If you are considering becoming a 1M/1M premium member and would like to join our mailing list to receive ongoing information, please sign up here.

Subscribe to our Feed

Cloud Stocks: Why Salesforce Buying Vlocity Proves the Growing Importance of PaaS

Posted on Friday, Feb 28th 2020

Salesforce (NYSE: CRM) is dominating the news this week. Along with an outstanding quarterly result announcement, the company delivered two significant news items. First, Salesforce is acquiring Vlocity for $1.3 Billion. Salesforce also announced that its co-CEO Keith Block was stepping down from his position. Marc Benioff is back to being the sole CEO of the company.

Salesforce’s Vlocity Acquisition

The big news of the week was Salesforce’s announcement to acquire Vlocity for an estimated $1.33 billion. Last year, I had mentioned how Salesforce could benefit from the acquisition. Vlocity was set up in 2014 by former Siebel and Veeva Systems co-founders and experts Craig Ramsey, David Schmaier, James Ramsey, Mark Armenante, and Young Sohn. Vlocity was focused on the principles that best customer experiences are industry-specific and omni-channel. While Salesforce took care of the omni-channel segment of this requirement, Vlocity focused on catering to the industry-specific segment. As part of this focus, Vlocity developed vertical-specific solutions that embedded digital, omni-channel processes for customer-centric industries. It built on’s Force platform to build industry-specific solutions for the Communications & Media, Energy & Utilities, Health, Insurance and Financial Services, and Government and Non-profit sectors.

Vlocity has been privately held so far and raised $163 million in four funding rounds from investors including Bessemer Venture Partners, Accenture, Salesforce Ventures, New York Life Investment Management, Sutter Hill Ventures, TDF Ventures, Wildcat Venture Partners, and Kennet Partners. Its last round of funding was held last year, when it raised $60 million at a valuation of over $1 billion. Vlocity does not disclose its financials. Analysts estimate that it was trending at annual revenues of $160-$170 million for the year ending January 2020.

Salesforce believes that Vlocity’s verticalized offerings will help it double its TAM. In my view, Vlocity’s acquisition will help Salesforce deliver on a vertical-focused strategy. Salesforce has taken steps in that direction earlier when it aligned its senior management and sales strategies towards verticals.

But the acquisition is also a living example of why I am so excited about the PaaS model. Like Vlocity, other platform companies can benefit from opening their cloud-based platforms to developer networks worldwide. Salesforce’s PaaS has allowed companies like Vlocity to develop industry-specific solutions. Its AppExchange Marketplace has empowered them to attract customers within these industries and to build sustainable businesses that translate to billion dollar valuations and exits.

Veeva, now a multi-billion dollar public company is a case in point. Vlocity, in many ways, is a perfect acquisition for Salesforce – easy to integrate because it is built on the Salesforce technology, and perfectly aligned business wise.

Over the past few years, Salesforce has made some big acquisitions in the industry. It acquired Mulesoft in 2018 for an estimated $6.5 billion and followed it up with the $15.7 billion acquisition of Tableau last year. It appears to have started the new year with a promising acquisition, as it hurtles forward to achieve its goal of $20 billion in annual revenues.

Salesforce’s Financials

Salesforce’s Q4 revenues grew 35% to $4.85 billion, above analyst projection of $4.75 billion. Adjusted earnings was $0.66 per share compared with $0.70 per share, but significantly ahead of the Street’s forecast of $0.56.

By segment, Subscription and support revenues grew 35% to $4.56 billion. Professional services and other revenues grew 26% to $288 million.

Sales Cloud revenues grew 17% to $1.23 billion. Revenues from Service Cloud improved 26% to $1.22 billion. Marketing & Commerce Cloud revenues grew 28% to $690 million, and Salesforce Platform and Other revenues improved 74% to $1.43 billion.

Among key metrics, its current remaining performance obligations (CRPO) bookings grew 26% to $15 billion, ahead of the market’s forecast of 21% growth to $14.41 billion. CRPO bookings include deferred revenue and order backlog.

Salesforce ended the year with revenues growing 29% to $17.1 billion. Subscription and support revenues for the year grew 29% to $16 billion and Professional services revenues grew 21% to $1.1 billion. Non-GAAP earnings was $0.39 per share.

For the first quarter, Salesforce expects revenues of $4.875-$4.885 billion with adjusted earnings of $0.70-$0.71 per share. The market was looking for revenues of $4.84 billion with an EPS of $0.70 for the first quarter. Salesforce expects to end 2020 with revenues of $21-$21.1 billion and an EPS of $3.16–$3.18. The market was looking for revenues of $20.91 billion for the year with an EPS of $3.10.

The market is still digesting the news of the leadership change at Salesforce. Block was instrumental in delivering the skyrocketing growth that Salesforce has seen in the past, and his exit was a surprise. However, there is no question that the genius behind the company’s extraordinary performance is Benioff, the founder.

