all right. Upside, way out of sight. Baby, everything is all right. Upside, way out of sight. Baby, everything is all right. Upside. Oh, yeah. Baby, everything is all right. Upside, way out of sight. Baby, everything is all right. Upside, way For once in my life, I have someone who needs me. Someone I've needed so long.
For once, unafraid, I can go where life leads me. Somehow, I know I'll be strong. For once, I can touch what my heart used to dream of long before I knew. Someone more like you would make my dream come true. Yeah, yeah. For once in my life, I won't let sorrow hurt me, not like it's hurt me before. For once, I have something I know won't desert me. I'm not alone anymore. For once, I can see this is mine, you can't take it. Long as I know I have love, I can make it. For once in my life, I have someone who needs me. Yeah. I've been loving you. For once in my life, I won't let sorrow hurt me, not like it's hurt me before. For once, I have something I know won't desert me. I'm not alone anymore.
For once, I can see this is mine, you can't take it. Long as I know I have love, I can make it. For once in my life, I have someone who needs me. For once in my life. Yeah, somebody that needs me. Who needs me.
I want a girl with a mind like a diamond. I want a girl who knows what's best. I want a girl with shoes that cut and the eyes that burn like cigarettes. I want a girl with the right location who's fast and thorough. I want a girl with a short skirt and a long jacket. I want a girl who gets up early.
Gets up early.
I want a girl who stays up late.
Stays up late.
I want a girl with uninterrupted prosperity.
Uninterrupted.
Who uses a machete to cut through red tape. With fingernails that shine like justice.
Oh.
A voice that is hard like cannon claps.
Oh.
She is fast, thorough, and sharp as a tack.
Oh.
She is touring the facility and picking up on Slack. I want a girl with a short skirt and a long, long jacket. I want a girl with a smooth liquidation.
Smooth liquidation.
I want a girl with good silver thumbs.
Good silver thumbs.
At Citib ank we will meet accidentally.
Meet accidentally.
We'll start to talk when she borrows my pen. She wants a car with a cup holder armrest.
Oh.
She wants a car that will get her there.
Oh.
She's changing her name from Kitty to Karen. She's trading her MG for a white Chrysler LeBaron. I want a girl with a short skirt and a long jacket. On the other side of the street, I knew. Little girl that looked like you. I guess that's déjà vu. I thought that can't be true, 'cause you moved to West L.A. or New York or Santa Fe, or wherever to get away from me. Oh, but that one night was more than just right. I didn't need you 'cause I was all through. Oh, I was overwhelmed and frankly scared as hell because I really fell for you. Oh, I swear to you, I'll be there for you. This is not a drive-by. Just a shy guy looking for a suicide. Everything a home guy loves. When you move me, everything you prove me.
They don't like it, soothe me. The way you do me. Oh, I swear to you, I'll be there for you. This is not a drive-by. On the upside to a downward spiral. My love for you went viral. I loved you every mile you drove away. Now here you are again, let's skip to how you've been and get down to some more than friends and that. Oh, but that one night is still the highlight. I didn't need you until I came to. I was overwhelmed, and frankly scared as hell because I really fell for you. Oh, I swear to you, I'll be there for you. This is not a drive-by. Just a shy guy looking for a suicide. Everything a home guy loves. When you move me, everything you prove me. They don't like it, soothe me.
The way you do me. Oh, I swear to you, I'll be there for you. This is not a drive-by. Please believe that when I leave, there's nothing up my sleeve but love for you. A little time to get my head together too. On the other side of the street, I knew. Little girl that looked like you. I guess that's déjà vu, I thought that can't be true, 'cause oh, I swear to you, I'll be there for you. This is not a drive-by. Just a shy guy looking for a suicide. Everything a home guy loves. When you move me, everything you prove me. They don't like it, soothe me. The way you do me. Oh, I swear to you, I'll be there for you. This is not a drive-by.
Can't stop, addicted to the shindig. Chop top, he says I'm gonna win big. Choose not the life of imitation. Just hip hop into the reservation. Defunk the pistol that you pay for. This funk a feeling that you stay for. In time I want to be your best friend. East side love is living on the west end. Knocked out boy you better come to. Don't die, you know the truth is some do. Go write your message on the pavement. Burns so bright, I wonder what the wave meant. White heat is screaming in the control. Complete emotion if you stumble. Go ask the dust for any answers. Come back strong with 50 belly dancers. The world I love, the tears I've dropped to be part of the wave can't stop. Ever wonder if it's all for you?
The world I love, the trains I hop to be part of the wave can't stop. Come and tell me when it's time too. Sweet talk is bleeding in the snow cone. Pop, she's leading me to ozone. Music's a great communication. Use two sticks to make it in the nature. Artist doing the penetration. The gender of a generation. Above the memory of a nation. Took your weight, the load of meditation. This check is gonna be a close one. Smoke rings, I know you're gonna blow one. All on a spaceship persevering. Use my hands for everything worth fearing. Can't stop the spirits when they need you. Mob cops will help you when they feed you. J-Pop, drop flyers in the tree tops. Put the code of meaning in the beat box.
The world I love, the tears I've dropped to be part of the wave can't stop. Ever wonder if it's all for you? The world I love, the trains I hop to be part of the wave can't stop. Come and tell me when it's time too. Wait a minute, I'm tapped out. Win or lose, just like you. Far more shocking than anything I ever knew. How about you? 10 more reasons why I need somebody new, just like you. Far more shocking than anything I ever knew. Right on cue. Can't stop, addicted to the shindig. Chop top, he says I'm gonna win big. Choose not the life of imitation. Just hip hop into the reservation. Defunk the pistol that you pay for. This funk a feeling that you stay for. In time I want to be your best friend.
East side love is living on the west end. Knocked out, boy you better come to. Don't die, you know the truth is some do. Go write your message on the pavement. Burns so bright, I wonder what the wave meant. Tick-tock, it goes and generate hub. Sweet talk, don't intimidate love. Can't stop the doc from engineering. Feel no need for any interfering. Your image in the dictionary. This life is more than ordinary. Can I get two, maybe even three of these? Coming from a space to teach you of the Pleiades. Can't stop the spirits when they need you. This life is more than just a read-through. Coming out of my cage and I've been doing just fine. Gotta be down because I want it all. It started out with a kiss. How did it end up like this?
It was only a kiss, it was only a kiss. Now I'm falling asleep and she's calling a cab. While he's having a smoke and she's taking a drag. Now they're going to bed and my stomach is sick. It's all in my head, she's touching his chest now. He takes off her dress now. Letting me go. I just can't look, it's killing me. Maybe I'm just sore. Jealousy, turning saints into the sea. Swimming through sick lullabies, choking on your alibis. It's just the price I pay. Destiny is calling me. Open up my eager eyes, looking for the bright side. I'm coming out of my cage and I've been doing just fine. Gotta be down because I want it all. It started out with a kiss. How did it end up like this?
It was only a kiss, it was only a kiss. Now I'm falling asleep and she's calling a cab. While he's having a smoke and she's taking a drag. Now they're going to bed and my stomach is sick. It's all in my head, but she's touching his chest now. He takes off her dress now. Letting me go.
It's killing me and taking control. Jealousy, turning saints into the sea. Swimming through sick lullabies, choking on your alibis. It's just the price I pay. Destiny is calling me. Open up my eager eyes. 'Cause I'm Mr. Brightside. I never, I never. I never, I never. Oh, yeah, baby. Like a fool I went and stayed too long. I'm wondering if your love's still wrong. Ooh, baby. Here I am, trying to live the rest of your life. Ooh, last time I went and said goodbye. Now I'm back and not ashamed to cry. Ooh, baby. Here I am, trying to live the rest of yours. Here I am, baby, whoa. Trying to give a little bit of hell, baby. Here I am, baby. I got to give a little bit of hell, baby. I just thought of a foolish thing. I'd better end this thing.
Yeah. This night, oh, baby. Seen a lot of things in this old world. I've never seen nothing, girl. Ooh, baby, here I am, trying to live the rest of yours. Of yours. Ooh wee, baby, since I saw you last time. That's why I know you must really need me this time. Ooh, baby, here I am, trying to live the rest of yours. Here I am, baby, whoa. Trying to give a little bit of hell, baby. Here I am, baby. I got to give a little bit of hell, baby, yeah. I just thought of a foolish thing. I better end this thing. I can feel it growing thin. Here I am, with just a little bit of hell to pay. I. Here I am, baby, whoa. Here I am, baby. Here I am, baby. Oh, baby. Here I am, baby.
People keep on learning. Soldiers keep on falling. Worlds keep on turning. Loving all beneath the ones. Powers keep on lying. While your people keep on dying. Worlds keep on turning. Loving all beneath the ones. Johnny's running and he cried again. It's my last time on earth, I'm heading home again. Sorry that I had no more left to give. I keep on trying to give all I need to my friends. Lovers keep on loving. I'm a believer, keep on believing. Weavers, just stop weaving.
Don't play fair, you make me cry. The last time I left, I got my heart burnt up good. I know better, baby, know much better than to look. Gonna keep on trying until I reach the higher ground. Until I reach the higher ground. No, no. No one's gonna bring me down. Oh, no. Until I reach the higher ground. You left your body down around. I should've known better than to come around.
All right. If you all would like to take your seats, we'll get started in here in just a minute.
Oh, yeah. Oh, yeah, yeah, yeah, ooh. Oh, yeah. Oh, yeah, yeah, yeah, ooh. Never ever did I think that love were miracles. Never want to force my heart on nobody. Swimming in your water was a spirit drug. I'm gonna get to the top, lose sight of the sky. Yeah, yeah. You take me to paradise. Yeah, you take me to paradise and it feels so good. Yeah, yeah. You make me feel like I've been locked out of heaven. Oh, too long. Oh, too long. Yeah, you make me feel like I've been locked out of heaven. Oh, too long. Oh, too long. Oh, yeah, yeah, yeah, ooh. Oh, yeah. Oh, yeah, yeah, yeah, ooh. You bring me to my feet, you make me say the vibe.
You can make a sinner change his ways. Open up your gates 'cause I can't wait to see the light. Love everywhere, I won't let go. Yeah, yeah. Yeah, yeah. You take me to paradise. Yeah, you take me to paradise and it feels so good. Yeah, yeah. You make me feel like I've been locked out of heaven. Oh, too long. Oh, too long. Yeah, you make me feel like I've been locked out of heaven. Oh, too long. Oh, too long. Oh, yeah, yeah, yeah, ooh.
All right
-to my death.
We're going to go ahead and get started with the third half of our show. Just kidding. I know there's some math people here. I would like to welcome Alex Dayon, who's President and Chief Product Officer at Salesforce, along with the members of his team. I'll let Alex and his team introduce themselves. This is an opportunity for you all to ask questions, dive deep into product strategy, and get to know both the executive team and the management bench that we have across the product portfolio, and go deeper into some of the products you care most about. With that, I'll let the rest of the team join you, and Alex, take it away.
Okay. Well, thank you. Thank you, John, for the short introduction. I'll let everybody join on stage. I think the best is I'm going to quickly introduce myself. I'm Alex Dayon. I run the product organization and pretty much all the different clouds. As you know, our product team is organized by what we call clouds, and each cloud corresponds to a very specific business process or functions or industry. Our objective today is to be able to answer any questions you may have related to our product offering, our product strategy, and the amount of news we're bringing to the market. Dreamforce is always a milestone in the year for us, where we announce a lot of innovation, a lot of acquisitions. We're here to answer all those questions.
Before we go into the interaction, you also notice that we have an amazing bench of leaders at Salesforce, it's true across the entire organization, but it's partly true in the product organization. I'm sure for those of you who have been covering the tech industry for quite a while, you'll see on this stage a lot of familiar faces. We pay a lot of attention to scale the company as fast as its revenue when it comes to management and leadership. With no further ado, I'd love to let all those leaders to introduce themselves. Ladies first. Stephanie, why don't you start?
Hi, my name is Stephanie Buscemi. I head our product marketing organization. I've been with Salesforce just about three years now at this point.
Bob Stutz, CEO of Marketing Cloud, as well as Chief Analytics Officer for Salesforce.
Mike Rosenbaum, I run Sales Cloud and Service Cloud and been in Salesforce for 11 years.
Adam Seligman, platform developer, admin and Trailhead, and I've been at Salesforce for just over five years.
John Wookey, Salesforce Industries, Vertical Products, also five years at Salesforce.
I think now we can open. You had a pretty busy morning, I think. Mark went through all the product strategy at the very high level. We can open to questions right away. We have Mike in the room, so feel free to. There we go. All right.
Hey, thank you. Tom Roderick with Stifel. Question on the Marketing Cloud side, might be a little bit early to answer this since it was just announced yesterday, but the acquisition of Krux and the idea of a data management platform. Can you talk more about what that brings to you strategically, how you think about integrating it, and what you've already done from a partner integration standpoint with them? Thank you.
Yeah. Krux today is already a partner. We have numerous joint customers with Krux today, the integration will be really fast. What it brings to Marketing Cloud is it really allows us to identify new segments for customers to market to in a quick, fast way, and high scale.
Hi, it's John DiFucci from Jefferies. Great to see the product people up here, Alex, because there's a lot of talk in this room about what Salesforce might do, from a strategic level in acquisitions. We all know that you or the company bid on LinkedIn. There's a lot of talk about Twitter. I think some people understand a little bit better what LinkedIn would've done for you. I'm not saying you're going to buy Twitter, but what would it do for you? Because I keep getting asked that question as a sell-side analyst, and I just don't have a good answer. I'm just curious from your perspective. I'm not saying you're going to buy it. I'm not asking that question. What would something like Twitter with access to that data do for you?
Okay. It's a question around M&A strategy. I take it broadly as what's your M&A strategy, because indeed, there is so much noise. I can comment on how we look at acquisitions, what type of acquisitions we've been looking at, and how we operate those acquisitions. First and foremost, if you step back, what is our strategy as a company? We define ourselves as a customer success platform. Our job is to help our customers to connect with their customers in a whole new way. The world is changing. Every business is being disrupted. Every business. Banks, newspapers, cars. You can walk the campground. You'll see a showcase. Our customers have booths where they show what they're doing in their digital transformation. You can see customers like T-Mobile, General Motors, Eli Lilly, Farmers Insurance, ALDO Shoes.
All those customers are getting completely disrupted in this new digital world. It's not just for marketing, for sales, for service, it's across the board. The way you operate in a new world is very different. Our job has been to be basically the technology engine behind those digital transformations. That's our core mission. We're not here to build an ERP or to do HR system. We believe that this is the fastest-growing segment in the whole industry. There is billions of dollars being spent by every CEO to lead their digital transformation, that's really the core of Dreamforce. People are coming to Dreamforce not to talk about HTML, SQL, Hadoop, big data. You don't hear those words here. You only hear stories about customer success, about transformation, and that's what we do. That's what we do.
We abstract our customers from the technology to give them the tools to lead their transformation, to innovate quickly. That's the big vision. Now, how does it translate to products? A big question. How do you translate that to products? Well, we believe that the segment we're in is the CRM. It's kind of a new generation of CRM, so we're careful using the word CRM. But typically, in terms of spending, we play in the CRM category. That's where the money is flowing. And the CRM historically has been divided by subsegments, which corresponds to the way companies are organized around their customers. You have advertisement people, you have marketing people, you have sales people, you have support people, you have product people. So all our clouds kind of map those buyers, those functional buyers who are coming to Salesforce to transform themselves.
Even though all our products are connected together, at the end of the day, we stitch them together. So when we look at acquisitions, we really do two things. There's really two types of acquisitions we're doing. The first one is we're trying to fill segments in the CRM space we don't play, and we hear our customers asking us to do it. Marketing Cloud, Commerce Cloud, Krux, SteelBrick for CPQ. These are obvious extensions of our addressable market. We enter that segment because we know these are products that extend our reach in our core sweet spot. We're not going to brand new segments we don't know how to write or sell. And when we buy those assets, we pick the best.
If you look at Marketing Cloud, if you look at Commerce Cloud, if you look at Krux, each of those companies are leaders in some form of analyst segment. Marketing Cloud in the Magic Quadrant. Commerce Cloud is the leading cloud e-commerce in the Gartner Magic Quadrant. Krux is a leader in the Forrester Wave in terms of DMP. So we really go after the leading technology, and it's okay to pay a premium because you want the best team in industry, and you want the best technology. And we really spend a lot of time making sure we get the best asset and the best competitive edge out of those acquisitions. So that's one big part of acquisition, which bring revenue, expand our TAM. There's another set of acquisitions we're doing on a regular basis, probably way more in numbers, which are technology acquisitions.
The world is changing faster than most company can innovate. So you always need a good balance between the build and the buy. We build in terms of technology internally, but when it comes to AI, for example, artificial intelligence, and Einstein, we did a mix of building internally the core infrastructure with a team that was dedicated under John Ball, and then we bought the best team we could find. When it comes to discovery, we bought BeyondCore. When it comes to sales AI, we bought Implisit. So we went to buy those little teams that were made of the best data scientists in the industry that were not really a revenue acquisition. They was a pure talent, technology acquisition that we could integrate into our core.
That's really the way we're looking at acquisition, which is help our customer accelerate their digital transformation, and really have two level of acquisition. The big one with revenue and TAM extensions, which obviously require bigger consensus within Salesforce. The smaller one, which are usually the decision of the people on stage. They make those decisions. We don't have to get to Marc's approval to buy a small talents around AI. We just want to go fast and let the team execute. That's really the way we're looking at M&A. If you look at our track record, we're not that crazy. I know people, when they read those articles in the press, we look like crazy people buying anything we see in the corner of the street.
