Gavin Patterson has growth on his mind.
Coming off another quarter of growth bolstered by increasing demand from its customers for tools that help them establish direct relationships with their own customers, Salesforce shows no signs of slowing down. The SaaS giant is also going all-in on its Customer 360 strategy, helping companies like Moderna, PayPal and Southwest Airlines analyze first-party sales data, connect remote employees and answer customer service calls around the world.
But Salesforce’s growth prospects might look vastly different in the future. The SaaS pioneer is taking a pause from its string of acquisitions over the past few years to instead look inward at strengthening integrations across its existing products and growing those businesses across the globe.
Leading those growth efforts is Patterson, Salesforce’s president and chief revenue officer, who was named to the position in May 2020 after serving as president and CEO of its international business. Before that, Patterson worked across Europe and North America at Procter & Gamble, Virgin Media and BT. He was at P&G right as the company was shifting from being a U.S. company with an international arm to becoming a truly global company that could find customer insights across markets.
With a deep understanding of the effects of globalization and an eye on the customer, Patterson is now responsible for driving the growth of Salesforce products and services around the globe. In a recent conversation with Protocol, Patterson discussed how Salesforce plans to keep growing, the importance of Slack, the tech landscape in Europe and the company’s plans for globalization.
This interview has been edited and condensed for clarity.
What do you see as the primary drivers of Salesforce’s growth in the most recent quarter? What was really pushing that growth?
Well, I think the underlying demand for what we offer, which is fundamental digital transformation of your relationship between you and your customers, has become absolutely critical to every type of organization: be that a small business, a one-person business all the way through to multinationals, schools, governments.
What has become clear over the last couple of years was that if you didn't have a digital strategy, or you had a superficial digital strategy, then quite frankly, you didn't really have a strategy at all, because you weren't able to manage through this challenging period.
At its heart, what we do — and we like to think we're the best in the business at it — is more important than ever. I think we've really got our execution right on the money. We’re operating as a global organization now in a very agile manner, with strong leaders in each of our key markets. And we're able to really attract some outstanding talent to come and work in the business as we've grown over that period.
And we've continued to verticalize our business. By that I mean — it sounds rather jargony when I say it like that — it means organized by industry. And what that means, I think, for our customers and our clients, is we just understand what the problems are that they face ahead of the meeting so it’s not a generic sell, it's actually [that] we understand the issues. And the solutions that we come with already come with the right customization for that industry.
One of the things [mentioned] in the earnings call was that there are no immediate plans for any sort of M&A, no big acquisitions or deals. So where do you see the growth coming from over this coming year?
One of the pleasing things you can see in our numbers is if you want to call it the core or the base business — the existing business, pre-acquisitions — is growing as fast as the acquisitions, if not faster in some places. That’s quite remarkable in many ways. To deliver the sort of growth rates we're talking about, you need the bulk of the business to be growing at 20%-plus, and that's what you can see. Be it those core Sales Cloud numbers over 20%, Service Cloud the same or annual sales: Each of them have over $6 billion [in revenue] now. That’s bigger than many SaaS companies in totality. And those two clouds are now over $6 billion, growing 20% a year.
The U.S., if you look over the last couple of years, we're really growing fast again. It's our most mature market, it's our biggest market, it’s probably two-thirds of the revenue of the company. In order to grow at the rate we're growing at the moment, the U.S. needs to grow. We need to grow both outside the U.S. and inside the U.S. We can't make the growth rates based on the international business alone. So that has made a real difference.
We're at the beginning of the Slack integration. It's a brilliant product. You give it to a customer, they play with it a little bit or they've already experienced it, they won't give it back. I mean, it's an extraordinary product. In my lifetime, I've only probably seen two things like this. And people, once they get [started] using it, it's very, very sticky because it changes the way you work. And you realize that email hasn't changed in 40 years, and it wasn't really designed for the way it's being used.
Once you start organizing around channels, not people, and you've got access to two and a half thousand different apps now that are part of the Slack open architecture and can plug straight in, the way you work just changes. And so we're right at the beginning of that. I see a huge opportunity in really bringing that to customers and helping them change the way they work.
What is Slack’s impact for Service Cloud and Sales Cloud, and the overall vision for where Salesforce is going? It’s obviously a huge strategic priority for the company.
Well, it's integrated in each of the clouds, so they come Slack-ready. And if I give you a couple of use cases, because I think it's easy when you describe how it gets used, it begins to become clear why it changes the way you work.
So we did the whole Slack acquisition on Slack; we closed the deal on Slack. So it works in a sales process extremely well if you want to. If you want to swarm around closing a deal and making sure that all the documentation is evergreen, you're able to work with outside advisors and inside colleagues, lawyers, investment bankers. It applies the same way in our own selling motion, you just move faster. The data is fresh, it doesn't get stuck in people's emails and, because you're able to plug in things like DocuSign and other apps, you just move quicker.
So [it] significantly reduced time to close deals and radically reduced, I think it's almost 50% fewer emails have been sent since we've started using Slack. And it's because you don't have all this noise behind it.
In the service arena, it's fantastic for swarming around complaints and outages. If something is moving in real time, you need the most up-to-date picture of what's going on available to a group of individuals who are working on it collectively. To me, that's another great example of how it works.
