Salesforce (CRM, Financial) is one company that knows how to stay in the news. Hot on the heels of Oracle’s (ORCL, Financial) OpenWorld conference, Salesforce launched Einstein, its artificial intelligence platform, two hours before Oracle’s big event kicked off.
Even if you ignore the timing, the launch of AI-based capabilities for Salesforce customers is an important milestone for the company, one that can keep full-service cloud providers from poaching its clients.
Amazon (AMZN, Financial), Microsoft (MSFT, Financial) and especially IBM (IBM) have been beefing up their artificial intelligence deep learning capabilities. Most of these products are delivered in the as-a-service mode, making it easy for clients to try out the product while allowing these companies to more effectively reach a wide audience in a short period of time through online advertising.
Salesforce’s strength is essentially in business management software. It is the leader in the Customer Relationship Management (CRM, Financial) segment and has forced big names such as Oracle and SAP (SAP) to be happy with second and third positions in the market. But even more significant than its dominant position in this space is that this is software delivered in a pay-as-you-go model.
When Salesforce began its journey in 1999 most software companies were used to the licensing way of sales, which always made sure the seller – not the customer –”‹ got the better end of the deal. Salesforce on the other hand pushed hard on the as-a-service method from the start, making it easy for users to get in and get out. And its product was well-received so they quickly scaled to the top.
But as-a-service product sales are no longer a novelty. The entire world is moving toward it, ably helped by cloud providers such as Microsoft and Amazon. The cloud infrastructure market is growing at a rapid pace and that is keeping these big boys busy in that segment. There will be a point where those companies will have millions of customers in their folds, and nothing is going to stop them from expanding into the business management software segment and offering CRM and ERP tools for their customers on the cloud. If that happens, the convenient bundling of products from these companies will make things difficult for Salesforce in the future.
The other big problem for Salesforce is the way artificial intelligence is growing. IBM, Microsoft and Amazon have started offering AI-powered products. IBM’s Analytics division powered by Watson, for example, is already approaching $5 billion in quarterly revenues. AI can totally transform the way we analyze our data and derive actionable intelligence out of it. The more it evolves the easier it will become for companies –”‹ especially on the sales side –”‹ to analyze data and act on it. Salesforce knows that not having that capability would be equal to offering a huge opening for these cloud providers to encroach into their CRM fortresses in the future.
Salesforce experienced the effect of this shift when Microsoft took former client HP Inc. from right under its nose. Microsoft is already getting serious about its CRM business (Microsoft Dynamics), and this isn’t going to remain an isolated event for Salesforce. That’s why it saw the urgent need to launch Einstein as an add-on service to its CRM offering, making Salesforce the smartest CRM on the planet. It was a necessary move, and it will help protect the company’s customers from being poached for sheer lack of analytics capability.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
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