If you pay attention, for those two categories, we always buy the best technology we can find, and we put a lot of thinking behind that. That's my answer.
Given your role,
As shareholder, you would want us to be deeply involved. As shareholders of Salesforce, we have obviously a CEO with a very dominant personality, but we really work deeply together. We go deep. We go deep, and we look at every aspect of everything, and we challenge ourselves very hard because indeed, all the acquisition we've made so far, the price are expensive. If you want the premium assets in the market, the price are expensive, but that's the nature of the technology market. Of course, you need to challenge yourself internally. Clearly, Marc is involved, I am involved, Parker is involved. We really look at every single aspect, and teach ourselves both sides of the equation.
There's a lot of internal discussions around those acquisition. We have a process internally, which is very formal when it goes to the board. We have an M&A committee. We have tons of documentation internally to make sure those acquisition are done to the interest of our customers first, but also our shareholders.
Thanks. Steve Koenig with Wedbush. Maybe this one's for maybe Bob or John, or whoever wants to comment. First part of the question, maybe an update on where do you stand relative to selling to B2C companies? Where is that in your mix, and what are your strategies for driving further into the B2C space? Beyond that, maybe just an update, perhaps from John, on where you are with your industry strategies and where you're headed with that, and current state of the nation on that.
You want to start with industry, I take B2C after that?
Sure. I think we sort of have a couple key parts of our industry strategy. The first is, I think, pretty fundamental, which is, we started as a company that was incredibly successful with what you'd sort of think of as a horizontal focus. The fact is, we've kind of been successful in almost every industry from the very beginning, because frankly, whether you're a hospital or a bank or a retailer, you actually found our technology was pretty unique in the marketplace. It was cloud-based, it was a single version of the product, continual innovation, great extensibility through this metadata architecture in the platform that we have. Customers kind of discovered a lot of the value in it for specific industry use cases a while ago. Over the last few years, we really started seeing that.
We started bringing a lot of their best practices and best use cases, we've actually helped amplify the success that they've had and make it more broadly knowledgeable to the marketplace as a whole. We brought in a lot of industry talent, people who grew up in the communications industry, in the retail industry, in the banking industry, and they've basically helped us better articulate the message of the marketplace, something we call speak the language of our customers. Our job is to help customers basically make their customers more successful. For us to do that well, we have to understand that from an industry context. We've really increased our investment in that over the last several years.
The other thing we've done is we've actually found it in certain use cases, it was incredibly helpful for us to actually extend our core products to address industry specific use cases. It started a few years ago with the government cloud, where we basically made our products FedRAMP certified so we could sell into the federal marketplace. This last year, we introduced Health Cloud and Financial Services Cloud, which are still based on our core customer success platform. We're not building core banking systems or an EMR system. We found it was incredibly helpful for us to basically extend those products with healthcare and financial services specific use cases, because it allowed our customers to more quickly see the value. It allowed our salespeople to basically close deals more quickly.
It drove faster adoption and helped everybody really understand how we could solve those unique industry problems. I think we've had great success since we've started introducing those products this year.
The strategy is really to continue to round out those products. Initially, Financial Services Cloud was focused on the wealth market, we're rapidly expanding into retail and insurance and other use cases. Same on the Health Cloud side. It was provider-focused, we actually have a number of life sciences companies implemented, now we're actually looking at the payer space as well.
I can answer regarding the B2C question. Clearly today, if you're a B2C company, put yourself in the shoes of the buyer just for a minute. There's no better place than Salesforce today to do your digital transformation, and it's clearly something that we've been executing for the past six years step by step. It started with Service Cloud. Suddenly, Salesforce was going above and beyond just the Sales Force Automation. We could run big call centers at scale for large telcos or large financial institutions. We started to step into the B2C world with that first product. Since then, we have extended pretty much every year the portfolio of products. Now you have Service Cloud, you have Marketing Cloud, which is the largest digital marketing engine. No one else sends more personalized emails than us.
On Black Friday, I think, Bob, you send like 3 billion emails, personalized. Each of them is different. No one can do that at that scale and ensure that deliverability and track all those signals and all the feedback. With Commerce Cloud, it's another step to be completely relevant to our B2C customers. Quip is another step. We're clearly building gradually the best, the most complete CRM for any B2C brand in the world. You'll experience that firsthand. I really encourage you to walk the campground where you see our customers. We even have a store in the campground. You can buy T-shirts and ties. There is a Salesforce tie for sale by vineyard vines. We run their store. They're online. Everything runs on Salesforce. We have ALDO Shoes, who runs on Marketing Cloud. We have all the digital brands, like General Motors, run on Salesforce.
Also, one of the brands that really surprises me every year is the brands like adidas. You're probably familiar with adidas, the sports shoes. We run their call centers. Who would thought that there is 700 people in call centers to support basically the adidas customers? They run on Service Cloud. We run their online website. If you type on your phone adidas.com, you're on Salesforce. The whole digital experience is Salesforce. It's our Commerce Cloud. You can buy shoes, and they, in fact, sell more than $1 million worth of GMV through Salesforce on that online, and it's growing double digits. It's one of these amazing stories. We clearly can cover the complete life cycle from advertisement, marketing, commerce, and support for a B2C brand.
We feel we really have done an amazing execution in the past five years by expanding Salesforce from being really, indeed, when we started, really hardcore B2B opportunity management, sales guys selling over the phone, to a complete CRM that can service not only B2B customers, but B2C brands with the most relevant set portfolio of products. Anything you want to add?
No, I think that covers it. I think on the marketing side, we truly are the leader in B2C.
Hi. Ed Maguire from CLSA. This is a question for Stephanie. I'm over here. Hi. We haven't heard as much about the Analytics Cloud as we have some of the other clouds. Could you provide an update in terms of where the business is proceeding according to your plan, your expectations, some commentary on the changing competitive landscape with Microsoft launching Power BI and QuickSight in the market, and also down the road, to what extent Einstein may play a role in the evolution of the Analytics Cloud and how it relates to the other clouds?
Sure. We brought Wave, the Analytics Cloud, out about two years ago here at Dreamforce. When we first brought it out, we went with a platform-first orientation. We knew all along that we were going to develop our own CRM analytic applications. Who better than Salesforce to build the CRM analytic applications on top of it? We also wanted to make sure that we could build a robust partner ecosystem on top of it, as well as allow our customers to build any analytical application on top. We started with that platform, and then over the last two years, we've delivered for sales, for service, for marketing, and IT analytic applications, the Wave apps on top of that.
We've seen tremendous momentum in our sales organization and with our customers using those analytic apps because really what they were having is they have free operational reporting with Salesforce already, but they sometimes have the need to marry third-party data, and they can do that with Wave. They can marry their CRM data in Salesforce with that third-party data. They can do that in a self-service, easy way, and get up to speed fast. We're seeing huge momentum there, both departmentally. As the platform has matured, we're actually seeing a lot more pickup within IT organizations as well. It's working quite well in that it really sells two ways in our go-to market. One, we see that our queries are able to sell this, and it's sort of a seed and grow.
We also see that it's been attached in expansion into some of our larger accounts. Anything you want to add on Analytics Cloud?
I think we really are differentiated in the marketplace from our other competitors, and the fact that we are truly the only platform that can do true insight to action. Not only can you see your data on a mobile device, and we have the ability to build analytical applications that are mobile, but you can click on any piece of data and take an action directly from there. I think that's a huge differentiator for us in the marketplace. I don't know a single other platform where you can do that today. As far as Einstein is integrated into our Analytics Cloud today. If you get a chance, you should see some of the product that is GA today that you can actually see Einstein embedded in and working in Wave and in Sales Wave, as well as in Service Wave today.
Tomorrow I'm doing part of the keynote, and I'll show Einstein in Wave, where we can build. Wave is an amazing way to explore. Wave is really the navigation layer on top of your Salesforce data. That's really what drives our customer to the Wave platform because that's the way to really understand their Salesforce data and have an amazing experience in terms of navigation. You can go all the way down to the field in Salesforce and take actions because it's the same stack, it's the same login, it's the same identity. What we're doing with Einstein is we're now bringing predictive modeling into the Wave platform. Tomorrow, I have the pleasure to be on the keynote with Stephanie. Together, you're doing one demo, I'm doing another one.
I'll show Einstein into Wave, where we can basically help you find stuff that is modeled, so things you can't find on yourself in your data set. That's really the power of Einstein, is to be able to discover, to predict, to recommend, and maybe automate if the level of prediction is high enough to do to the next step. We will show that in action. It's an amazing asset to surface all those predictions in Waves. Also Wave, every year, I'm amazed by how much Wave is taking over the conference.
If you pay attention walking also the campground, the demos, everybody's telling a story for Wave because it's such, as I say, it's such an amazing layer on top of Salesforce to understand your data that most of the demos I was working this morning early, the campground, start with Wave because that's the best way to articulate what's really happening in the business process.
I think one of the things I know all of us hear the most, whether it's an executive briefing center or meeting with a customer, I've heard numerous people describe it as Wave is a carrot, not a stick. Whether we like it or not, that maybe historically to a salesperson, a consumer of CRM, it's mostly been transactional screens. Really the promise that Wave is a giveback is that we're now moving to more of a much more informational UI that's more engaging. It keeps sales, service, marketers in the applications longer. If you talk to any CIO, that's what they want to see in terms of adoption and usage.
Hi, Bhavan Suri from William Blair. Just a quick follow-up on the analytics space. As you embed that into each of these applications, you've had to rejigger pricing for Wave a couple of times. I'd love to understand how you're thinking about the pricing as it relates to bundling within that cloud application itself. Then just to follow up on Quip, how you plan to integrate that in the various clouds, pricing, and how do you plan to monetize it? I guess also importantly, what does that do to your relationships with Microsoft and Google? I'd love to get some product thoughts on that.
It's really a question around price. First, packaging and pricing. When we launched Wave, Stephanie was walking through the story of Wave, the two-year story of Wave. We started with Wave as a platform because you need to build a platform before getting the app. We launched Wave as a platform, and it was basically priced as a high-level platform. It was not really priced per user at that time. We knew we were starting from a very different point than traditionally where Salesforce is starting new products, which is per user, easy sell, add-on sell. With the Wave apps, Sales Wave, Service Wave, Marketing Wave, we have now a pricing per user, which is really an add-on pricing. We call that option, which basically enables every Salesforce customer to add to their deployment this option which just adds on top of their pricing.
I think this price for the top editions are about $75 add-on to what you're already spending with Salesforce. For us, it's basically an opportunity to expand the portfolio of product we're selling to each and every user sold on Salesforce. Your second question was about Quip. Quip is typically with acquisition of probably first and foremost, I hope you'll have the opportunity to meet Bret Taylor, or if you don't, try to locate him or go to one of his sessions. Because with Quip, we first and foremost bought the best talent pool you can ever imagine. Bret comes with this reputation and aura. He was the person who wrote Google Maps. He's been at Facebook. He's one of probably the most talented executive in the valley. He built a product called Quip, which we were working for a couple years with.
We've been very close to Quip. They had integrated in Salesforce. They were down the street on Market Street. As the product was maturing and we were seeing the traction with joint customers like Facebook who are using the 2 products together, we felt that clearly Quip could bring collaboration within Salesforce to the next level, especially around documents, productivity, like producing documents, producing spreadsheets. We felt that it would be an amazing combination to bring that to the market. The mobile experience is killer. I invite everybody to download it and test it for yourself on your phone. That was really about making sure we help our customers continue to be productive in context in Salesforce. Our strategy has always been to be open. We go where our customers want us to go.
When it comes to the relationship with Microsoft, we have a big investment, probably bigger than actually our investment in Quip, in just integrating into the Microsoft products. We have deep integration into all the Office assets. Excel. The number 1 integration that most customers are asking us is clearly Outlook and Exchange. Here we support pretty much every possible configuration of Outlook and Exchange. I can tell you there's a lot of them. It gives a little bit of headaches to Mike next to me. Our goal is to basically deliver success to our customers. Some customers want us to integrate to the Microsoft products. Others want more integrated collaboration, and we're very excited about this product. This is clearly a very disruptive technology. I think we've been using it for now quite a while internally at Salesforce.
Those guys have really nailed the usability, the mobile experience, and the integration with Salesforce is just mind-blowing. Salesforce Identity, you can put Salesforce data into your spreadsheets and document that are dynamic data, and there is a level of integration like we could not do with anyone else. We want to play in that field. We think there is value for us to have an offering, but on the other hand, it's not exclusive. I mean, this is really part of our DNA. I want to just to wrap my long answer on the fact that the way we define success at Salesforce is through usage. We don't want to own everything. We just want to make sure everything we introduce to the market is being used. Most of our Monday morning meeting, all of us here, we look at usage data on the service.
That's what matters to us. If we spend money on a product that is not used, there is a problem, and we feel that we need to service a lot of different requirements. That's why we're so open to other companies and try to share as much with other companies because we do believe it drives usage and value for customers.
Over here on your left.
You want to add?
Hi, it's Samad Samana from Stephens. It seems like Trailhead was something that was off in its own corner last year in Moscone West, and this year, just walking around, I see it everywhere. I was wondering if maybe you can give us an idea of what type of impact Trailhead has on the platform, and if you could give us an idea of what adoption levels look like or the monetization framework, and if it's a beginning of a foray into a commercial learning product.
It's a question about Trailhead. Abhey talked about it. It's been incredibly exciting. We launched it two years ago with one slide in the developer keynote. That was it, and it was like a little pod. Again, it comes down to usage. We just had a really latent need for customers to want to innovate on the platform and do more with the platform. We thought we would start with technical topics, like developer topics and programming on the platform. What we discovered very quickly was there was a lot of demand to really broaden beyond that, from developer to admin, from admin to analyst, to sales manager, sales rep, everything about Wave Analytics. Now we've got basically coverage of almost everything in the customer success platform.
We've even started to put content in, just for everyone's benefit, on the way we manage, the way we manage our employees and manage our teams. Instead of making that private secret Salesforce training, we just put that public to the world in Trailhead. Also, our diversity and inclusion content, that's the equality for all is a key corporate strategy. Again, our internal training on that, we put in Trailhead. We're on Twitter, and we're out talking to customers and in our success community, listening to the feedback and watching the adoption, and it just continues to amaze us all the adoption around the world. We've got five languages supported, all this different content. I'll answer the second part of your question, sort of the future and monetization. Just one other observation.
What's really amazing for us from a product management standpoint is it really closes the loop on our product back to usage. We have live telemetry from all of our service to understand how every single user, every single admin, and every single developer is using it. With Trailhead, we have the ability to go help them adopt more and learn more, and then we can watch and see if they use it in production. We use our own technology, our own CRM technology, our own process technology in Force.com, our own marketing automation and analytics technology, our own Heroku technology to run the Ruby on Rails front end that you see when you hit Trailhead on your mobile phone and our APIs. This is letting us close the loop and drive adoption of all of our different products, which is incredibly exciting.
It's taken off. As you've seen, it's taken off in a really big way, which is really great. We get a ton of feedback from the community, our product managers learn which features are getting used. To answer the second part of your question, I think the learning management space is a really interesting space, it strikes me from the outside as maybe a little bit of a backward-looking space. It's all about just delivery of content, sort of the Trailhead model is figure out how to make the content fun and engaging and social and gamified and kind of the Salesforce way, incredibly customer-centric. What we decided to do was start with our own employees.
We're using Trailhead, to train all of our own Salesforce reps in distribution and internal employees, train them on the Ohana way, train them on how we do sales, train them how we do customer engagement and customer success first. We're learning from that, and we'll sort of learn from that and decide how and when to turn it into a commercial product.
Just to add to that answer is, you see now Trailhead is becoming the brand. When we ask ourself a couple months ago, "What is our brand? How should we look like at Dreamforce?" The first thing that came to everybody's mind was Trailhead. Trailhead is about this big family, this big ecosystem, and this learning process and this openness. That's why now you see the whole conference is looking like a national park, which came from the Trailhead team, and that's pretty exciting, actually.
Hey, Raimo Lenschow from Barclays. Continuing on that thought, you talked about the digital transformation that's going on with your clients and how they have to think about the whole spectrum. What are you guys doing around bringing all those products together? At the moment, it feels a little bit like a silo, like Mike is already kind of bringing sales and services together. Bob is still running marketing. How does it have to change in the future to kind of be able to do the end-to-end from a product perspective?
Well, I'll probably let you answer on each side. I think there's really two. First and foremost, our strategy is to offer that integration to our customers. That's what they want us to do. That's the number 1 thing they want us to do. Very often, those acquisitions were actually asked by customers. They say, "Why don't you guys buy this company and integrate it? Because I have to do it on my own. I want you to do it." We hear that from the largest B2C brand of the world every day. That is also guiding our thinking, and indeed, when we acquire a business, my strategy at the product level is we have eight clouds and one platform that summarize it all. I want each cloud to be a leader.
If each cloud was an independent company, you probably saw that in Marc's presentation this morning, they would be leader in their category. They would be leaders. My job is to make it one cloud, to connect all those clouds together. When it's a product we built from the inside, it's pretty easy because we just build on our stack. The Wave was a product we built from the inside. It's really, really tightly integrated. The identity, the data are co-located. Huge value, day one. When you acquire a business, obviously, you are also acquiring, as part of the good things of you bringing in tons of customers, but you also bring their legacy. You need, obviously, to build that roadmap to integrate those business step by step without disrupting their execution.