We're seeing a shift toward first-party data and companies wanting to have that customer data and developing customer data platforms. Is there a connection between having that customer data platform and already being in the CRM business — already having some data on customers and that history?
First-party data is critical to every business now, and particularly the way things have moved with Apple and to some extent with Facebook and Google, you can't buy it in the same way. And by the way, actually, you can collect a lot more of it with your customers' permission anyway. So we certainly believe in that vision.
We're delivering against our customer data platform strategy: It pulls together all the clouds on a common architecture with a single data source. And with MuleSoft, you can integrate it to existing IT and databases. That is a big theme and one where, again, we're delivering on today, but we're well-positioned as well for the future.
Another thing I wanted to touch on was international markets. A lot of the company’s growth is coming in the U.S., but some of it is also coming from international markets. How are those markets doing, and are there plans to continue to expand further internationally?
I mean, you've got the numbers, but just to contextualize them, overall revenue 26% up year-on-year, Americas 23%, EMEA 38%, APAC 20%. APAC is a little low because it's affected by FX in Japan in particular, which is a very big business for us, but if you back that out, it's growing 26% year-on-year.
In terms of why and the importance of it, as I mentioned earlier, the ambition we've got coupled with the demand we see in the market is such that growing at that sort of rate is not unreasonable in the U.S. and outside the U.S. This isn't a choice, as far as we're concerned.
Actually, what we’ve found that has been very effective is in creating a global organization [is that] we’re able to bring the best examples to our customers of things that are working in one market and bring them to other markets. And those can be geographical markets, or they can be industries or verticals as I mentioned earlier.
I spent my first 10 years of my career at P&G in marketing, and I was there in the 1990s as P&G was going through this same journey to go from being a U.S. business with an international arm to actually a truly global business that looked at its customers and found customer insights, found themes that work on a global basis. And what P&G found, and software is exactly the same thing: There are far more similarities than differences around the world.
It's not to say we don't need to have some form of localization — language is a good example of that — but the challenges facing a bank in Australia are the same as those in Japan, are the same in the Netherlands, they’re the same in New York.
What are your thoughts on the current climate in Europe now from an economic, business, social and political standpoint?
The situation in Ukraine is obviously very close to home. Not for me, at the moment, since I’m in San Francisco, but I spent a lot of time in London. And it's a heartbreaking situation, no question about that. And we're playing a role in humanitarian efforts, we've made donations to Ukraine and the victims.
The impact on our own business is, quite frankly, it's on the edge of our business: We don't have a business in Ukraine. We have a very small business in Russia, which we're exiting, as many companies are doing. And employees-wise, we don't think we don't have any in Ukraine. Now, we have families of people who work in the business who are affected by it, and we're supporting them as much as we can. But we don't anticipate the war to have more than a marginal impact on our business. And where we'll need to, we’ll just reallocate resources because actually, in truth, we’re supply-constrained, not demand-constrained, at the moment.
What are your thoughts from a broader perspective on how Europe plays into the tech industry? I know, for example, Eastern Europe plays a pretty large role in outsourcing technology talent. What are your thoughts on the general European tech landscape?
This is a good question because there’s a lot of very talented engineers out of some of the Eastern European countries, Poland being an example, Hungary, Ukraine. For our own business, it's relatively limited in that area.
More broadly though, I would think it will have an effect. Estonia is an incredible country, it's where Skype was conceived and is a very digitally savvy country. So my sense is a lot of that talent is mobile and will move to safer locations if the war spreads. Let’s hope it doesn't, and let's hope for a fast resolution.
I think more generally, there is a lot of talent in Europe, and it's beginning to come through a bit more now. So, fintech, for example, in London has really taken off over the last few years, and I would say is competitive with the U.S. in terms of fintech startups. And so that's one cluster that has managed to break out and become competitive with the Bay Area.
The games industry in the U.K. is another one, where there are these clusters of talent-meets-money and investment that has done very well. The scene in Paris is blossoming, I know that. And Berlin is very strong. Israel and Tel Aviv are a source of many great startups.
It's interesting as the companies get bigger, the place to be still is to graduate to IPO or list in the U.S., in my opinion. It’s a much better place for a tech business to grow, and that's just the way it is, I think. The markets understand them better.
What other differences do you see in terms of, let's say, the maturity of enterprises moving to the cloud in Europe as opposed to here? Do you see more adoption here than there? Are there different challenges or different ways that they're approaching it?
Obviously it started here, but the big European countries and companies have run on a global basis. So if you're Unilever, you see your competitors as P&G. And so in terms of technology adoption, I think it's pretty similar. And there's a long way to go on cloud and public cloud deployments in particular, both in the U.S. and in Europe.
Having local instances of software — so not taking the data offshore, ensuring that it's managed locally and serviced locally — this is a big theme in not just Europe, but in many countries around the world. So in Germany and France, in Switzerland and Singapore, in Australia, I see the same thing: They want local people to look at local data and [have] it not leave.
I think the good news for us is through our Hyperforce deployment, we can scale our business and create local instances of Salesforce in a very efficient manner. So we're not dependent on building our own data centers in all these markets, which is very inefficient. We can use the shared infrastructure which is highly secure, very resilient, very scalable, that we're building on AWS primarily. And it's a decision that was made a few years ago. It's one of the things that Bret Taylor championed when he arrived in the business, and it's a brilliant decision. And we’re reaping the benefits now.