Future revenue mix of most of the global companies is going to change soon. One of the major driving factors would be the revenue shift of the clients that will push them to adopt innovative solutions relevant to the constantly evolving requirements. Companies who are preparing for their clients’ future revenue shift will ride the tide, while others might find it challenging to sustain. Salesforce has taken a similar strategic initiative to acquire Tableau recently, which might be primarily driven by future revenue shift of its clients.
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Salesforce, primarily known to us as a Customer Relationship Management (CRM) solution provider, is one of the leading players in areas such as sales automation, lead intelligence, and customer experience management which have paid them well in the past; however, Salesforce also understands these are not going to help in the future revenue growth. This is evident from the fact that on one hand its revenue has grown from USD 5.3 billion in 2015 to USD 13.2 billion in 2019 at a CAGR of 25%, while on the other hand the revenue of Sales Cloud has witnessed a relatively sluggish growth of 13% dropping its share of total revenue from 45% in 2015 to 30% in 2019 (Source: Salesforce Annual Report). While the revenue generated by the other streams such as Marketing Cloud has been promising, there was an urgent need to continue the momentum by tapping new clients and new use cases. Acquisition of Tableau may serve the purpose, but it is not as simple as it sounds.
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Salesforce has a decent hold of marketing and sales functions of many organizations; however, in view of connected ecosystem now, these functions have started talking to other horizontals within the organization. This is where the complexities come into play as you need to be thoroughly aware of the clients’ critical operations that drive their business. For instance, future revenue of a healthcare company would be driven by connected imaging and diagnostics, e-Prescribing, precision medicine, remote patient monitoring, and digital diabetes management. Unless you are aware of the revenue impact of these streams on your client, it will be difficult for you to tailor your solutions as per your clients’ future needs. The combined opportunity of above use cases for the healthcare sector is more than USD 50 billion by 2023; hence, it becomes imperative for a company like Salesforce to estimate the unknown impact of its clients’ changing revenue mix on its own revenue.
The decision to buy Tableau could prove to be fruitful provided Salesforce understands new Tableau clients and new use cases of existing Salesforce clients where it can do the cross-sell.
Shekeb Naim, Associate Director – ICT Research & Consulting at MarketsandMarkets™ quotes “If Salesforce can customize its solutions as per the changing client’s revenue mix in view of connected ecosystem, 20-25% of its revenue target of USD 26-28 billion by 2023 could be achieved by the synergy created through Tableau acquisition.”