I think we, so far, are doing a good job of integrating this business for our customers. The one that was probably the biggest integration was Marketing Cloud, where we deliver the identity data that you command, but every year, we work super closely with our customers to deliver on a new level of integration. Sales and Service are completely integrated. They are really deeply integrated because those two products are built on the stack. Communities is deeply integrated. Analytics is deeply integrated. It's really the integration work is mostly when we acquire an asset, and that's a 24 to 46-month roadmap. There is no secret behind that because you need to go step by step to evolve their stack. If you look at the rest of the industry, we feel very good about the level of integration we offer to our customers.
Do we feel we have done everything? No. That's clearly our core value proposition. That's also why we have a job, is to make sure we integrate those products. Commerce Cloud now is in the process of also doing more and more integration, even though they had some before the acquisition. All the integration for us are mostly through those acquisition. Everything we do internally starts from the core stack and the integration. Einstein, for example, started from the inside, and then we plugged these acquired businesses into that stack. Einstein is very integrated. It's one of the key value propositions. You want to comment on the Marketing Cloud?
On the Marketing Cloud, the integration is very deep today, and as an example, we passed 3 billion contacts a month between Sales Cloud and Marketing Cloud. The connectors that we've built between Sales and Service, everything's fully integrated, and if you have a chance to go to the Palace Hotel and see the marketing lodge over there, you'll see that everything is in Lightning. Full integration. We've come a long way in integrating Marketing Cloud. It looks and feels like every other Salesforce product now.
In the back left.
Hey, guys. Alex Zukin from Piper Jaffray. Mike, maybe for you on the topic of Service Cloud, and specifically service management. As you think about expanding the delivery around Service Cloud, particularly inwardly facing, I wanted to get your specific take on IT service management, HR, how that competitive environment's kind of evolving, and how you view your strategy in that vertical.
Yeah, thanks for the question. I was getting lonely. Here's how we think about it. Number one is I'd say that the customer-facing side of service is a huge market and a huge opportunity, and that's our primary focus. If you think about what Alex was saying, it's about making it very, very easy for companies to deliver best-in-class digital experiences to consumers and allow them to iterate quickly and keep pace with all of the change that we all know, that we all experience in our personal lives. When you think about, is it necessary for us to expand? Not really. Is there an opportunity for us to expand into inward-facing employee service with HR and IT? Absolutely, right?
What we see is a lot of companies who have seen the power of Salesforce and the Service Cloud say, "Why can't I just take all these benefits and apply them to employees? Why can't I get the same level of service that we're delivering to our customers and apply it to employees?" From that regard, I think that we see those deals quite a lot. Then it'll augment the sort of baseline Service Cloud business. To be perfectly clear, the baseline Service Cloud business is about reinventing how companies connect to customers and delivering a world-class digital experience. That's what's behind things like, there's another recent acquisition that we did is a company called HeyWire and making it possible to bring a text message or any, really, message channel directly into a service center and making that really just drop-dead easy.
Those kinds of things will be applicable to employees, too. That's how we see those markets.
Hi, thank you. Sarah Hindlian with Macquarie. I wanted to dig into Einstein a little bit with all of you, actually. Forgive me, it's been a while since I've been in school, but my understanding of machine learning and AI, which I acknowledge is pretty limited, is that you really do need a good data model, for intelligence, then of course, you need a data set for continuous training purposes. Then of course, the compute processing capability to do so. I'm wondering, maybe this is a little specific, but perhaps it's behind some of the M&A headlines we've been looking at recently, is really about getting a large and arguably live data set.
If I'm correct, or if I'm not, what I'd love to understand is when you're working with Einstein today, what data are you using for training the model? Perhaps even a bigger question, are there limitations in terms of what you can do with the data you have from your customers today under your contracts? Where do you see that unfolding in the future as you really seek to make your applications more intelligent, predictive, and capable of making recommendations?
Want to take a shot?
If you want your shot. Do you want to take a shot?
All right, let me take a shot. You can make everyone answer the question. It's a great question. This is how I think about it. CRM, what we do is provide a pattern for companies to follow in terms of how they can engage with customers, right? Database application, if you think about it on the sales side, that goes from leads to opportunities to account management, right? That pattern is a big opportunity for machine learning and data science. We have hundreds of thousands of customers putting data into that pattern that we can then take these techniques, apply it to, and make predictions about outcomes. Those patterns exist all over our CRM portfolio, whether it be marketing or sales or service. Should I predict whether the opportunity's going to close?
Can I predict how long it's going to take us to resolve this case? Can I predict who to route this case to? Can I predict which is the best email to send to a customer? All of those things are much more doable because we are specifically taking these techniques and applying them to those CRM use cases and those CRM patterns. It's actually an incredibly good opportunity to apply AI and machine learning, too. To the second part of your question, all of this is completely based on the trust that we have in our customers and the contractual relationships that we have with our customers.
When we bring something new to market like Einstein, customers will be completely explicit with them about how we will use the data and how those models will be developed and how they will work, and that'll all be completely explicit, and those customers will opt in to sharing that data with Salesforce in a new way, which will provide them this new benefit of the insights and the automation that Einstein can provide.
You want to add a little bit on the-
Yeah, I think just two things. One, I want to underscore Mike's point on the trust. That is so core to our values and everything we do, and we thought a lot about that as we were bringing Einstein to market here. The notion of being able to leverage that data across customers, every customer is going to have the opportunity to opt in for that. Their MSAs, they'll get fully exposed, full transparency, and there's a ton of work from our go-to-market perspective to make sure that all of our customers are aware of that and how we communicate that and document that. They'll have a full option on that. Most customers, just anecdotally, for what it's worth, are very interested in this. They're looking for this. They want the smarts on it. In terms of the data set, that's a key piece.
You know all the right stuff to ask on it. It's all about not only taking all of that CRM data, but what is the other data that we can marry with our CRM transactional data to help then have more and more on that and be able to make the models richer and richer. That's really what we're focused on right now. I see a lot just coming off of working on the Wave team in terms of what are all the third-party data sets that people want to bring in terms of is it social data that they need to bring in? Is it their ERP data? What are all those things that we can do? As Mike said, we look at our end-to-end processes of sales, service, and marketing.
What are all the key points of insight that you'd want potentially predicted for you and that the model can start doing that? What are all the data sets that we can overlay to make the model richer?
Thank you. Mark Murphy with JPMorgan. I had a question on the platform business. It has generally been accelerating, and it's at a good scale. I'm wondering, can you help us to maybe unpack that into the sub-components of the platform business? There was a nice reference to Veeva earlier this morning. I'm wondering, is there a part of that, specifically the ISV business, is it possible that that is pulling away from the other components in terms of scale and growth, or is it more balanced when you look across Heroku, the Force.com platform itself, the Lightning platform, et cetera?
Yeah, I won't go into specific numbers for category, but we definitely look at the business with sort of the three different parts, the kind of core app dev business of Force.com, Lightning, and Heroku, where our customers are building new applications, new use cases, all sorts of amazing new scenarios and customer engagement apps. The second one is the ISV business, which is a really exciting and thriving business. I came from the partner keynote this morning, and the room is packed. What's kind of neat is the ways those ISVs can get to market is really richer now. It's not just a Force.com app. It's using the Bolt technology. They can sell Bolt templates. They're consuming Heroku. They're providing Analytics apps, Analytics add-ins. We have a data provider marketplace, just more and more richness around that ISV business is pretty exciting.
The third is a really healthy add-on business. Our customers are adding technologies like Shield. They're developing more solutions. They need sandbox and storage from us. That is often a great way to start with a customer that's focused on sales or service, but then broadens to app dev from there. It's not our primary mission to sell those things, but they're really important to broaden the customer's perspective on what they can do with us. All three of those components are growing quickly, and it's incredible to spend time with the customers and see as the lights turn on for them and they figure out all the new things they can do with the platform.
Hi. A question for Mike. How does the combination of Microsoft and LinkedIn change the competitive landscape for the Sales Cloud? How do you plan to address the long-term threats? Thank you.
First of all, I think you got to remember that we're partners with both Microsoft and LinkedIn, and have good relationships with both, and I expect that those things will continue. I think Salesforce has always been an open ecosystem and an open partner in terms of the way technology works, and our expectation that you can integrate Salesforce into and out of a collection of different applications that customers use. I mean, I think at the end of the day, in terms of competitiveness, Sales Cloud is far and away the market-leading product for Sales Force Automation in the world. There's no more trusted product when customers want to make sure that that implementation is going to work and that there's an ecosystem of partners and a platform to back it up.
Sales Cloud is going to continue to be the market leader, I don't see anything changing that.
Hi. This one's for John. John, could you just talk a little bit about the success you've seen thus far in terms of your first-party apps in both financial services and healthcare? Then, how do you think about going into other vertical industries, not only sort of developing them yourselves, but also maybe buying your way in? You obviously have a very thriving ISV ecosystem in a lot of these verticals. Is there a chance that you could actually look to maybe acquire your way into some of these places longer term versus just developing them yourselves? Thanks.
Yeah. I think we're in our second full quarter of selling the Financial Services Cloud and Health Cloud. I think we're close to 150 customers now. What's really exciting about that is something like 35% of those customers are net new to Salesforce. I think that's one of the things that we've really learned in introducing these industry products. Even though if you look at Financial Services Cloud, under the hood, a lot of it is core Sales Cloud functionality. If you look at Health Cloud, a lot of it under the hood is core Service Cloud functionality. We've leveraged a lot of the functionality in those core components and in the platform to deliver that to market, but it's been really tailored to these marketplaces. In some ways, it's the fact that we created branding around it.
We announced it. We had a big deal at HIMSS. We went to a bunch of financial services conferences. We got a lot more attention in the marketplace. We've done well in financial services and healthcare traditionally, but there's a lot more growth that we could do there with our core products. About a month ago, we did a big announcement around telemedicine support with Health Cloud, and it was all based on SOS functionality that was built into the Service Cloud. We're incredibly encouraged by the results we've had so far. Again, we're broadening the number of use cases into more segments. Obviously, the next question is, where do we go next? We're certainly looking at other industries where we think we can take the same sort of model into.
The thing we've tried to do is sort of keep a focus on our core mission, which is how do we help our customers connect with their customers in whole new ways? If you look at these products, Health Cloud is basically care coordination, which is service, basically in the healthcare context. If you look at Financial Services Cloud, it's basically a sales use case in the financial services segment. It's really helped us accelerate our mind share there and generally the growth we've had in those industries. We're certainly looking at other industries to try that model. If we find a partner that's done similar work that can basically help us move in that market more quickly, we'll certainly be open to it. Like with any M&A, I think we look at, is it a place, like Alex said earlier, is it technology we want?
Is it a strong team? Have they got momentum in the marketplace? We'll certainly be open-minded to consider that.
Derrick Wood at Cowen. I wanted to follow up on the Microsoft competition question. There was a press release recently that Hewlett Packard Enterprise is choosing to move off of you guys and Oracle to go to Microsoft. Just curious from your view, why you think that took place. From a partnership standpoint, in the last couple of years, Satya was on stage. There was a lot of focus on Microsoft partnership, maybe not as much this year, but you did announce a new alliance with Cisco. It'd be interesting to hear about what's incremental there and how you expect that to play out over the next couple of years.
Yeah. Well, I can take the first part. First, Microsoft is the sponsor for the conference. They have a booth on the conference. We welcome the Microsoft partner at the conference, and we think it's in the interest of everybody, for our customers. At the end of the day, it's all about what the customer wants. In the cloud, you can't create divide. You can't rule your territory. It's an open world, and we believe that both for Microsoft and us, the customers are telling us loud and clear they want us to work together. That's kind of the guiding light behind that, and they are a sponsor. They're pretty much on every sponsor panel. You have the Microsoft logo. They have the booth. We continue to work very aggressively on those different points of integration. Keep in mind, Microsoft is a big company.
They have many product lines. CRM is a tiny piece of their $30 billion revenue. That's a teeny little piece that is somehow not really material. Of course, they will announce some wins. What I can tell you about HP is I've been actually myself working very closely with the HP team for many years because HP is a big Salesforce deployment. When we talk about scale and complexity, they are in that zone. Very few vendors can power that scale and deployment in terms of sales and service. I can tell you that Salesforce will continue to run HP sales and service, whatever announcement have been made, for a couple of years at minimum, before they figure out what their go-forward strategy. We're going to work very hard to make sure they are successful as long as they continue to be a Salesforce customer.
For me, as a product guy, HP is a customer. They're going to remain a customer for a couple years, maybe more, before they figure out what this announcement really means to them, because the scale of the implementation is clearly among the most complex and broader in the industry, we're going to treat them as the customer they are, which is a big customer for us, continue to ensure their success. That's the way we look at that. You probably understand that they also do billions of dollars of business with Microsoft, they have obviously a parallel relationship. The announcement with Cisco is the same vein than what we've done with Microsoft. It's customer driven. Some customers want to use Skype for collaboration, we announced that last year.
Remember, I demo'd the Skype integration during the Western Union demonstration on the keynote, it's great, we continue to release constantly new features with the Skype team, they have, I think, here, a couple keynotes, actually, where they present more stuff. When it comes to call center, to collaboration, some customers want us also to support the Cisco infrastructure, it's also driven by this other side of the segment, where we want to make sure our customers have the choice. It's our duty. In the same way we want to integrate the products we acquire, we also need to integrate with the leaders in their industry. We need to provide that level of integration so our customers don't have to deal with that complexity.
We have a dedicated team in my team who solely focus on building those integration points with our ecosystem of partners. It's really part of our DNA. We're not the company who wants to own everything from A to Z. We really want to be the best at what we do well and make sure we have the most valuable ecosystem. Sometimes it's hard, because this ecosystem may have overlapping functions or friction, but that's okay. That's the industry. That's where we are. It's a very active and hectic industry, so we can live with that.
I just would say what Alex said is really, really important, because the design philosophy around product at Salesforce is that it's open by default, and that there is an API for the product feature by default, and that the product teams and the product managers are thinking about the product we're going to deliver, but they're also expecting it to be connected to other things in ways that we have not designed or imagined. That leads to all this overlap, which I think is great. You know what I mean? Because it creates confusion a little bit, but it also more creates innovation and choice, and that's why this conference is so successful. That's why the customers keep coming back, because they have choices. We remain committed to that, I'd say, as a product team.
Thanks. Abhey Lamba with Mizuho. Just following up on Manish's question here. Mike, can you talk about the importance of data that's in LinkedIn or Twitter or some of these platforms? Do you really need to own that data for your product roadmap to really work over the next 5 to 10 years? Or is this something via integrations you can kind of work around it? Thank you.
I'd just say, think about what I just said in terms of openness and APIs, right? It's a pretty vibrant landscape, I think, that we all live in terms of where this data is and where it's being created and how it's being used. Salesforce is committed to a philosophy, I suppose, an approach, that we want to make it very easy to bring that data into Salesforce, very easy for you to get that data out of Salesforce and put it into another tool. Another great story is Slack.
Yeah, in particular with those two vendors, we already have tons of integrations. LinkedIn even has a product on our AppExchange to basically do sales in Salesforce. It's not new. For years, they have their Sales Navigator. They do CRM already, but bring new IP. Those IPs have been around for quite a while, and we've been working very hard with those companies to make sure they had access to our data, we had access to all their data. We live in a world of openness, and I think that's really our guiding light and somehow part of probably all the noise you're reading right now in the press, which is, it has been, I think, everybody's success to be able to share those data, obviously in a compliant and regulated way. To enable our customers to connect, they're all together. Twitter, we have the firehose.
When you use our Social Studio, we have in real time every possible tweet in the world available into your marketing tools in Salesforce, and we've been working for many years together. It's not a matter of ownership. It's a matter of use case and integration between the two companies that has been very important. We continue to operate on those integration, and I think when you see those integration being blocked for some reason, then we react, and that's, I think, the statements you've seen in the press.
Can you just follow up? Why does this keep doing this on this end?
Well, I don't think we can really comment. I don't know if it's the area of. You probably had this discussion this morning. As I say, as part of our M&A strategy, we want investors to look at every possible opportunity in the market. That's our job. You want us to look at those opportunities. I think we always step into any acquisition with a very open mind. The monks are here if you want to open your mind, we are not dogmatic about. Well, we don't have clear principles. We're really open about every opportunity. When there's a process, you want us to look seriously at every possible angle of the problem. I think so far, if you look at what we've done so far, materially to date, I think we've done a pretty good job on the acquisition front.
I think you clearly can see we have executed very well. We've built the muscle. Sometimes things are harder than we expected, which is obviously the part of the game. We've been very mindful in terms of our acquisition strategy, and I can assure you that's always the way we look at the future. We're very, very mindful as a company about doing those acquisitions.
Thank you, Steve Ashley, Robert Baird. Mike, I was going to ask you about communities. It seems like I'm hearing about it more from people. I was wondering if you were hearing about it more from people, if there's actually more activity around your customers deploying communities, what kind of uplift they might provide to a Sales Cloud kind of customer monetarily, and if there are primary use cases that are emerging that you're just seeing throughout organizations. Thanks.
Yeah. We're definitely seeing a continued, I guess, acceleration in terms of customers deploying communities. We have 100 million users now externally in terms of our customers' customers accessing those communities and actively interacting. I'd say three use cases, and it's sort of how we take this product to market. Number 1 is about partnerships and partner relationship management. Number 2 is customers and the ability to get customer service and also create a customer community to share insights and deflect customer service. Then also internally, we're seeing a big uptick in terms of how people are deploying a community as a social network, so to speak, inside of a company.
