Salesforce workers down to co-founder and CEO Marc Benioff were able to breathe easier this week after the enterprise software company posted significantly stronger earnings and guidance than analysts had estimated. , drawing applause from Wall Street.
But challenges remain.
Like other cloud software developers who saw their stocks plummet due to rising interest rates, Salesforce is more focused on profit than ever. This could make it harder for the company to develop technology to deal with emerging threats, such as moving from a longtime partner to a competitor.
This is the dynamic at play at Veeva Systems, which sells software to life science organizations. Veeva is also up, with shares up 4% on Thursday after the company’s higher-than-expected quarterly earnings.
Veeva built its core software on Salesforce’s application development platform, but that will end in 2025. The risk is that other companies built on Salesforce may be inspired to follow Veeva.
“If I were Salesforce, I would actually worry about the long-term implications of this,” said Rishi Jaluria, an analyst at RBC Capital Markets with equivalent buy ratings on Salesforce and Veeva. Salesforce did not immediately respond to a request for comment.
Jaluria pointed to banking software maker Ncino, whose CEO Pierre Naudé said in 2021 that it was the biggest company to rely on Salesforce after Veeva.
Salesforce and Veeva are closely related. Peter Gassner, founder and CEO of Veeva, led the Salesforce platform before launching Veeva in 2007. “Peter has been an outstanding CEO,” Benioff reportedly said in 2017 as the two companies deepened their partnership. Veeva President Gordon Ritter of Emergence Capital invested in Salesforce before backing Veeva.
The agreement between the companies states that Veeva is obligated to pay Salesforce because Veeva customers use Salesforce’s platform — and costs have increased as more people rely on Veeva. In exchange, Salesforce will not enter the specialized and regulated market of Veeva.
This kind of arrangement might have worked when Veeva was a startup. But it grew into a profitable, publicly traded software company with annual revenue of $2 billion and a market capitalization of $28 billion. Veeva accrued about $7 million in fees payable to Salesforce during the October quarter, according to a regulatory filing.
After Veeva announced the news alongside financial results in December, Gassner and other executives spent time answering various analyst questions about the change during a conference call. “I think overall, for customers, that’s a positive,” Gassner said. “It simplifies their landscape.”
Veeva, which pays Amazon Web Services for hosting capabilities, will move its customer relationship management software to its own Vault platform. The plan is to provide tools to help customers move, although they have until September 2030 thanks to a five-year liquidation period specified in the agreement.
Veeva will demonstrate its software using Vault at its Commercial Summit conference in Boston in May, Paul Shawah, executive vice president of strategy at Veeva, said in a Wednesday call with analysts.
Jaluria said he doesn’t think Salesforce will be able to compete effectively with Veeva after the deal ends in 2025. Salesforce’s push for higher profits, which happened when activist investors Asked about Salesforce’s growth and margin balance, might not help, he said. “But even before that, Salesforce hasn’t shown us its ability to grow the industrial cloud organically.”
Under Benioff, Salesforce fueled much of its growth through acquisitions, and there was a time when Gassner might have ended up at Salesforce. A leaked Salesforce presentation in 2016 included Veeva on a list of “potential acquisition targets.”
Today, that seems unlikely. Gassner orders Veeva out of Salesforce, and on Wednesday Benioff said Salesforce’s board dissolved its M&A committee.
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. Salesforce do face perspective departures customers platform after Veeva
. Salesforce faces prospect customer departures platform Veeva