- Salesforce has a handful of challenges ahead as it targets $50 billion in revenue by 2025.
- The company is going through a period of change, including its $27.7 billion Slack purchase.
- Analysts say it could face three nightmare scenarios in its ascent, including cloud complexity.
But hitting that milestone won’t be easy and analysts say that a handful of “nightmare scenarios” could play out for the firm.
After all, Salesforce is going through a period of significant change. It just closed its $27.7 billion deal to buy workplace chat app Slack and intends to transform from a CRM tool into a comprehensive hub for productivity and collaboration.
It’s also looking to modernize its cloud offerings, allowing customers to host its software on services like AWS.
With all that at stake, here are the three main challenges that analysts said could stunt Salesforce’s growth:
The Slack deal could fail to drive customer value
mega-deal came only a few years after two other major buys: MuleSoft and Tableau, for $6.5 billion in 2018 and $15.7 billion in 2019, respectively.
While Salesforce has recently started to show how it’s reaping the benefits of those two purchases, there’s more risk as deals get bigger, said RBC analyst Rishi Jaluria.
And while there are clear places where Salesforce and Slack are aligned, it still has to prove the deal was worth it, said Futurum Research analyst Dan Newman.
“The company made a huge bet,” he said. “This isn’t just about having a collaboration platform. It’s really about building the Slack application to become its own version of what Microsoft has with Teams.“
Microsoft’s chat app has grown tremendously over the past year and because it bundles Teams for free into its Office suite, it’s an easy choice for existing customers.
To catch up, Salesforce will need to seamlessly integrate Slack and prove why the combined products drive value for customers, Newman said. If it can’t do so in a timely manner, Microsoft will pull even further ahead.
Cloud transition could spiral into complexity
Salesforce is investing big to allow customers to run its platform on any public cloud vendor through a program called Hyperforce. The ultimate goal is to make it easier for customers to connect their business tools and access all their data in one place.
But if this multi-cloud effort fails or doesn’t go as planned, it could create a miserable experience for Salesforce and its partners, said Gartner analyst Jason Wong.
“If that stalls, that leads to even more fragmented technology architecture for clients and partners to implement,” Wong said. “If that leads to more platform complexity, then that could really spiral into a negative outcome.”
Salesforce isn’t a small, fast-moving company anymore
As it ages, Salesforce also has to be deliberate about continued innovation.
As companies grow, it’s easy to lose touch with how the market is changing and stall out, said Valoir analyst Rebecca Wettemann.
There are many startups taking on Salesforce’s market and if it doesn’t watch out, it could get left in the dust, said RBC’s Jaluria.
“They could start to resemble a legacy, stuck-there company versus an innovative cloud company,” Jaluria said. “They get mega-disrupted themselves and people look at them the way that they look at Oracle right now: That would be another nightmare scenario.”
To prevent that, Salesforce should keep investing in R&D, he said, and “focus on customer success — not win rates and not on increasing pricing constantly as a way to get more growth.”
Salesforce declined to comment.
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