The Number 1 thing that we've done, and that's why Lightning and this Lightning Bolt framework are so important, is the feedback that we got was that, "We love this, it's great, but can you help us go faster? Can you help us deploy these things more quickly?" When you see the demo of what you can do with this framework and literally create a community in three clicks and 30 seconds of the thing building, now your community is live, we're really excited about that product. Extending it out to the ecosystem of partners. The brands that created packages with this Bolt framework were pretty amazing. Accenture and Deloitte and PwC and on and on, taking their expertise, packaging it into a community application, and putting it on AppExchange. We're very, very excited about that. I'm glad you asked the question.
I'm jumping in on your question, sorry, Mike. I was getting bored here. I have no cellphone to play with while I'm sitting here. It's really unnatural for 60 minutes to sit here and not check anything. One of the things we've seen is in our care coordination solution with Health Cloud is actually using communities as a way to create, not just people thinking of public communities, we're actually using it to create private communities, where basically the caregivers inside the healthcare facility, the at-home caregivers, and the patient actually come together in a basically secure environment, basically to share information, have the conversation, to basically interact with their caregiver in a way that they've always wanted to. Communities is the perfect platform for supporting that.
Hey, Kash. [inaudible]
Hold on. I'll tell you one other thing. Don't discount the possibility that the TAMs grow in sales and service, as they have over the last 10 years, right?
You've been saying that.
Yeah.
The beauty indeed of our market is it's growing 12%-14% overall a year. Even if we were to stay at fixed market share, which is not what we're doing, we would grow at 12%-14% just by keeping our market share. As you see, we have a more aggressive strategy, which is for each and every cloud to continue to capture market share. When you have the right market share like Service Cloud, we basically expand the spectrum of the footprint by adding CPQ. For Service Cloud, we're adding field service, which adds a couple additional billion of market share. We gradually expand. We try not to go too fast because you need to be good at what you're doing before you go. You know the grass is always greener.
When it comes to platform and analytics, I would like to quote Marc, which is, "You always overestimate what you can do in a year, but you underestimate what you can do in 10 years." You really go step by step with those products. You can't change overnight the market dynamic. What's important is you enter into a big market with the right playbook, the right sweet spot. Those businesses, those analytics entered the market two years ago as a startup. It was really a startup. It was one new product on a 30-year-old market. You need to be laser-focused on one scenario and grow out of it and be very clear where you play, where it doesn't play. That's really what we've been doing with analytics, which is we want to be the best analytics for the Salesforce customer.
There's plenty of $ billions to do just there, before you are everything to everybody. Each cloud has a very specific roadmap given where they are. The platform development is a tricky market as well. You can really lose a lot of money by trying to do everything to everybody, because every day there's a new technology, there's a new framework, there's a new device. You really need to have clarity of mind about where you're going to double your revenue, what is the next area of growth, and go step by step. You build a very solid position because you want to lead one part of the ecosystem instead of being too thin. The platform, I think, has done a fantastic job with the CIOs.
If you work the conference and ask any CIO, what does he think about the platform, he's going to tell you, "This is the best thing I have today to deliver innovation my company needs." We want to be the best platform for the CIOs. That's our anchor point. We want the ecosystem because it's very important for the CIOs. That's kind of how we're building our tooling and our products every year. Because keep in mind, unlike a lot of other companies we're going after in terms of growth, we have limited resource in a sense. We're growing fast, but we need to be very careful not to spread ourselves too thin. You need to prioritize. Every year we go through it, and it starts the week after Dreamforce. We go through excruciating prioritization exercise in terms of funding those teams.
They need to pitch us how they're going to execute, we operate as internally, pretty much like a board of a VC that is having startups. Those guys need to convince us that they're going to use the money the most effective way to penetrate their market. Are the TAMs big? Yes, they are super big. There is a certain point where if you go too big, too fast, you're going to burn a lot of cash, you're going to confuse everybody, and you won't be really building your leadership. That's kind of the way we're looking at it, which is, we want the small products to become leaders and execute with a laser-focused strategy. We want the big products to expand their addressable market by, once they have really anchored their leadership to other areas.
We don't want to be too broad too fast. It's a fine balance. Keep in mind, just to wrap up my statement, we are a subscription business. The most precious asset we have when we look at our competitor is our install base. Keep in mind, this year we're going to do, with our guidance, $8.3 billion of revenue. We are a subscription business. These are subscriptions. These are not new licenses. It's very important for us also when we balance our investment, to make sure that those customers are happy, they're growing, they're using the system. Dreamforce is for us, a unique tool, and also for you, to check with our customers. Are we doing a good job of listening to them? Are they adopting the system? Are they using all the licenses they're buying?
This is a very hard barrier to entry when you have that level in subscription with that level of usage. Whoever can claim, "We're going to go after Salesforce," you need to disrupt a very strong anchor point that is built on usage and recurring revenue. That's our core DNA, that's why it's so important for us to have an open ecosystem and to have our ears wide open. This conference is one of those tools. I spend, I know all of you spend tons of time during the whole day and at night with customers to make sure we listen. We listen deeply. We listen to each and every signal they have to make sure that we're doing a good job helping them. That's my answer about market share.
The market share is already there, we need to continue to be very careful step by step, building the next level of Salesforce. You want to add something, Mike, you?
No, I was just making sure to get the question in. He's been patiently waiting.
Oh, someone has been patiently waiting here.
Stuck in the middle.
Okay. Sorry for that.
I'll find an end seat next time.
Yeah, it's the middle seat is.
It's Brent Thill with UBS. Bob, on the Marketing Cloud, going back to what Mark highlighted, the CAGRs, the highest CAGR in terms of the growth rate for all the clouds. Can you just give us a sense where you see the lowest hanging fruit in that opportunity to go after? You're not used to having anyone in front of you, but you do have Adobe ahead of you in revenue dollars. Do you see this as a different strategy where Adobe's going? How do you play in that world?
I think our advantage is, first of all, we own the CRM market. You couple marketing with the core CRM products. It gives our customers a huge advantage. For us, I think, we announced just today the intent to acquire Krux, which sort of adds to our whole marketing portfolio. It was a piece we were missing. It allows us now to actually play in a bigger way in the B2C segment and in deriving new audiences. Also, if you think about what Krux does and the fact that they can use intelligence to go through billions of profiles and trillions of events, to generate new segments for marketing. This is a way to really help our customers and actually to drive our customers and allow them actually to get to know their customers better, actually.
I'll just pile on as the one marketer here, sitting up here. As a marketer, if you look back one decade, two decades ago, we were so focused just within the four walls of the marketing organization in terms of web data, lead data, things like that. Now, if you're running as a marketer just on that, you're in big trouble. When I look at us relative to our number one or number two or whatever you think competitor out there on the marketing side, I look at the fact that we're now being able to bring that, as he said, the CRM data across Sales and Service and Marketing, put Wave as that interface across all of that. Having the analytic platform for not only Sales, Service, and Marketing, but to build any analytic on top of that.
If you look at some of the other vendors out there, they may specialize in web analytics, one type of analytics, but they're not giving you that analytics across that entire spectrum. Just to me, the data that you can get and how you as a marketer can then work across Sales, Service, and Marketing, it's a huge leg up for us.
Tom, to add to that, I think, our philosophy, we have actually very different plays on this market indeed, than Adobe in a sense that we are really data-centric, and they always have been more content-centric, tracking website activity. Their life starts with the creative content you produce with Creative Suite, then you start building analytics or emails or campaigns, but it starts with the content. Our world starts with the customer or the profile. That's really the core center of gravity of everything we do in marketing. There will be areas of marketing we won't do. What we will do is really what matters in a connected world where people are trying to figure out if someone is on Twitter and goes to a website, what happened? Is it the same person? You can do that with a DMP.
You can't do that if you just do web analytics. You have half of the picture. We really try to build this customer journey to deliver better personalization, better targeted advertisement, better marketing campaigns, more personalized commerce. For example, our Commerce Cloud, as today, a predictive Einstein engine in it. The customers who are using it, basically when you search on the e-commerce navigation, you ask for a sticker, or you go to buy a sticker, we will present the stickers based on your profile. The people who are using predictive navigation or navigation into e-commerce site convert 14 more their shopping cart than the others. Those signals are very important. That's our center of gravity, is really to start from the data, the profile of the customer, to deliver those personalized.
What we do is we try to make sure we integrate well with any creative content sources or processes we have around. Our view of the market is it's prone for disruption because it doesn't start with the content, it really starts with the customer or the profile. Before it becomes a known entity, it's just a profile that is surfacing through signals and data science. That's really what Krux is giving us. That's really our philosophy about this market, and I think we're really bringing a very differentiated play for our customers. What we do with Marketing Cloud, no one else can do at that scale. No one can send that level of personalization through emails and messages at that scale, no one in the world. That's where we're very unique. Commerce Cloud, no one is managing 300 million shoppers every year.
$16 billion worth of GMV move for our Commerce Cloud. No one does that at that scale. Each of those assets gives us a unique edge in terms of being able to target and market those individuals.
Hey, it's Bhavan here again. Just a quick question. The finance team had come on earlier and given us some metrics about number of clouds at the top 200 customers. Last year, I think the metric was 20% of your top 100 customers were using 4-plus clouds. This year, Q2, the metric is now 75% of the top 200 customers are using 4-plus clouds. It's a pretty dramatic expansion. I'd love to sort of get the color from each of you in the various clouds, sort of the penetration rates in these top 200 customers. Are these small instances with sales being the primary one, and that's how it's expanding? Or are these sort of larger deployments in these multiple cloud scenarios?
Look, first, our strategy is to get our customers using 8 clouds. That's why we track the metrics. We would love our customers to use 8 clouds. We spent a complete study around the adoption patterns of our customers internally. Out of the top 20, clearly the majority started kind of the story of Salesforce. They anchored themselves around Sales Cloud, then they added Service Cloud, then they started to spend more with the platform to develop the apps. That's the majority of those customers. You always have customers that went either straight, because they are B2C, to really, really big Marketing Cloud investments, because for them, the engagement was the number 1 thing. You have customers who start also super big with Service Cloud. These are smaller groups. Those two groups are smaller.
The majority start through a big sale, SFA then Service. Depending on the industry, you may see a couple customers going upfront, super big on Service or super big on Marketing. I can tell you really a pattern. We have segmented those different customers, clearly what we're trying to do is to make sure we build those maps in terms of what's the life cycle of a customer to go from one cloud to another cloud. Also to adopt within each cloud, the different sub-components of a cloud. For example, I know Mike tracks very precisely the usage of mobile apps, the usage of Outlook connectors, because we know these are adoption patterns that drive to additional purchase.
It also connects back to Trailhead. One of those strategies to make the admins and developers in the account that work with Salesforce, make them heroes, make them trailblazers. They become evangelists internally that then go develop new use cases and bring in a new cloud, build new applications, and extend from there. That strategy seems to be really clicking for us.
Over to your left.
Hi, it's Ed Maguire from CLSA. A question about the platform. There'd been some discussion in the past about the economic multiplier effect that the platform actually brings to the other clouds. I was wondering if, this is sort of a broad question to the panel. In the past, we've heard about the proportion of custom objects in the Salesforce system, how much that's increased and how much that improves stickiness. Two questions. One is, in terms of growing the platform, how much outbound efforts are there to drive demand and how much is inbound? How much is pull from users of other clouds? Secondly, could you comment on the economic value that gets touched by the platform across the other clouds?
I can take the first part, which is we do aggressively go sell App Cloud licenses, Salesforce.com licenses, Heroku licenses, Lightning. Force.com licenses with Lightning user experience. We very aggressively do that. We pitch new use cases. We call it wall to wall, when we go drive that out with the customers. What's great is then we get complete coverage across Sales, Service, Marketing, all the different lines of business, and the customers can really start collaborating on whole new use cases. Could probably never dream of business processes that cut across. Everyone has access to the customer. We do have a direct sales team that focuses on App Cloud licenses, and we're out fighting for customer wins every single day.
I would just say that, just to be clear, the number one competitive advantage of Sales Cloud and Service Cloud is the platform, right? The fact that what Salesforce does, and I think John said this to me a couple of days ago, the fact that we can allow a customer to completely configure and customize their application, build a completely new application if they want, and then upgrade them 3 times a year and nothing breaks, and it just keeps working, and we just keep being able to add this new functionality, that is like a technology miracle that is still the core differentiator of Sales Cloud and Service Cloud. Right? I don't want to underestimate the economic value of the platform to Salesforce overall.
Yeah, we sell it directly in these other use cases, but the fact that it's part of Sales Cloud and Service Cloud and the whole ecosystem and platform that are backing those two products, it's an incredible advantage for us.
Alex, you have a little bit of one of everything in the foundational components of whether it's AWS to Oracle to Microsoft. Can you just talk about it at some point, does this make sense to harmonize and go to one? This integration would seem like it would take a lot of time and money, or is that not the case if you built some type of abstraction layer where this can plug into any cloud? I think we're all sitting here watching this going, "Is there consolidation around the foundation now to make this a lot easier for your developers to build?" Am I totally missing the point?
Well, the good news for our customers, they don't really see that.
They don't see it.
Yeah, because that's the whole point. The reality of tech is complex. There is a lot of technology you need to assemble to stitch together to get the killer mobile experience you're getting on Salesforce1 or on the Lightning platform. Behind the scene, there is tons of technology. There is not just relational, there is application server, Hadoop, security. There's zillions of technology stacks that we have to combine together. Also, we're evolving all the time. In fact, when people ask us, "Oh, are you moving out of this database or going to this database?" We're already super hybrid. In the back end, there is tons of stuff that are, for a long time, outside the core Oracle database that runs on Hadoop clusters. Our back end itself is a pretty complex stack because that's the world we live in.
By the way, that's the barrier to entry for any CIO. Today, you can't run your own data center anymore. It's just impossible when you look at the stack and the complexity of the technology you need to stitch together to deliver those values. It's kind of like the acquisition. We are also very open about what makes the best sense. When I joined Salesforce, we were switching from the Sun to Dell hardware. Customers don't care where you run on, if it's Sun or HP or Dell. What they want is for the service to be trusted and working. Behind the scene, they want us to scale, which means we constantly need to upgrade the types of technology we're using in the back end. Customers want us to run sometime in some geography.
It doesn't make sense sometime for us to build a data center. Why don't we partner with an infrastructure vendor like AWS or Azure or Google? We need to be really rational about how we make those decisions, and that's what we're doing. There's no such thing as a standardization into this world of technology because the stack you need to bring together is actually very complete. There is not one vendor who provides everything. Or if there is one, it's called Salesforce, at least for our customers, because we're solving that. We're abstracting our customers from that complexity.
That's why when I hear some companies saying, "Oh, we're switching off Salesforce, going on my own," we heard this question earlier, it's going to be hard because we're bringing a lot of stuff together every day that covers a broad set of technology to support super large-scale, complex implementation, that's kind of half of our value proposition. In fact, here we have mostly product people. We don't have Tech Ops. I don't know if you're planning to meet with Randy Kern or Parker later in the day, but our Tech Ops operation is as complex as our product operation. We're only one side of the coin in terms of technology.
What we put into our data centers and the complexity and the constant upgrade and the constant rearchitecture of the underlying services is a huge part of the value proposition that also makes our service so unique. I think your question is really about customers don't care whether it runs on this or that, but they want it to run and be easy to use. Our job is to always figure out what's the best technology we should be investing in. We also try different things. A good example, just easy to grasp, is our mobile app, Salesforce1. If you use Salesforce1, we have 1.5 million users on this mobile app. This is the most adopted enterprise mobile app. Tons of debate. Should it be native or HTML5?
Some people say it needs to be 100% native to be killer experience. Some people say, no, HTML5 is the fastest way to deliver cross-platform things. In reality, it's hybrid. We constantly change some page. On one release, one page will be HTML5, the next day it'll be native because we're constantly monitoring the response time and what's the best technology because the answer we have today may not be true tomorrow. We're making those decisions for you all the time. If you're a CIO, there is no way you can build those types of applications. It's a level of engineering and expertise that is really way too high to be able to deploy those applications. We abstract our entire install base from those discussions.
Going to be our last question.
You want another one, guys? You want to add, because it's your daily life, so if you want to add a little bit.
Hey, guys. Jeff Houston from Navidar. John, I wanted to circle you back in before the panel ends. Digging a bit deeper into the verticals, how do you think about outside of financials and healthcare, are there other verticals you're interested in looking at now? Are you more focused on digging deeper into those and some of your other current focuses?
Well, those are the industries we've sort of built explicit products in. If you actually go to the campground, we have an industry showcase with customers who basically show end-to-end solutions that they've done with our products, and it shows Sales Cloud, Service Cloud, Communities. I came from the comms keynote right before this. Virgin Media was there, and they were showing basically how they've completely changed the customer engagement strategy, and its Marketing Cloud. This goes back to sort of Stephanie and Bob's point about Marketing Cloud. It's Marketing Cloud, it's Service Cloud, it's Communities, it's analytics. It's all those things together to create basically a customer engagement strategy that's completely changing the way they engage with their marketplace, and growing share, and increasing customer stat scores.
Although we've built these explicit products, we actually have solutions based on our core products that go across every industry. In some cases, we create explicit sort of packages around it. In some cases, we work with partners. In some cases, it's just really a matter of how do we configure and present that appropriately. For each industry, we sort of determine what is the right approach based on what customers need and what we think the product needs in terms of making it basically available to customers in a way they can easily see. We'll continue to build more vertical clouds, but we have solutions today in all these marketplaces, in manufacturing, comms and media, in retail, financial services, healthcare, government. We'll continue to expand that as we go forward.
All right. Well, with that, let's give a round of applause to our product team. Thank you all for joining us.
Thank you.
