Salesforce.com and its ecosystem evolve to address industry demands
Jillian Mirandi, Senior Analyst
JUL 29, 2014 02:18 AM
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Salesforce.com takes a three-pronged approach to industry-specific applications

The fundamental difference between the Salesforce1 World Tour in Boston and Salesforce.com's Dreamforce event last November was that speakers at the Salesforce1 World Tour placed increased importance on industries. Over the past 15 years, Salesforce.com has experienced approximately 30% year-to-year growth, generating $4 billion in CY13, with a largely horizontal portfolio. At this scale, Salesforce.com must evolve its strategy to penetrate the next wave of customers and will tailor its portfolio and message to better address specific industries. The company's industry strategy is three-pronged: Build industry-focused business groups to develop, market and sell its suite of applications; encourage Platform ISV partners to build, market and sell industry applications; and acquire vendors with industry-specific expertise to tailor Salesforcce.com's solutions to verticals.

Salesforce.com will successfully address industry demand through its new business groups and partners, but will face challenges as vendors from across the IT landscape make similar investments. Salesforce.com did not take full advantage of its portfolio and ISV partner ecosystem head start against competitors, and we believe the company will see more competition than it is used to in the industry race. However, with such a powerful and agile sales and marketing engine, Salesforce.com has the opportunity to get out in front of potential customers very quickly.

New industry-focused business groups and experienced executives will drive the next wave of CRM growth

Salesforce.com's portfolio will maintain a horizontal focus, while the company tackles vertical growth by tailoring its messaging and focusing its sales teams. By increasing industry investment, Salesforce.com has the ability to penetrate highly specialized businesses it otherwise may have missed. Tailoring sales and marketing to specific industries through use cases and customer examples to prove the company understands unique vertical demands is a key element Salesforce.com is working to build through its new business groups. The company may never have the industry expertise of SAP or Oracle, but improving the way it interacts with industry players will help drive growth of Salesforce.com's portfolio.

As outlined at the Salesforce1 World Tour in Boston, Salesforce.com has had six industry-specific groups in place for six months under the new Industries Business Unit led by Vivek Kundra. Industries include public sector, financial services and insurance, healthcare and life sciences, automotive, retail and consumer products, and communications and media.

Additionally, Salesforce.com appointed employees with key industry experience to lead respective industry initiatives such as former Comcast Cable CIO Andrew Baer, former Gap, Inc. VP of CRM Marketing Shelley Bransten, former Genentech CIO Todd Pierce and former Renault COO Patrick Palata. Furthermore, industry guru Keith Block was appointed as Salesforce.com president and vice chairman and retired U.S. Army Gen. Colin Powell was elected to Salesforce.com's board of directors. We expect industry leaders to be selected for financial services and public sector initiatives in the coming months.

Salesforce.com relies on ISV Platform partners to develop and sell industry-specific applications

Salesforce1 is the driving force behind the company's industry applications play. Salesforce.com is taking a similar approach as Amazon Web Services (AWS) and Microsoft by leaving partners white spaces to build, sell and service industry-specific applications. While Salesforce and its platform competitors have the technical expertise and agility to build industry-specific applications in-house, building and supporting these applications increases R&D and sales and marketing costs — costs that Salesforce.com, in TBR's opinion, is trying to reduce. Instead, leveraging partners to drive the majority of industry growth and ensure simple integration enables Salesforce.com to enter the industry applications market while improving profitability and leaving the risk to partners.

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