Editor's note: We have updated this story with comments from SAP CEO Bill McDermott, who spoke Wednesday afternoon at the Citi 2016 Global Technology Conference.
Salesforce President and COO Keith Block tried to convince investors the software company’s soft US sales is a minor blip in an otherwise record second quarter that brought in $2.04 billion in revenue.
Block, speaking to investors Wednesday at Citi’s 2016 Global Technology Conference in New York City, also dished about the San Francisco software giant’s new artificial intelligence (AI) offering, Einstein, and its acquisitions strategy.
'More Push Than Pull' for Salesforce in US
In its second-quarter earnings call for fiscal 2017 last week, Block told investors Salesforce “saw some softness at the end of the quarter, primarily in the United States.”
Salesforce still does most of its business in the Americas — by far. According to its financial reports for the second quarter, the Americas accounted for about $2.91 billion in revenue for the six months ended on July 31, or 74 percent of company revenue. Europe came in at 17 percent, and Asia-Pacific 9 percent.
Asked about its United States sales performance at the Citi conference Wednesday, Block said Salesforce saw more “push than pull” in the United States market.
Some deals, he said, will be pushed to the third or fourth quarter or even into the first quarter of fiscal 2018. Enterprise buyers are “very smart” and “very sophisticated,” and he expects those deals to resurface later in the year or early next year.
He told investors last week he’s spent time with three of the CEOs and COOs of the top 10 banks in the United States.
Block said the US team is tightening its playbook and making necessary adjustments.
“This is a blip, more or less, a speed bump around execution,” Block said. “I have enormous confidence in our leadership team in the US. We’re tightening processes and adjusting the playbook.”
Gunning for SAP ... Again
When the conversation turned to e-commerce and Salesforce’s acquisition of Demandware, Block took on SAP again. SAP Hybris is a major player in e-commerce. The moderator of the talk with Block specifically cited SAP's e-commerce presence, prompting Block to respond,
- "SAP is entrenched in the back office. They've made a wonderful living off the back office. But I don’t think anyone would sit here and say SAP is a company that has vision and innovation. Now I'm sure that (SAP CEO) Bill McDermott would come here and say something differently. Great guy, great CEO, great vision. But this is not a company that is steeped in innovation."
A SAP corporate media relations official offered a response after CMSWire alerted the company of Block’s comments:
- "Bringing attention to your rivals to deflect from yourself is a strategy as old as competition itself. Consider this: SAP S4/HANA, a new business suite, is years ahead of what competitors offer. S/4 HANA is already the de facto standard for enterprise software, as R/2, R/3 have been in the past. SAP S/4 HANA has changed ERP from a system of record to a system of innovation. In addition, SAP continues to invest in new areas of innovation, such as IoT, Connected Health, artificial intelligence, machine learning, blockchain, to name a few."
Block also called out large, legacy vendors for being more about integration than innovation.
In head-to-head revenue competition, it’s still not close: SAP's yearly revenue of $23.7 billion is significantly higher than Salesforce, with revenue of more than $6.7 billion.
SAP CEO: Advantage is Ours
Later Wednesday, SAP's McDermott spoke from the same stage at the Citi conference. Asked to compare SAP Hybris to Salesforce Demandware, he said many SAP customers do billions of transactions on Hybris with "huge scalability." Salesforce Demandware is "North American-centric."
Demandware has "a level of complexity and individual implementation cycles that a company like Salesforce historically wouldn’t have been accustomed to," McDermott told investors. "This is not a turnkey, simple 'let’s just get it on-demand' kind of solution."
Putting Demandware into Amazon Web Services with "that level of complexity" along with other Salesforce recent acquisitions "will be interesting," McDermott said.
"They took a company that essentially had a simple cloud offering and now you’re getting into more sophisticated, complex business processes," he added. "We think that's our sweet spot. We think that will be a tougher transition than people might think for a company like Salesforce. ... If you think about core ERP there’s nothing about Salesforce's history that would indicate they actually have core ERP in their skill set and that will be a very important advantage for us."
During his time in the spotlight, Block also discussed Salesforce’s plans for Einstein, its artificial intelligence (AI) offering. The company’s making the big unveil at its Dreamforce Conference in San Francisco next month.
“We’ve been lining up assets for some period of time now to fill out our portfolio for AI,” Block said this morning. “Einstein is our foray into the space in a big way. It’s a classic example of listening to our customers.”
It also made a major acquisition this year with its $2.8 billion purchase of Demandware, marking a move into the e-commerce space. It adds to its cloud platform lineup with the creation of a Salesforce Commerce Cloud.
Block said Salesforce looks for culture and technology fits in its acquisitions, and Demandware represents a “great complement to our space.”
Asked about the missed opportunity to acquire LinkedIn, scooped up by Microsoft in June, Block said, “I’m looking for (Microsoft CEO) Satya (Nadella) to walk in the door to answer that question so I don’t have to.”