We have about a 15-minute break or so, jump outside and get some refreshments, and we'll be back for a go-to-market Q&A around 2:45.
Welcome back. We're going to continue our program with a discussion with Keith Block and Tyler Prince about our go-to-market strategy, and I'll invite them to stage. Welcome, please, Keith Block, who's our Vice Chairman, President, Chief Operating Officer, and Tyler Prince, our EVP of Worldwide Alliances and Channels. Gentlemen, thanks for joining us. Appreciate it.
Thank you.
We'll spend the next hour and change, in conversation with these two gentlemen about what we're seeing in the market and how we're tackling it. We've talked about product so far and business overview with David and Mark Hawkins, you're sort of our closers here. Actually, well, we have Parker after you guys, this is a conversation that I know everyone's been very anxious to talk to you about. We're going to leave it at that. Enjoy.
Great. Thank you. Good afternoon. How's everybody doing? John, did you have a question?
I do.
Hold on, we're going to come over here because mic.
Okay. Yep. Mic.
Hi, Keith. Walter Pritchard from Citi. I'm wondering if you could talk about some of these new products, analytics, IoT. I was over in the expo, they're talking about a data lake, and it seemed very kind of open-ended. I'm wondering how, when you're in selling sales and service and marketing, it seems very tangible, and some of these others seem very longer-term projects trying to maybe prove business value more broadly than just in one department. Can you talk about sales cycles as it relates to things like analytics and IoT and machine learning and artificial intelligence? Just seems less tangible than what you've sold in the past.
Thanks for that question. There are many parts to that question. Let me try and address this as best as I possibly can. When you take a look at the combination of things around IoT and analytics and artificial intelligence, I'm going to add another one in there, which is called field service, okay, which is something we're very excited about. These are transformational in nature. These capabilities, when blended together, really give companies the opportunity to reinvent their business models in a very competitive world. Just to give you an example of that, I was on the phone within the last week with the CEO of a very large industrial manufacturer, very competitive global manufacturer out of Europe.
They are very excited about working with us and continuing to work with us in terms of combining all of those capabilities and products together as they reinvent service, which can translate into sales and marketing opportunities for them. It's a very compelling solution. Obviously, selling to the CEO and the CEO level is a very different sell than perhaps the line of business. When you have the CEO, who is really, for all intents and purposes, the Chief Transformation Officer of most corporations, at least the most progressive CEOs, that would accelerate a sales cycle when you have the buy-in from the key decision-maker, as we like to refer to them this week as the key Trailblazer inside the company. We are seeing more and more of those type of opportunities. We are in more and more of those conversations.
Industrial manufacturing companies, energy companies, anybody who would use field service who already have devices and robots that can collect data, those are natural plays for us. There's a fair bit of activity going on. That's pretty consistent with what we've seen over the last quarter or two.
Hi, it's John DiFucci from Jefferies.
Hi, John.
Hi, Keith.
Yeah.
Keith, earlier, Mark Hawkins answered a question and said that lessons learned from ExactTarget could be applied to Demandware where, hey, listen, we'd like to integrate it more quickly.
Which sounds good, ExactTarget took years, and in some cases, at least from what I hear, not all your sales guys are actually able to sell it themselves today, and you have to bring in another guy to sell it. I just wonder, in your current role, your previous place, the integrations would happen like in a couple of months.
What place was that? Sorry. Yeah.
If I bring up the name, then.
Please don't
You're going to say, "We don't do that.
Right.
We don't do what they do.
Right.
There's positives and negatives to taking a long time to integration, right?
Yeah.
You take a long time, maybe you get more right, 90% right, instead of 80%, you know the story.
Right.
In your previous role, you were just bringing it to market, putting it in your bag. Now you, from my observation, you've built a world-class enterprise Salesforce. It was always a good Salesforce at salesforce.com, but now there's a world-class enterprise Salesforce. Once you establish that trust with your customers, with those salespeople, that relationship, if you have more in your bag to sell them, they'll buy more from you. How do you accelerate getting that in the bag? Because if you do it faster than ExactTarget, and you do it in a year, let's say, then that's better than ExactTarget. Jeez, why not three months or two months? How are you making a difference this time with Demandware versus ExactTarget?
Okay. I think that's a fair question. When you acquire a company and you try to integrate them, there are two different models, and this is kind of the way that I like to think of it. There's a spectrum. There's innovation over here. You put a premium on innovation, and you put a premium on integration, right? Every company runs differently. Everybody puts different premiums or KPIs or measures their business, to one side or the other. If you integrate a company and you put a premium on innovation, the chances are that you leave them alone. You don't want to spoil their culture, and you want them to innovate, and you want them to be fairly autonomous. Now, when you do that too much, you give up other things, right? You give up leverage points maybe into the install base.
You may not indoctrinate them into the culture. You may not get the economies of scale that you would like to. That's innovation over to the extreme left. Some companies slam it in, okay? They integrate. What they do is they kill the innovation because they're trying to do a one-size-fits-all, square-peg-round-hole approach. You might get economies of scales, you might drive cost out of the equation, but you may kill a culture, you may drive out innovation, you may lose talent, you may kill a product line, et cetera. These are the two extremes, and I think with every integration that you do, you have to evaluate the strengths and weaknesses of the company that you're bringing into Salesforce and say, "Is there a premium on innovation? Is there a premium on integration?" I don't think either extreme is ever the right answer.
I think you've got to find the appropriate fit for the type of company that you've just acquired and you're trying to merge in. I will say that M&A is always tough. I don't think that's a secret to anybody in the audience. I think we've gotten very good at it. I think we've learned a lot through all these acquisitions that we've done. I would say that we've learned a lot with the ExactTarget acquisition. As far as accelerating time to market, which I think is really what you're driving to here. As you know, I'm a big believer in a specialized sales model, right?
As we expand the portfolio, that our core AEs carry in their bag, they can only get so deep, and that's where you have to have these specialized sales forces, what we call co-primes or specialized sales engineers or specialized architects to support the sale of those specialized cycles coordinated with the core AE who's managing the overall sales cycle of the deal or the life cycle with the relationship of the customer. The way I like to think of it is you maintain these specialized sales organizations. You build critical mass. You indoctrinate them in as quickly as you can. Every one of these is unique, and I think you have to decide, is there a premium on innovation? Is there a premium on integration? How quickly can you absorb them in? I think we've learned a lot.
I think the numbers look pretty good.
Hey, Keith. It is Bhavan here. A couple quick questions. One maybe a short-term question and then a couple longer-term ones. Just in the short term, you have talked about softness in July, execution, and sort of your own sort of internal things. Just to get a sense of how you feel, not an update, but just how the last few weeks, months have been since then.
More strategically.
Basically, you want an update? Is that?
No. And then, more strategically, just taking the previous question a little bit, you've been a driver of these vertical strategies and approaches. What's worked in the vertical approach? What hasn't worked? What are the key takeaways from the ones that have worked that you can apply, and some of the verticals that haven't worked as well, just to get a sense if you think about rolling out the vertical approach for Analytics for the various other Clouds too.
Yeah. Okay. Thank you. I'll give you the update. I think everybody knows, we talked about Q2, a lot's been said on that, but just to kind of recap. We did see some softness in the business in the U.S., in July, right at the end of the quarter, in Q2. I would've chalked it up to, as I said, execution. I would also characterize it as a blip. It's a very high-performing team that we've assembled. One of those very high-performing folks is sitting right next to me in Tyler Prince. We made some adjustments to our playbook, as I had said before I would say some minor personnel changes, layers down in the organization. At that time, I had said that felt very, very good about our pipeline in Q3 and Q4.
As you know, we are two-thirds of the way through the quarter, I'm not going to give you an update on, "Hey, how's it going?" I will just say that, I'll reiterate what I said before, that our remaining pipeline in Q3 looks very strong, Q4 looks very strong. I feel good about where we are. As far as the vertical strategy goes, I'm a very big believer, as you know, in the vertical strategy. I'm actually keynoting the Financial Services session tomorrow, which I'm super excited about. My experience would tell you, and I'll ask Tyler his opinion because he's been around the block as well, but speaking the language of the customer is just so critical if you want to drive these long-term relationships and build credibility and trust, and take on this mantra of this trusted advisor, and being in the boardroom.
About two hours ago, I was addressing the board of directors of one of the largest SIs in the world, who is a go-to-market partner with us, and also a customer of ours. Their CEO pulled me aside and said, "There are only two companies that I'm talking to, Salesforce and another cloud infrastructure company that you can figure out who it is. They're north of here, and it doesn't begin with an M." I think that tells you the kind of mind share that we have with these SIs. We're very, very vertically focused. We've had tremendous success in Financial Services. We see tremendous momentum in Financial Services. Obviously, our public sector business is very strong. We've got great relationships with Accenture on consumer packaged goods, who is one of our go-to-market partners. The insurance industry within Financial Services is very strong.
Telecommunications, through our partnership with Vlocity. I don't know if I can tell you that there's a lesson learned. I will tell you that the team has executed incredibly well. One of the industries that we're super excited about is retail, particularly because of the acquisition of Demandware is now our Commerce Cloud. Our customers love the fact that we speak the language that they live in the world that they live in. Our systems integration partners absolutely love the fact that we go to market by industry as do they, so we align very nicely with them. The vertical strategy is definitely working. It's three and a half years in the making. We just continue to strengthen things.
Just another comment on that, is the fact that in March, we released the Financial Services Cloud and the Health Cloud, the very first products that the company's ever released on a vertical basis, and the traction has just been fantastic. Tyler, do you want to comment on the SI piece?
I think, you referenced the playbook, right? I think we know what the playbook is to continue to very much focus by industry, and the partner angle of that, which I have responsibility for here at Salesforce, I think is an important part of that. Every one of the large SIs, if you look at the big banners of the big sponsors here, firms like Accenture, Deloitte, PwC, Capgemini and IBM, organize and orient themselves by industry. They have for decades, quite frankly, right? That's how they differentiate. That's how they align their client partners to go engage and understand the industry drivers or the pain points, and then bring solutions to them.
That's given us an incredible accelerator, I would say, to take our solutions and either tailor those solutions slightly so they resonate well within the customers from an industry point of view, or in some cases, go deep and build industry-specific product. Regardless, it takes that kind of product. It takes sort of the advocacy of these large SIs to go in and say, "I have seen Salesforce in the CPG space, and they've done exceptionally well. It's following three or four companies." A partner doing that as well is important. The ISV part of the equation, or AppExchange business as well, which is what I look after. To go out and encourage and embrace third parties to build applications on our platform or that tightly integrate to our CRM set of applications from an industry-specific point of view is pretty compelling.
You mentioned Vlocity on the telco side. You think of a company called nCino, which is another one in the banking side. The list goes on and on. We orient ourselves by industry. I think that partner strategy is part of the playbook, and it's helping us accelerate our go to market.
Over here to your left.
Hi, Samad Samana from Stephens. I wanted to ask a question on Demandware. One of the trends for Salesforce historically has been retaining the top talent from their acquisitions and keeping them at the company. I was curious if you could give us an update on whether you've been able to retain that top talent, and what the early outlook there is in finding roles for them in the future. Then, in that vein, when you think about Demandware with ExactTarget, early on you guys had a quota or a double quota plan where sales was incentivized to cross-sell even before you folded them in. Are you doing something like that today with Demandware already?
Yeah. We are very, very excited about Commerce Cloud. When you look at our portfolio, including the Marketing Cloud and Commerce Cloud together, we think it's very compelling for retail. A lot of the existing Demandware customers were very, very excited when we brought them into the family. Our SIs were very, very excited about the acquisition as well. This is a case where we were already very good in retail, and now we're going to be incredible in retail as a solution. As far as talent, they have great talent. We all spent a lot of time with that group. I'm happy to tell you that we've retained just about everybody. Don't expect us to lose any of these folks.
We worked very hard to make sure that we've given them a big. You've probably heard, I don't know how many times you've heard the word Ohana, but you're going to hear Ohana a lot this week. We've gone and given these guys a big Ohana hug. Ohana is Hawaiian for family, which is a big part of our culture, in case you didn't know. Jeff Barnett is a great person, great executive. Tom is a great executive. They're a big part of our strategy. They've also, quite frankly, put the Boston area on the map. We already had a great presence in Boston. Now with HeyWire and Demandware, we've got two premium companies as well. We're all excited about that.
Hi, Karl Keirstead at Deutsche Bank. Question for you, Keith. Earlier today, Mark Hawkins put up some metrics around how your revenue mix is skewing a little bit more to larger customers. I think the percentage of revs from customers paying Salesforce over $1 million a year is 22%. I was just curious, to what extent is that mix shift to multi-clouds and seven, eight-figure deals skewing your sales cadence to a traditional fourth quarter? Is that phenomenon playing out in the second half for Salesforce?
Well, I don't think it's any secret that when I joined the company three and a half years ago, one of the asks from Mark was to help drive the enterprise sales business, and thank you, John DiFucci, for the nice compliment. I think we've been very successful. We've built a terrific team, and we've changed the culture and the approach that we've taken in terms of going to market around enterprise. Part of it is through the industry strategy. Part of it is through the alliance and channels strategy under Tyler's leadership. Part of it is our international expansion, because if we're going to serve global multinationals, we have to have a presence all over the world. All three of those strategies, I think, have been playing out very nicely in the marketplace.
I think it's an indication, quite frankly, with the size of the deals that we're getting and the level of access and the level of engagement that we're getting in terms of CEO-level access or the reference that I made earlier about presenting to the board, that we are certainly climbing the ladder in terms of getting mind share, which translates into wallet share in the boardroom, in the C-suite, and with CEOs. To do that, you have to sell and deliver a solution, okay? A solution may be one cloud, but more often than not, it is a multi-cloud solution. It's an assembly of parts and third-party products, if you will, that basically solve a business problem. That is the cultural shift that we've made over the last three and a half years. Look, we just have a lot of momentum.
We have a lot of momentum with these very senior executives in the industries that we've chosen to do business with. We'll continue to do large deals. In Q2, I talked about, yet again, we did another significant deal in the quarter. We have a very good playbook. We'll continue to execute, and you'll just see more and more volume around that going up over time.
Hi, good afternoon. Sarah Hindlian from Macquarie.
Hi.
Hi. This is a question specifically for you, Tyler. Surprisingly, we keep hearing on the SI side a need for more consultants around Salesforce practices. I'm wondering if you could give us a little bit of color on where you are in terms of SIs building practices around you in particular. Then secondly, looking at the platform opportunity and how you're differentiating, we're all very aware of Veeva and how successful they've been. I'm wondering, do you have a line of sight into what the next Veeva might be? In particular, when you are, and I'm going to try to sneak in a third here, maybe I'll get away with it. When you're attracting customers onto the platform and you're going up against competitors, what is it that is really differentiated about the Salesforce platform opportunity?
Okay. Great. First part of the question is about the consulting ecosystem, if you will. We have what I consider a fairly rigorous process by which we encourage consultants to become certified. They go through a certain amount of training, most of which online, but then they pass an exam to really credentialize themselves so they can then market that to the marketplace. We track that number, and I think we provided that number to this group, and I think from this time last year, we're up about 30%. Now, there's a broader set of consultants, if you will, that are surrounding the Salesforce ecosystem. They may not be certified, but they're experts in customer transformation or service transformation, more the business process, so related to Salesforce, but doesn't require deep technical skills around Salesforce. You're right.
The biggest opportunity we have is how do we continue to get those firms to continue to grow their resources. They're doing it in two ways, and this comes firsthand from conversations that we've even had this week. We've got the CEO of Accenture here, the CEO of Deloitte Consulting here, the CEO of Capgemini here. The list goes on and on. We've had access to this, and what we're seeing them do, these companies, in fact, I came from one. I was a partner at PwC, running a large implementation practice around sort of an on-premise software provider, happened to be Keith's alma mater as well. Those practices, these on-premise practices that albeit have been very large historically at places like Accenture, Deloitte, and PwC, are not growing. I'm being generous.
It's not uncommon for them to celebrate when there's flat year-over-year growth in some of these on-premise providers, because a lot of it's focused on application maintenance, hosting, upgrades, things like that. Where we change the conversation, this is about transformation. This is about helping people do things differently. It allows them to bring their strategy services to the forefront, and then bring these business process skills. The excitement and energy we're seeing, the firms I've just mentioned, it's not uncommon for them to talk about their Salesforce practices to be growing at 50% plus year-over-year. Therefore, they're converting resources. They're converting resources in many cases from these on-premise providers into us, which is exciting.
We're also seeing this rebirth of finding people early in the process, either on-campus recruiting or folks that are early into the consulting business to really respray and really train them around Salesforce and the opportunity here. We're going to double down on this. We had a partner keynote this morning, which was great. We had a full room. Keith joined us as well. We committed to some additional investments in training. Trailhead, which perhaps maybe some of the product guys talked about earlier, we're pivoting Trailhead to make sure we can train the consulting world at scale globally, as quickly as we possibly can. I'm excited about that opportunity. I encourage you to check against what I just said with any of the firms I've mentioned, we're excited about that.
Just to add a comment on that, Tyler and I were in a meeting this morning where, not to name the firm, they've had 100% growth in their Salesforce practice. They're doing it by two things. One is they're hiring tons of people. They continue to hire, they're super excited. They basically are taking away from the other practices, kind of those traditional legacy practices that Tyler's talking about. It's been very exciting for us in the marketplace to see that happen. Again, just addressing the board of this one firm today, they get it. They know where the future is. They know what's going on in the marketplace. They see this conversion of these amazing technologies.
They know that we're in the age of the customer or call it the Industrial Revolution 4.0, whatever you want to refer to it as. They know that this is here, and they want to be able to play a significant role with their customers, and they want to use it with our technology.
Yeah. The second part of your question, there was a third, I'll at least answer the second part before people get anxious, it was a question about our ISV ecosystem, we continue to be thrilled with the progress that we're seeing, certainly everyone here is familiar with the Veeva story. I think we recently celebrated our 10-year anniversary of the AppExchange. That was really the point at which we formalized how applications come to market with our support, building on our platform or integrated to CRM. Now we have about 3,000 apps on the AppExchange, there's a number that are very promising and exciting that are coming up through that. I think Vlocity is one that perhaps we mentioned earlier. It's coming at this from a very vertical specific point of view.
How can we build applications that really complement and sit on top of the Salesforce set of applications, whether it's sales, service, or whatever. I think that's one. I mentioned nCino, another one in banking. These happen to be industry-specific ones. There's some horizontal solutions. There's a company called Propel PLM, which actually you probably haven't heard of because they're new, relatively new, and they've chosen our platform to standardize, to build their next generation of product lifecycle management capabilities. If you're familiar with Agile Software, they were a PLM provider that PeopleSoft bought back a long time ago. The founders of that have now decided we're the platform of choice to build this new innovative solution. There's lots of those stories coming up. The other thing that's encouraging, though, about our platform and the opportunity with our partners, it's certainly those that are, let's call them startups.
They come with an incredible idea, they choose our platform to build a company around. The other thing that I think is pretty compelling are the number of partners that have tremendous amount of experience. They've been building software for decades, they choose our solution to build their next generation of applications. The ones that come to mind there are Accenture. Accenture has a software arm in it, which many of you may know if you follow them. They have a variety of products. One of them is a trade promotion management product for the CPG industry. It was sort of the gold standard, if you will. It just happened to be built on technology that's a decade or two old. They've chosen Salesforce to rebuild that cloud-based solution for CPG companies.
Imagine that story, where you have Accenture, going into the world's largest CPG companies, talking about how they've chosen to build this industry-specific product on the Force.com platform, tightly integrated to Salesforce in partnership with Salesforce. We go in, and we're having fun in those CPG conversations. Sage is another one. Right? Sage, I think I'll get this right, I think they're the third-largest ERP provider in the world. They're the number one ERP provider of SMB ERP solutions. They're based out of London. Similarly, they've acquired a variety of solutions and ERP products over the years on a variety of different technologies. Some are relatively old. They have decided to build the next generation cloud-based financial system for small and medium-sized business, and they chose our platform to build it. It's a product called Sage Live, which they released about a year ago.
It took them 26 weeks from when we reached agreement to when they released the first version of this. 26 weeks is pretty incredible for any of you who have followed building financial systems. They continue to innovate that. They're an early adopter of Lightning, so everything is Lightning-enabled. It's a cool story. Between the sort of the startups that are building cool stuff and building companies to the folks who have been in the market for a while and certainly have choice and certainly have a point of view, we're proud many of those are choosing Salesforce as well.
Hey, Keith. Alex Zukin with Piper Jaffray.
Hey.
I wanted to kind of double-click on the ISV question because clearly having thousands of ISV partners and apps integrate with the product is a core differentiator for you guys competitively.
As you move to specific functionality, I'm thinking field service, I'm thinking CPQ, I'm thinking others, as maybe $0.20 on that dollar is not enough to kind of capitalize on that $100 billion TAM opportunity. How do you balance that without alienating that next wave of startups from-
Coming and building products on this.
Yeah. Let me try to address that. We're a company that is very transparent by nature. It's one of the things that I think all of our employees, and I think our customers and partners really appreciate, is the fact that we're pretty open in terms of what our direction is, what our plans are, how we want to interact with our partners, whether it's an SI or whether or not it's an ISV. I'm going to use industries as an example because I think it's important. One of the things that our Salesforce Industries team does is they have a product roadmap. We pick the six industries that we want to play in. Let's say it's Financial Services.
We have a process map for the front office and a point of view for the future around CRM, we make a decision about, are we going to build it? Are we going to acquire it, or are we going to go recruit a partner? Tyler's team plays a big role in this. If you have that level of transparency, where you can sit down and say, "This is our vision of the future as it relates to retail banking, or wealth management, or capital markets, or insurance," or pick your micro vertical within Financial Services and say, "We're going to do this, and we would like you to do that." There is a social contract, if you will, based on trust and transparency, where we work together. There's a high degree of collaboration. That model has served us very well.
As we think about building our own organic product, we also think about building out our ecosystem and making sure that there's no collision course. Now, nothing's perfect. This is the nature of the channel, and it's the nature of a company that has a great platform, that would be us, where third parties want to go build product. We try to be as communicative, as collaborative, as transparent as we possibly can, as it relates to what our build plans are versus what we want to go out and recruit in the market. That's how we manage the process.
Okay.
Yeah. The only thing I would add is that ultimately, it's all about customer choice as well. We have some great examples when we acquired SteelBrick, right? The CPQ, configure, price, quote marketplace was very exciting, and SteelBrick was a very strong partner of ours, ISV partner of ours, and now we're thrilled to have them with the company. Very elegant technology, and really have enjoyed working with the leadership team when they were a partner, and now welcoming them to the family. At the same time, when we acquired them, and we're proud of the success and momentum we're seeing around SteelBrick, it doesn't mean we're not still promoting folks who may be considered competitive in the same segment. You can still go to the AppExchange, and you can still find other third parties in the same space.
In fact, we're starting to see a phenomena where some of these folks that build CPQ are innovating on top of our CPQ. Think of that as another layer of the platform. I think we've done that over and over. It's a very resilient ecosystem out there, right? Whenever we move into a new space, it just means the parties around it and the players around it evolve a bit, right? They build on top of and further integrate into our solution. In the meantime, in many cases, there's alternatives in the market that the customers will buy. There's a science to it because you have to be very predictable where you can, and transparent. There's a bit of an art to it as well to make sure we're still the advocates of the partners in the marketplace and promoting them.
Thank you. Mark Murphy with J.P. Morgan. Mark, I was wondering if you can update us on your progress and traction with the U.S. federal government. If you go back to March, there was this $100 million notional contract award.
Yep
with Health and Human Services. That was on top of a $500 million services award. The federal government fiscal year ended a few days ago. It's an interesting time, coming into the election cycle. I'm just kind of wondering, how do you think it's all lining up? What is the government prioritizing? Does it feel like speed of government, or does it feel like it's kind of moving along pretty quickly?
I'm not going to comment on the election. Mark, thanks for the question. You're familiar with that contract. I mean, that contract is essentially a blanket PO to do business. What's really important about those sort of agreements is that it is a statement of direction that is very important, and that statement of direction is that in public sector here in the U.S., the federal government, and we see this around the world, has endorsed cloud computing as a transformational agent, as a wave of the future. In fact, I'm proud to say that one of the folks in Salesforce Industries, Vivek Kundra, who at one point in time was the CIO in the federal government, was one of the original champions for cloud transformation, embracing the cloud for the federal government. The private sector and the public sector move at different paces.
We all know that. I think the most important thing is that contract vehicle, which allows a select few on that contract vehicle to help the federal government transform, leveraging the cloud. We benefit from that, of course, but most importantly, citizens in this country benefit from it. It's a good thing, but the most important thing is it is a statement of direction. It is an endorsement that the cloud is here, and it's the future for the federal government. I think it's a great thing.
Thank you. This is Keith Weiss from Morgan Stanley. Thank you guys for joining us this afternoon. I was hoping to talk to you guys a little bit about distribution strategies around stuff like Project Einstein or the IoT project. It seems to me a little bit different in kind from what you guys typically sell. You typically go into existing markets like SFA or marketing applications or Service Cloud, whereas this is much more evangelical. When we talk to systems integrator partners about Project Einstein, they kind of shrug their shoulders. They don't know what they're selling yet. How do you approach these new evangelical markets? How do you have to change or sort of adopt your distribution strategy to be effective and actually help everyone figure out what they're actually going into the marketplace with?
Well, thanks for the question. Look, I think it starts with painting a vision. It goes back to part of our critical go-to-market strategy. Right? Again, the three legs of the critical go-to-market strategy were all about speaking the language of the customer and painting a vision around an industry. Super important. Second was the ecosystem play, right? Which is both the ISV play and the systems integrator play. Of course, the third was the international expansion. I think what's important here is to understand that as these new products and offerings come in, we become more relevant. The company was born 17 years ago. Marc pioneered cloud computing, all that good stuff. We're all thankful for that. It's great to be at Salesforce, and I think it's great for our customers and our partners to be part of the Salesforce ecosystem.
As we become a more significant player, as we reach into the enterprise, as we deliver great success that we've guided towards this year, as we think about our goals of where are we going to get to $10 billion, how are we going to get to $20 billion, what sort of market share are we going to capture, it really is about mind share. Having mind share means that you have to have solutions that I would call sticky. Okay? The products stand on their own merit, but when you assemble solutions that run mission-critical systems for corporations, I don't care what industry you're in, I don't care what geography you're in, there's a common theme, which is mission-critical systems to drive success. Everything today is about the customer. Every pivot point is around the customer.
I think one of the reasons why we're seeing so much success, why our customer engagement has never been stronger, is that if you talk to the CEOs, pick a company, they want growth. Their agenda is growth, their agenda is shareholder value, but growth is typically number one. Usually when a CEO is not talking about growth, that company is not doing well. They're in trouble. Our message aligns very nicely because our whole message is about growth.
When you think about the ability to transform a company's business model around IoT and then layering in artificial intelligence on how you can make salespeople more productive, because they're just going to be more productive because something like Einstein is telling them, "You should focus your attention here." Or the use cases around service, which I'm sure Alex Dayon took you through, which are absolutely amazing in terms of top of the queue, predictive analysis, identifying problems that nobody would ever know about, taking next best action. I mean, you can pick every use case by line of business with Einstein and make a far more productive workforce. What CEO wouldn't want that? These are compelling messages. We train our Salesforce, we train our services people, we educate our partners on the capability and the opportunity to paint a vision.
As we continue to innovate, and one of the great things about this company is we are all about innovation. We'll provide these more relevant solutions that will be more mission-critical, which will go deeper in these organizations. That just means C-suite, boardroom, CEO, stickiness, mind share, and mind share always translates to wallet share. Okay. Yeah.
Hi, Steve Ashley, Robert W. Baird. You've done a few nine-figure deals to this point in time. Why don't you just give some color around what solution were you providing? What pain point were you eliminating? How important was the platform in those deals to delivering that value proposition? Thank you.
Yeah. Thank you for the question. These are typically multi-cloud solutions. A lot of them are great service use cases, but the walls between sales, service, and marketing are basically gone. Okay? I'll pick an example of the company that I've referenced before, not necessarily a nine-figure deal, but a great company called ABB. A great brand, global customer, industrial manufacturer, and they have a visionary CEO. Okay? Ulrich Spiesshofer is a visionary CEO, and he understands that there are traditional industrial companies, and there are companies who can actually capture data from robots to make a more meaningful service/sales and marketing experience. That is a very prevalent use case in industrial manufacturing. If you think about, there's always been a lot of data out there's always been a lot of data collection. Pick your company, pick your industry, but it's always been out there.
The question is, what do you do with that data? What is the next best action? Typically, if you're lucky, maybe you could translate that into better service. How do you take the step from maybe better service to better sales? Because your account team has a 360-degree view of the customer. There's a next best action for the salesperson to sell another warranty or to sell additional products. That is a typical use case for these larger deals. When you have somebody like Ulrich stand up in front of 400 people unsolicited at the World Economic Forum and saying, "I'm completely reinventing sales and service, leveraging Salesforce," I think that's a pretty good endorsement. Okay.
Thanks so much. Kirk Materne, Evercore ISI.
Hey.
When you think about these bigger transformational deals that you guys are seeing, and you think about technologies like AI and Einstein, when you go and talk to CEOs, how many of them have the business agility to even embrace some of these technologies that are transformative? Meaning there's a lot of business processes that inhibit the adoption of technology.
Right.
The technology in some respects is ahead of where the businesses can actually embrace it. I guess two questions around that. One, is that why you guys kind of lean more on ramp deals around some of these bigger transformational deals? I expect we'll continue to see that. I guess when you think about something like Einstein, of the CEOs that you're talking to, how many of them could really take advantage of the technology within a 12 to 18-month context, just given they've got business processes that are very rigid in nature? Thanks.
Yeah. No, thanks for the question. Look, transformation is difficult. It's not unique to us. It's not unique in the software industry. Transformation is as much of a cultural shift as it is a technology shift. I think the most successful companies who embrace these technologies have CEOs who are visionaries, who appreciate the value of technology, who have a sense of urgency, and in some shape or fashion themselves actually are the chief transformational officer for the company, whether they take on that title or not. I think you have to be very careful. If I were a CEO and I was embracing this technology, of course, I'd want to understand how I would apply it to a business problem.
There's a tried and true process here, where there are quick wins, you gain momentum, you gain believers, then transformation becomes easier. That's kind of a standard practice that most companies undertake. If you're going to do anything transformational, it starts with the CEO. It has to be the CEO agenda. It has to have incredible business value, and that person, quite frankly, as I said before, has to be the chief transformational officer. The artificial intelligence, AI has been around for a very long time, okay? In various forms. There's an acceleration because of all these emerging technologies that have come together that make it easier. We think with Einstein, we've assembled an absolutely incredible solution.
Again, going back to those use cases that I talked about earlier around a line of business, the use case around AI for sales or Einstein for sales or Einstein for service or Einstein for marketing. Those are natural use cases, and they drive productivity. Anytime you can stand in front of a CEO and justify results with productivity, CEOs love productivity, right? What does it do? Productivity drives growth, and it drives shareholder value. It's not that difficult a conversation, but again, I will tell you, these large transformations are as much cultural as they are technological.
Yeah, I think I'd just add to that. I think that's almost precisely the point. We'll see how this unfolds. If any company technology provider went in to talk to a CEO to talk about how artificial intelligence can change what they do without a point of view, I don't think that meeting's going to last very long. If you go in and talk about, we're encouraging our partners to do it, that's why I'm comfortable speaking about this, which is let's talk about how you transform your sales process. Prior to Einstein, it would've been talking about our amazing sales productivity tools are going to help you transform yourself. Now that conversation is more than that. It's about imagine if we bring these wildly intelligent CRM tools to help your salespeople be more capable, your inside salespeople.
By the way, there's an analytics layer to this as well, that will help you get better insight out of that data once you have it. I think it's precisely what the market needs, and I think it's precisely what CEOs want, which is what is the use case? I'm slightly confused by all the technology. Help me understand how this is going to help me sell better, service better, or market better. I think that's precisely the point.
Hi. Kash Rangan with the Because he's got another funny thing to say as well. Mark laid out the TAM this morning. Sales and support is about a $5 billion business. You already have a big share of your TAM. When I look at where the company needs to be in order to hit its audacious goal of $20 billion, there's a large TAM in analytics and platform together. It's about $40 billion today, going to $50 billion. We have a very tiny share of the TAM today. How do you, both Tyler and Keith, view sales capacity deployment, productivity, and the cost to book what seems to be a new set of frontiers in light of the company's longer-term targets?
Well, you don't want to ask the question?
I'm in.
Okay. Is the question about how we deploy our resources to drive-
How you see this going forward? You've got big TAM, small share. That's the obvious.
First of all, there's tremendous opportunity here, right? Even in our core business that have been around for a long time. As you all know, every quarter I do a very detailed operational review. I do mid-quarter operational reviews. I take a look at what we've done in terms of penetration by market, by country, by industry. Even if I go back to a core product like Sales Cloud, there is tremendous opportunity for us. Whether it's Sales Cloud, Service Cloud, Community Cloud platform, tremendous opportunity. Just remember, in the last 2 years, even though we launched the strategy 3 and a half years ago, this whole notion of solution selling, which really translates into multi-cloud solutions, really started to get traction 2 years ago, right? 3 and a half years ago, you put something in place, take some time to get some traction.
It's a bit of a cultural shift in terms of changing the way that people sell and position and service our customers. Even building the ecosystem of our partners and building their confidence, so that they don't look at us as tactical or opportunistic, and they think of us as going to market with them strategically. Across our entire portfolio, we have a lot of room to run. There's just no question about it. Now, every time we release a product, there's a life cycle in terms of, is it kind of in its incubation stage, early days, go to market, building up skill set, building up capacity, putting the right incentives in place, the right compensation plan? Somebody asked that question earlier about compensation plans. We try to design all of that to accelerate as much growth as we possibly can.
To set expectations properly, every time we release a product, no company gets it 100% right. I think we do it better than most. You learn your lessons. You learn your lessons after the first week, after the first month, after the first quarter, and then you make adjustments. You accelerate resources, or you shift resources, or you change compensation plans. You may incent partners. You spend marketing dollars. There's all sorts of levers that you can pull here. Platform, people love Lightning. In this world that we live in, where when you think about it's going to be all about intelligence, it's going to be all about mobile, it's going to be all about speed. Speed is the new currency. It's about connectivity, it's about productivity.
When you think about all those things, those five concepts, you're going to hear a lot of that tomorrow, I think it's just Phil Marc's keynote. When you think of all those things, we want to apply our resources where we think we're going to make the most impact to our customers. We make those bets, and we line up all those things behind it, dedicated sales forces, acceleration around compensation, for example, just to get people really excited, training programs. There's a massive movement behind everything that we release. We want to make sure that we have good plans, a product release process, if you will, all the way through the life cycle.
Over time, lo and behold, you get really good at it because you continue to refine and innovate the way that you go to market, the way that you invent the product. The product gets stronger. There are more proof points. As you know, you've been around this business a long time, there's a lot that goes into the thinking behind this stuff. Platform analytics, super excited. Still early days on analytics, even though it's been out for a while, and we continue to refine the product. Einstein, there's tremendous momentum, and we're just announcing it. There's a lot of thinking that goes behind it as we plan the business.
Hi, Ryan MacDonald with Wunderlich Securities. Keith, for you, we've seen obviously a heightened level of M&A from Salesforce this year, you talked a little bit earlier about finding the right balance with Demandware, in particular as you're integrating that. Can you talk about one with even more M&A beyond Demandware, what the challenges you face in integrating all of those in a timely fashion or the best strategy to balance that, as well as prioritizing that? Obviously with the M&A, you're taking on a lot of headcount. How does this impact plans for next year as you continue to look out to build sales headcount, sales distribution organically?
Yeah. Okay, thanks for the question. A couple of things. Number one, I've had the opportunity to talk to some of you about this before, and I think maybe Hawk had an opportunity to talk about it as well. We have a pretty methodical process around M&A. When we think about M&A, we think about not just the roster of companies that we think about, but we think about cultural fit, we think about the product, we think about the talent, we think about the opportunity to attach, whether it's going to enhance the capability or it's a net new revenue source for us. All those things go into the playbook. We think about how quickly can we assimilate? Are we going to be able to keep the people? Somebody asked the question earlier.
These are all things you think about, as well as, again, I keep referencing this because Tyler's here, so it's all good. How will our partners react to this type of acquisition? What would they think about it? What kind of difference would it make to their world? Of course, the most important thing is how do our customers feel about it, right? A lot of the great acquisitions that we do, the ideas actually come from our customers. Our customers have been talking about an e-commerce capability for years. Okay? Those are where we get a lot of those opportunities from. As we think about how these things integrate in our business planning, we also have a very disciplined process that Mark Hawkins and I work very closely on called the LRB. It's the long-range plan for the company, long-range budget and planning.
As we think about our M&A activity, we're also thinking about how that fits into the LRB and what the implications are, and what our allocation resources are across the company, across every line of business, customer-facing, R&D, operational, et cetera. We actually do a fair bit of planning inside the company, and we constantly innovate and iterate around those plans. That's my answer to your first question. Can you just tell me the second question again, please?
Yeah. With the influx of headcount that you're assuming with all the M&A, how does that impact your plans for next year in terms of building out the sales distribution panel?
Yeah. Again, we go through this disciplined planning process. I don't know. Mark, where's Hawk? How many times a week do we talk about LRB? Like every day?
We probably talk at least once a week.
Yeah
I would say. It's a fluid process where we're always trying to understand, exactly as Keith called out, how do we look at the long-range plan, how do we look at the near-term plan, and how do we constantly refresh that? There's a lot of discipline around that, and we're constantly thinking about what happens organically, what happens inorganically, and how does that come together? We look at it continuously, I guess would be the point.
Yeah.
For sure.
One thing I will add, Again, I was exposed to this three and a half years ago, and this is a company that runs the business based on prioritization. We have a process called the V2 MOM, if you're familiar with that, where everybody, starting with Marc. Marc and the rest of the executive team sit down on an annual basis, and we write the V2 MOM for the company. This is the vision and the values of the company, and the methods to achieve those goals, and the obstacles, and the metrics by which we measure the company. This is a very disciplined tool. It's not just Marc Benioff who writes the V2 MOM, along with the rest of the executive team, but Mark Hawkins has one, and I have one, and it cascades down. Tyler Prince has one.
My executive assistant has a V2MOM. There is that level of discipline and rigor inside the company around prioritization. When we think about acquiring companies, making investments inside the company, outside the company, we go through a very rigorous process through the V2MOM. When you come into Salesforce, you learn how to prioritize, because if everything is important, then nothing is important. That is kind of the golden rule for the company.
Question over here. It is Brent Thill, UBS. A question on international.
Americas has been the workhorse at 75% of revenue, but you have the other 25%. Most companies that hit six, seven billion in software spend about 50/50, and you are spending below that. What do you think needs to happen, or what are you putting in place to really open up that international opportunity?
One of our growth levers has been international, as I mentioned. Three and a half years ago, we put this in motion. When I came into the company, I looked at the portfolio of business. I would say, in your terms, we were overweight into the United States. Really to get into the enterprise, you have to serve global multinationals, which means you have to have a presence all over the world. I came from a world where international markets were certainly a much higher percentage of the revenue in the company, but that did not happen day one. That took decades to build that sort of diversified portfolio. When I came in, I thought, in discussions with Marc, we really need to accelerate this. We need to make more investment in Europe and Asia Pacific and Japan. Certainly, that takes many forms.
part of that is data center strategy, part of that is marketing strategy, some of that is distribution headcount, some of it is support services, some of it is in the channel. We've seen great results. Our fastest-growing region is EMEA. If Miguel Milano was here, our president of EMEA, he would tell you that he's thrilled that the company has rebooted, if you will, in terms of its investment over the last three and a half years into EMEA. There are a number of growth opportunities in EMEA. Many times in an earnings call, I will make reference to companies in EMEA because they're just doing a terrific job. We've got a very healthy business in the U.S. as well. The key is we want to run a balanced portfolio.
Balanced portfolio geographically, balanced portfolio from an industry perspective, balanced portfolio from a segment perspective, SMB, mid-market, and enterprise.
Industry.
Industry. Yeah.
Hi, Keith. Karl Keirstead at Deutsche Bank. Keith, I know Microsoft is an important partnership for Salesforce, but on the outside, from our point of view, it feels like the romance has cooled a little bit, and they're getting a little feistier competing. Is that an accurate observation, and what's your perspective around the relationship? Thanks.
Yeah. Thanks for the question. You should probably ask Satya if he's feeling feisty. I don't want to answer that question for him. Listen, we have a partnership with Microsoft, and we will always act in the best interests of our customers. This is nothing new in the industry. This is competition. We are a partner of Microsoft's, we're a partner of Oracle's, et cetera. It's nothing new. Competition is good because ultimately competition is what's best for the customer. I wouldn't characterize any relationship like that as feisty. I just think that's the nature of the technology industry. By the way, it's not unique to the technology industry. I just think it's competition.
Thanks. Derrick Wood at Cowen. Keith, last quarter, you mentioned a major expansion at UnitedHealth Group, and that may have been a first large win with the Health Cloud. Just would love to hear a bit more on this deal. Is there a competitive or, I guess, legacy displacement technologies involved? Were you able to go after budgets that you couldn't go after before with the Health Cloud and the vertical offering? Given the scope, were there different competitive dynamics that you saw in that deal?
Yeah. I actually don't think I said that, but probably somebody I work pretty closely, called Marc Benioff may have said that, but that's okay. Honestly, I don't want to comment on a particular deal. I want to respect the privacy of the customer unless they've authorized it. I know, for example, I mentioned ABB. I know that Ulrich, he wouldn't care if I said it. He's said things publicly, and that's fine. Generally speaking, though, again, when you speak the language of industry, when you have a vertical-specific product, there's just a credibility there, and these are multi-cloud solutions. Even if we sell something with Health Cloud, that is going to drag platform and analytics and other things with it. If we sell Financial Services Cloud, it's going to sell more products with it. It's been a very good strategy.
There's a lot of momentum with both of those products. We'll be releasing new products that we're not going to announce right here on stage from a vertical basis, and we'll continue to cultivate the ecosystem of the ISVs to build out those products as well. Again, industry orientation, speaking the language of customer, having an industry-relevant product set that will solve a pain point always drags more product. That's why you get multi-cloud deals. That's why those deals are large.
Okay.
Thanks. Steve Koenig with Wedbush again. Wondering if you can talk a little bit about the customer's desire that we've seen in some cases to have an integrated suite, which we saw play out in the on-premise market with the convergence and integration of on-premise applications throughout the enterprise. Will the same thing happen in SaaS? How long can a wide strategy, which is being best in class in CRM, how long can that sustain itself before you all have to rethink your strategy? Are there competitive situations in which you go up against a suite-based value proposition, and how do you compete with that now, and how will that evolve in the future?
Yeah. Thank you for the question. This best of breed versus suite thing has been around for a very long time. Everybody has a different philosophy. Where you have winning companies like Salesforce is when you have a best of breed suite. Okay? Our customer success platform. I think you know that in every cloud, we're a market leader. We're in the Magic Quadrant with Gartner, and it's all good. We're very proud of that. One of many things that's very different between Salesforce and sort of these legacy on-prem technology providers, is that we have a laser focus on the customer. We do not try to be all things to all people. We're not in the hardware business, we're not in the storage business, we're not in the server business, we're not in the ERP business. We are just focused on the customer.
It kind of goes back to my comments earlier around our process on the V2MOM and the culture of the company around prioritization and focus, don't be all things to all people. Don't be all things to all customers, but be very focused and be very good at what you do. Then over time, if you want to incrementally move to an adjacency, that's okay. But secure that serious focus on the customer, that makes us very different. We're not trying to dilute ourselves with all this stuff out here. We don't get distracted. I think that's one of the reasons why the company's been so successful.
Hi, this is John DiFucci from Jefferies again. Tyler, I have a question for you, and it's not about the large SIs, but you have a huge partnership network, and a lot of consultants that work with SMBs too. To follow up to Karl's question on Microsoft, one of the things that we're starting to hear more of anyway, is Microsoft's been plugging away at the Salesforce automation market. Let's focus on that. That's your biggest market right now, or your biggest business right now. It sounds like they've sort of become good enough, and it's a lot cheaper than salesforce.com, especially at a time when you're raising prices and adding more value, and that all makes sense. I know the last quarter, Keith has said several times, not just tonight, that it was an execution issue and sort of a blip.
That's sort of the thing in the back of my head that I just wonder. At some point, Microsoft's a big company, they keep plugging away. They got something now that's sort of good enough, at least for the SMB that is much more cost-conscious. Can you just comment on that? Actually, would you see that? Do you get any of that feedback?
Yeah, I think I might see it. I'll let Keith comment on more of the market dynamics, the question related to the partners, particularly the smaller partners in SMB. I think I would see it because I think I would see a defection of partners going to an alternative solution provider, I just don't see it. It doesn't mean it's not happening, I think I would see it because I think they would promote that, right, that they had done it. I do know we've recruited a handful of partners, the conversation is not about whose SFA is better when we recruit that. It actually goes back to something Keith said earlier.
Actually, if you're in the conversation that this is about sales and I'm only selling sales, then you're probably having the wrong conversation, because the partners that we're seeing see the bigger opportunity, where they understand that the lines between sales and service are blurring. In fact, in a smaller company, it's probably even more important than ever because in a smaller organization, it's important that sales are very dependent on service and vice versa. The conversations I'm seeing are how do companies take advantage of that? These smaller companies also appreciate that we're embedding things like world-class analytics into these applications, because for a smaller partner that's serving smaller customers, if they had to go build capabilities around one provider for SFA, a different one for analytics, a different one for, let's stick with AI for now, that's pretty challenging for a really small consulting partner.
Imagine they come talk to us. It's not about sales only. It's about sales plus service. By the way, it's got a proven analytics platform that's part of it. By the way, they're also thinking about what the next generation looks like in terms of AI and others. I don't think we're losing partners. I think we're gaining some partners in this game.
Aren't those partners both Salesforce partners and Microsoft partners?
There's some to that. The majority, I don't think that's the case. I think the majority of the smaller partners pick one or the other. Again, by definition, if they're small enough, it's going to be challenging for them to build competencies and capabilities in multiple areas. The bigger the partner is, I think.
Yeah
The more likely they might have multiple practices, and we deal with that.
Intuitively, if you have a dollar to spend and you're a small partner, you're not going to split that between Salesforce and Microsoft. You're going to place your bet on where you think the market leader is. Not to rephrase what you said, but I think that's what you're saying.
That's what I'm saying.
Okay.
Thanks.
Hi, Keith Bachman from BMO. Keith, I had two for you. You talked about processes and how management buy-ins for various activities. Demandware seems to make a lot of sense for why it fits in your platform, the events of the last few months seem to be, in some respects, more reactionary. For instance, Marc going over the top and saying he'd be willing to pay more than Microsoft for LinkedIn. The first part of the question, is there collective voices that come to decisions? In other words, does the whole management team buy into an outcome like that? The second part of that question is, you've talked a lot about analytics and Wave and Einstein, and all that seems to make a ton of sense.
Do you really need, as part of that process, incremental data-rich sets in order to make Einstein and Wave and the various other AI activities? Do you need more data sets in order to make all that come to fruition?
Yeah. I appreciate the question. We are absolutely unified as a management team on our M&A activities. We are very fortunate to have a CEO who has had incredible vision, and continues to have incredible vision, who pioneered an industry 17 years ago. One of the great things about Marc, there are many great things about Marc, but one of the really great things about Marc is that not only did he create a vision, not only do we create a first act and a second act, Sales Cloud, Service Cloud platform, we have had many, many great acts. When Marc takes a look at things, he looks at things with a visionary's eye and absolutely a beginner's mind. He looks at it through a lens that other people don't see, and he's able to translate that.
In every acquisition that we look at, in every sort of activity inside the company, whether it's an acquisition or whether it's organic in nature, it doesn't really matter, there is an awful lot of discussion and a lot of debate. That is part of the culture of the company, which is very transparent. This is something in this culture that I've never seen in a lot of companies, quite frankly. Whether as my role as a consulting person, my role as a general manager and executive selling to people or just running the day-to-day operations of the company, the fact that we are so transparent and that everybody gets a vote, and everybody gets a voice, and everybody gets an opinion, really makes us very unique. As I said, we are unified as a management team in these decisions.
There's always healthy debate about any topic, whether it's around M&A activity, or whether it's a decision about Salesforce Tower, look and feel of Salesforce Tower just a few blocks away from here. That is something that I can look at you with conviction. Okay? Lots of healthy discussion, lots of healthy debate. We have some great executives on the team that I have the privilege of working with. We have some outstanding board members. In fact, they're all outstanding board members, I should say, some of which are in the audience here today, who come with a point of view. At the end of the day, we fly in formation, and we stand behind the decisions that we make as a company. I'm not going to get into any of sort of the discussions around LinkedIn or any of that stuff.
I think that's been written in the press. Everybody's weighed in on their opinions regarding that. Artificial intelligence is here. We are at the forefront of it. It's been here for a while, but this is going to be a very long cycle. Of course, data is important to artificial intelligence, data comes from many, many sources. The beauty of our platform is that we're an open platform where we can get information from many, many data sources. We're all excited about that.
All right. I have time for one more question.
Hi, Sarah Hindlian, Macquarie again. Question for you, Keith. I wanted to piggyback a little bit on Kash's comments earlier in regards to Einstein and analytics. I am wondering, what is the monetization pathway for those products? Should we be thinking about the re-platforming or Lightning-type opportunity as the monetization, or should we be thinking about the next line item that you can break out, and where is that?
Yeah. Alex may have covered this this morning or today when he was talking about it, Einstein is built into our platform. It is part of our platform, there is some natural Einstein-like capability that will just come with the product. We will be making some announcements. Again, not sure it was covered today, but we will be making some announcements around pricing as it relates to Einstein. Okay. There is really two ways to look at it. There is a base amount, a base capability that will just enhance the product, which is good for customers. And then for the accelerated enhanced capabilities, there is an opportunity to monetize that. Okay.
Great. Keith, Tyler, thank you so much for joining us this afternoon. We really appreciate it.
You bet.
Thanks very much. Maybe give a hand for them.
Thank you.
Thank you. Thanks.
Yeah. Well, Keith, you are a tough act to follow, but we've got another great act, in fact. We're just going to keep rolling right now with our Chief Technology Officer, Parker Harris, who's going to come up and talk about, guess what? Technology. Sort of how we power the Salesforce solutions, and anything else you want to dive into with Parker. Parker, thanks for joining us.
Yeah. Thank you.
Ladies and gentlemen, Parker Harris.
Good to be here.
our chief technology officer.
Do you want me to start talking?
Maybe. You're going to get a question.
I figured you'd have some questions.
Yeah. The man in the middle.
Thanks for taking the time. It's Brent Thill with UBS.
Hey, Brent.
There's a lot of questions about the waves that you've been in through M&A. You went through a wave with ExactTarget, you kind of came off that, digested, and now we're in somewhat of a super cycle it seems like.
Yeah
given all the M&A that you've been going through. Can you just walk us through what, from your perspective as founder of the company, why is this happening now? There's a lot of questions around the organic ability for you to deliver versus having to buy everything at this point. What's happening in your mind that is causing this at this point?
I think if you look at the M&A we've done to date, there was an acceleration. I think when you look at tomorrow, I hope you all come to the keynote, by the way, and you see what we're talking about when we talk about Einstein. There were a number of acquisitions that we did for that. They were small, not that big. We were really looking for expertise, hiring data scientists, but data scientists had already been building technology and working in how to do that for Salesforce automation for leads and opportunities, and MetaMind was another one. That was a series of acquisitions that was really important, really to solidify. We were also doing organic development as well. We could do it all over time, and so for speed reasons, we felt like it was important.
I do think that's where the market's going, and it's important for us to have that capability, so we did it for speed. I've been working on bringing all those platforms together into one. They actually were all doing it in a very similar way. The base technology is mostly open source, so it's more the data science that was important. That was one set that we thought was really important. If you look at Demandware, that was a different type of acquisition. It was really when we look with Alex Dayon and Marc, and we look at CRM as a category, we want to be the leaders in the Magic Quadrant in sales, service, marketing.
If you look at the Gartner view of the world, not that we guide ourselves by Gartner, commerce is really that fourth pillar, and we didn't think that it would take us a long time to build. It's not a question of can we build it? It's a question of how fast do we want to go? We felt like in talking to customers like Louis Vuitton, who use both, they were like, "Oh, we use Demandware, and we use your Marketing Cloud." Now, we didn't ask them, should we go acquire Demandware? That was a good signal. Also came with revenue, bigger company, so a different type of company, not a tuck-in. We definitely look at the larger ones. We want to understand how does that come in with revenue. That was a bigger one.
The one that we just closed, Krux, that I think you all know about, was very important for two reasons. It's an asset I think that is immediately something we can sell in our Marketing Cloud. Andy Kofoid, who runs marketing sales, I think will hit the ground running with that. Also for me, it really is a platform. It's not a database-based platform. It's a horizontally scalable platform for taking all this from anonymous data to known data that I think over time, I see it as a basis for a lot of architecture work that I'm doing to bring together all of our B2C assets and then ultimately to bring together the B2B and the B2C side so that it comes together in one unified platform.
I think that some of these, if you look at the market, valuations have gone down, I think there's more activity in the market in general because of that, it's not a reason to go spend money. We're doing these for very specific product strategy reasons. Good questions.
Raimo Lenschow from Barclays. Parker, at the moment, this big shift in terms of how we think about cloud, with kind of AWS and Azure. As you think about the future of the company, you're using AWS for international expansion, it makes a lot of sense, how do you think about the underlying platform a SaaS company will have to kind of do themselves, co-locate, do in a public cloud in the long run? What's your thinking between the different drives?
Two years ago, I hired Randy Kern out of Microsoft, who runs infrastructure engineering for me. Really at the base layer of our platform, which is, we can call it infrastructure as a service. When we started the company, Amazon didn't really exist as a service, and it came out, so we built our own data centers, as you know, or we leased space and we built all the infrastructure. Our customers expected that to trust us, and initially weren't trusting companies like Amazon or Microsoft. I think that that has changed. At this point, for me, it comes down to an economic decision. We do not compete at that level of the stack, nor do I want to.
I think it's a commodity space, and I think you really need to be an ad-driven business, or have some model of revenue like a Microsoft has or an Amazon has that can fuel that, fuel that big build-out. That being said, what we're doing is we're engineering, and yet I have a lot of infrastructure that I run today, so that doesn't go away. We are engineering with both organic engineering and some open source, a way to run our service in our own data centers in a more abstract way. As you know, we have a partnership with AWS to run our service for some regions on AWS. It would be running on that similar layer, and then we're just going to, over time, look at what is economically viable for us.
We believe in the U.S., where we have enough traction and enough business that building our own and running our own economically is going to be more favorable to us. We believe in certain other regions where we don't have the scale, whether that's Canada or Australia or other regions, it may be more economically reasonable for us to leverage public cloud. From the engineering perspective, I'm going to build it in a way that I can kind of watch that play out over time. If public cloud becomes so cheap that I can't do it any cheaper, then I may go to public cloud, assuming that's what our customers want. Now, some customers are in the retail business, and I think that's changing, but they don't all want to give money to Amazon. There are other business reasons that are more than technical why.
There's compliance reasons, and then there's also competitive reasons that we may have to choose other solutions.
Wow. Quiet. Crickets.
I'll step in. Same infrastructure type question, we move up a level, is what are you doing on the database side? I have heard that you are really pushing the limits in terms of some of the infrastructure you have. I'm sure you're handling it, but what are you doing to make sure that you continue to scale up and create flexibility at that next layer up? Then, we've got a pretty sales-driven company here. How does the engineering follow along, and how do you feel about solidifying that base?
Didn't follow the second part of your question, let me answer the database question first. We started the company, I think we made the right decision. We bet on Oracle as a very solid database. It's probably the most solid database out there. Databases fundamentally have certain scalability restraints. Oracle may not say that, just the nature, you gain ACID transaction capabilities to make sure that when you save data, it's saved in a fully transactional way. You lose some of the things that you see now in these scaled architectures, horizontally scalable, where maybe there's less coherence, you get this massive scale, like a Google has, or HBase, Hadoop, Cassandra, all these other solutions. We have certain solutions that are perfect for running on an Oracle database. Our Sales Cloud or Service Cloud are great for that.
Now, when you get into marketing automation, you look at Adidas as a customer, you're selling sneakers on Demandware, you're targeting people you don't know, you're tracking clicks and email responses, that's a whole another level of data, I don't think a relational database is the right solution. That's where I think we're doing a lot of work with things like HBase. Also, the asset we just acquired in Krux has built a lot. It's built on Amazon, using a lot of Amazon's horizontally scalable services, but could run in other places. That is probably more appropriate for that type of data set. Back to Brent's question earlier, what I'm doing over time is there's going to be a data platform.
We already have a data platform, it will continue to evolve where data might be stored in a relational database like Oracle. It might be stored in a non-relational database. To a customer, it will still feel like one continuum, I'll also manage the data so that we're not just copying it back and forth, customers don't have to copy it. I think a lot of companies are headed that way. I think some companies think that maybe we'll solve the transactional characteristics of these horizontal systems. If somebody invents that, I think that would be phenomenal. Until then, we will see a mix of data providers. Your second question, I didn't understand. Sorry.
I was trying to be polite. I'll be less polite, hopefully more clear. Hardware engineering-driven companies tend to over-invest in hardware, under-invest in sales and marketing.
Sales-driven companies tend to maybe under-invest a little bit in the hardware and hope the engineers can keep the baling wire and the masking tape and the duct tape working.
Yeah
while we sell more stuff.
Right.
I'm not pushing that too hard on your front.
No, got it.
How do you keep You guys have had a massive scaling, so far you've done very well.
Yeah
How do you evolve the model so that it stays on top of it, especially as you take on more acquisitions, complexity, et cetera?
Sure. We have a planning process. We call it V2MOM process. You may have heard of it, but it's a way to prioritize what we do. Number one is what we call trust, and we manage the budget by that. We plan the budget. When we sit down with Marc and the executive team, we start with trust, and with Randy, we talk about, "Here's what we need to run all of our infrastructure." We spend what we need there. Now, it doesn't mean that Marc's not putting pressure, Mark Hawkins is not putting pressure, saying, "We need to see that you save a couple points." It always gets what it needs, and it's just that pressure to check to see, is that really the number that you need?
We move on to fueling the people who keep our current business, which are our customer service and customer support and CSM group, and then we fund sales. It's really in that priority order that we always think of our business, and there's never been an issue with being able to fund what we need on the infrastructure level.
I'll ask one here. You mentioned you didn't want to get into the infrastructure as a service business because it was an ad-driven model. I guess my question to you is, when you look at the consumer models out there, does the R&D organization need to operate differently when you're serving a consumer business where you're all more about getting users as opposed to serving a business which has different requirements? How do you think about that from an R&D perspective?
I think when you're serving the B2C world, it's less manual, human-driven technology where you're in a call center, you have people answering the phone. In sales, you have salespeople selling, typically. But in a B2C world, you're marketing to a massive amount of people, and I don't know it's you, I just know that you fit a certain characteristic, and I target you, and then you respond, and it's really computer science that's pushing you through the sales process, and then maybe you self-serve and you go to an e-commerce site. Whereas on the B2B side, it's usually human beings who are doing the selling, doing the servicing. What I find really interesting is I think there's, over time, more and more of a blurring of the lines. You take the adidas example, yes, you're put into a targeted bucket.
We think you're going to buy the Yeezy sneakers in the flash sale, so we send you a social post. You go and buy them, but you bought the wrong size. What happens, you're going to call the call center, and someone's going to answer the phone and say, "Oh, yeah, you bought the wrong size. Let me help you." Maybe you can do that electronically. That's where we see one of the connections and examples of crossing between what we classically call B2B and B2C. What I don't want to do, and what I think some companies think of is there's the B2B stack and the B2C stack, and B2B technology and B2C technology. I do think that there's different technology, there's different scale. Maybe the B2B is more of a relational database, B2C is not.
I need to make it more of a continuum because when you cross over, and you bought those Yeezy sneakers, and you were clicking on these things, and you call the call center agent, the call center agent needs to know who you are, what did you buy? Maybe if they're going to upsell in the call center, you want to see more information about not every granular bit, not every click that the computer cares about, but you want to see something a human might care about. That's what we're doing, is bringing that all together. I don't think we would be thinking this way if we hadn't, back to acquisition strategy, bought ExactTarget. We understood marketing automation, but ExactTarget took us into this entirely new space where it made us think more about those types of companies.
Even though we were marketing about it at the time, they didn't totally get it. We bought ExactTarget, and I think Demandware is just yet another synergy that extends that.
Thank you. Yun Kim from Loop Capital. Can you just talk about, from your point of view, overall, what's going on within the platform as a service market, the industry, and how, obviously, you guys have done very well over the last 10 years building that out and have early success and early leadership in that position. Now we see other vendors, including AWS, is obviously pushing that market pretty aggressively recently. How does your Force.com-driven PaaS offering different from AWS, which tends to be more focused on open source, kind of hybrid model? A lot of those NoSQL database applications are running on top of that. Do you ever envision supporting a lot of these open source, NoSQL type of database just to be able to compete against that growth area?
You have to remember that we are very focused on being a CRM company, and when we think of PaaS, we think of PaaS in the context of CRM. If you're building an application or extending CRM, it's related to something around the customer. I feel like we're at a higher level of the stack than an Amazon. Amazon is a collection of services, and they're amazing. Yes, they keep moving up the stack. One question, I'll just kind of repeat it and say it in a different way people ask me is, "Amazon keeps moving up the stack. Aren't they just going to move up into your space?" That's not how Amazon thinks. It's not their business. You may give a set of services. Great, there's a NoSQL database, and here's a SQL database, and here's a caching service.
That's just all technology, but we're very focused on building a solution first backed by a platform that lets what we call these trailblazers then take it and customize it and extend it and build other applications that are metadata-driven. We just think about it in a totally different way. I think where we have to be careful as a company is that we don't start to think of ourselves as a general purpose PaaS. Forget CRM. We have technology that could do that. It does do that. You could say, "Great, forget CRM. We're going to build a totally separate business." I think then we start to try to figure out how do we compete with some other general purpose PaaS.
Azure or Amazon, or even through Heroku, which is on Amazon, are great examples of using open source and using code that could help you. Field service is a great example. Route optimization. We've got to send trucks out and check the traffic patterns and make sure availability and send the right person to the right location in the most optimal way. There is software out there that does that. We happen to license some, but it could've been something that if we had all the right capabilities, don't rewrite it on my platform and try to translate whatever you've written, Java or Perl or whatever, into APEX.
Use it and extend out to Amazon or Azure or Heroku and run that processing and that complex processing, and then come back with the answers and come back to your CRM. That's my goal, is to extend into an Amazon, an Azure, a Google Cloud platform in ways that can extend what we do. You see customer examples doing that today, but they're wiring it up themselves. When I think about how can I have identity be shared, authentication and metadata and all of the things that you need when you extend out, you need that context, make that pre-wired so that you can actually use that. I don't see it as a competitive issue. I see it as something we're going to extend to, and we're going to stay true to our mission of CRM.
Hi, thanks for coming to talk to us. This is Keith Weiss from Morgan Stanley. A couple of weeks ago, Oracle was talking in this room as well. They talked to us about multi-tenancy at the database layer versus the application layer. Can you explain to me what that actually means? 2, is that something that is a relative benefit or deterrent for you guys, or is that something you could take advantage of since you actually use their database?
Yeah, that's a good question. When we started the company, we built in Oracle, as you know, and Oracle knows nothing about the fact that we're multi-tenant, the Oracle database, Oracle Corporation. When it's stored in the database, let's take accounts or businesses that I'm selling to, there is a table, a database table in the Oracle system called Accounts. Data is in there, and it's commingled. It's like your data's in there, and somebody else's data is in there. In front of that Oracle database, we have a lot of code that does the security model, it does the data extensions. We have custom fields. Everyone has different custom fields and how to make that optimized.
We've done a lot of work, and it works very well. A lot of work's been all the optimization. We are exploring very interesting things with Oracle on how to take advantage of more capabilities of Oracle so that, how do we store the data in a way that each company is on its own partition or table space is Oracle technology, or maybe even leveraging some of Oracle's native multi-tenant capabilities. The only reason that we would do that, where we get the advantage, the only time I care about it is when a customer wants to move around in our cloud. Why do customers want to move? Maybe they want to move from the U.S. to Europe because they're a European company, and they really want their data in Europe.
As we grow the service, we grow these Oracle databases, and sometimes we have to break them in pieces because they get too big. When we do that, it would be much better if that was completely seamless to our customers. It's pretty seamless now because we've done a lot of tech around it, but if I could just move customers transparently with some Oracle technology, that would be a benefit. Those are a couple of examples where it would matter, but it's mostly transportability and management of our farm of data, and less about anything inherent in the capabilities of the service.
Okay.
Yep.
Hi, thanks. Steve Ashley, Robert W. Baird. Is there anything with next-generation technologies, OpenStack, containers, Kubernetes, that would be germane to what you're doing and offer any opportunity for efficiencies?
Yeah
improved speed or anything? Thank you.
Yeah, great question. That's exactly what I was referring to when I was talking about when we started the company, we really did all of our IP very much at the top of the stack, the multi-tenancy, and it was really at the application tier. We ran the database at the time state of the art. It's not state of the art today. What we've been doing over a period of years is building out that middle layer, and leveraging every bit of open source we can. Things like Kubernetes and Mesos and whether it's Docker or other container technologies, those are all elements that we're looking at using.
They're not all mature enough for what we need, so we're having to put a lot of our own IP on top of it, and we're giving back to the open source community as much as possible, again, because that's not a layer that we want to own, and it's totally fine. I do think there's a lot of very valuable open source out there right now. I think it's a pretty exciting space. I think a lot of companies I talk to that are doing the same things are looking for that portability. They're looking to be able to move around.
I think that over time, more and more, there's going to be an arbitration between the public cloud providers where you're going to be able to say, well, Amazon will give it to me at this price, but Google is dying to get more customers, and so they're going to give it away right now. Great, I'll go to Google and then Microsoft. That's really where we're headed. For any public cloud usage, we want to be able to do that arbitrage as necessary.
Thanks, Parker. When you think about, you're obviously rolling out Einstein for Service, for Sales, for Marketing. Each of those clouds has somewhat of a different back end, meaning Marketing was built more on a Microsoft back end, then obviously you had Oracle for Sales and Service. Do you have to, I guess, construct an Einstein for those separately? Meaning, does the data interplay between, say, the Marketing Cloud differ in how the data would interplay on, say, the Sales and Service? Over time, is that, I guess, a hindrance to trying to bring the Einstein functionality together in a bigger offering that would cover all those clouds? I'm just trying to get a sense on if the back ends, how they're currently set up is limiting as you think about AI over the next, say, three to five years or something.
Yeah. A great question. Back to the conversation earlier about data layer, relational databases, non-relational systems, and B2C and B2B. Really what I see is, and what we're building, we have a first version of it, is a data lake. All the signals that are coming, when you look at our Marketing, we talk about the signals for data science. There's signals from Sales, from Service, from Marketing, from IoT, from your email, your calendar. All of those signals are coming from everywhere. They're coming for us from our Marketing Cloud. They're coming from Demandware. They're coming from Thunder, our IoT cloud. They're coming from our Sales and Service and Communities. All of those signals need to go into really one location. For our first version, that's essentially what we've done. We don't have separate versions of Einstein.
Certainly, there are separate models per customer, because we do want to keep that true that each customer has their own data. It's protected, it's safe, it's secure, it's separate. Really the value of data science is the signals are coming from everywhere. Don't forget, those same signals are also super useful, and data science is super useful in the Marketing sense to do that segmentation and targeting. I think we're going to see a lot of use cases of that. We've got a first version out. I think we're learning a lot from that and how it evolves over time, and that's really what I mean about how this B2B to C platform comes together over time is, what is that? What is that shared data lake? Activity lake, we call it, or engagement history, is different phrases we use.
What is the profile of a customer, and what is that? Do we have a federation of profiles depending on what the use case is and what is actually shared? That's the world we're headed into, and I think Einstein has helped push us there.
Any more questions?
I guess you had all your questions answered today because Well, Mark will be here tomorrow. You just got to wait and hit him with all the good questions.
I think people look thirsty.
That's it.
Well, actually, what it looks like is people need a drink.
Yeah.
There's a difference. All right. Well, Parker, thanks so much for joining us today.
Yeah, absolutely.
We really appreciate it.
Thanks for having me.
Just to wrap things up, I'd like to ask Mark Hawkins to come up and help close things out. Just as a reminder, we'll be back here in this room tomorrow at 3:30 P.M. for a conversation with our chairman and CEO, Marc Benioff. Just remember, make sure you bring your badges with you. We won't be able to get up to this floor, so please remember to do that. We do have refreshments outside the doors here, so please stick around, join us for a drink. Mark, why don't you come up.
Great
maybe wrap things up for us today.
Super. Thank you, John. Thanks again. I just want to say again, you guys, thanks for investing the entire day. We know your time is precious. We hope you found it informative, and you hopefully enjoyed the access to our entire management team. A good chunk of it, at least. Then also, of course, you'll have a chance to talk to Mark tomorrow. We look forward to that engagement as well. Thank you so much. We'll meet you guys in for a drink maybe out in the foyer. Again, thanks so much, guys. Take care.