Its stock is trading at $172.15 with a market capitalization of $158.7 billion. The stock fell 3% in the after-hours trading session in reaction to the announcement. It had touched a record high of $195.72 earlier this month. The stock hit a 52-week low of $137.87 in July last year. Of course, built into the stock price currently is the whole Coronavirus externality, so it would be unfair to attribute the gyrations entirely to business-related announcements.

Photo Credit: nathanmac87 /

This segment is a part in the series : Cloud Stocks

. Smartsheet Acquiring Bootstrapped Startups to Drive Growth
. Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups
. Netflix Price Hike Ruffles Competition
. How Will Carbon Black Differentiate?
. ServiceNow Grows Through Addition of Capital-Efficient Startups
. Zendesk and Freshworks Follow Different Acquisition Strategies
. Tableau Grows Through Small Acquisitions
. Open Platform Strategy Stands Intuit in Good Stead
. Will GoDaddy Follow the PaaS Route?
. Adobe Delivers Via PaaS
. A Look at Oracle’s 2018 M&A Activity
. What Apps Will Drive More Traction for Cloudera?
. Slack's App Focus Will Be Key to Post-IPO Success
. IBM Counts on its Cloud and Platform for the Turnaround
. Atlassian Acquires From its PaaS Marketplace
. What Should SAP Acquire to Triple its Value by 2023?
. Expect ServiceNow to Acquire From App Marketplace
. Should Follow a PaaS Strategy?
. How Upwork Can Leverage the Virtual Company Trend
. Qualys Scouting For Acquisitions
. Should SAP Acquire Zendesk or Freshworks?
. HubSpot Counts on its API Strategy
. SurveyMonkey Eyes Acquisitions for Growth
. Workday Wants to Disrupt Cloud Computing Using Machine Learning
. Einstein and Open-Source Platform Lead the Charge for Salesforce
. DocuSign Prepares to Beat Rival Adobe
. Veeva Soars, But Dassault Acquires Medidata for $5.8 Billion
. Tableau Acquisition Signals Massive Analytics Push for Salesforce
. Oracle Joins Hands with Microsoft to Take on Amazon
. GoDaddy is Making Strategic Acquisitions for the Next Level of Growth
. Alteryx Sees Strong Momentum
. Adobe Leveraging Magento and Marketo to Deliver Blockbuster Performance
. Is Slack Overvalued?
. How Will Cloudera Address the Competition?
. Zoom is Not Bothered by Cisco or Microsoft
. Domo Counts on Enterprise Revenue for Growth
. Netflix Plays with Pricing and Games to Attract Subscribers
. CrowdStrike Has a Successful IPO
. Atlassian Crosses the Billion Dollar Revenue Milestone
. ServiceNow Believes Strength Lies in Tie-ups
. Partnerships are the Mantra for BlackLine
. SurveyMonkey Counts on Enterprise Segment for Growth
. HubSpot Soars to a New High
. Intuit Pushes AI to Simplify Tax Filing
. Splunk Sees Strong Cloud Momentum
. Forescout Partners with Big Names
. Smartsheet Tapping into the Government Sector
. Salesforce Continues its Shopping Spree
. Palo Alto Networks Targets the IoT Security Market
. DocuSign Focuses on the Mortgage Sector
. Oracle Brags About Autonomous Database
. Blackbaud Acquires YourCause to Grow Addressable Market
. The Market Expects a Lot More from Adobe
. Anaplan Makes its First Acquisition Post IPO
. Activist Investor Drives Market Interest in Box
. MongoDB's Formula for Success
. Coupa Aims for $1B Revenue
. Dropbox on a Rocky Road
. Medallia Banks on Acquisitions
. IBM Banks on AI
. Time For Skepticism with Netflix
. SAP Riding High on the Cloud
. Amazon's Faster Shipping Hurting its Earnings
. ServiceNow CEO Change Signals Focus on Acquisitions
. Will Google Acquire Fitbit?
. HubSpot Focuses on Its Platform
. BlackLine Partners with Google Cloud
. Rapid7’s Focus on Cloud SIEM Pays Off
. Splunk Bets Big on Data Streaming
. Intuit's QBO Scores Big
. VMware Builds Up With Acquisitions
. Palo Alto Targets $5B Revenue by 2022
. Workday Targeting Procure-to-Pay Cycle
. Will Salesforce Acquire DocuSign?
. Okta Targets Enterprise Customers
. MongoDB Eyeing China With Alibaba Partnership
. Twilio Counts on API Upgrades for Growth
. Adobe Revs up its Experience Platform
. Top 20 for 2020
. Anaplan Sees Expanding Use Cases
. Dropbox Gears Up to Regain Lost Valuation
. Forescout Fails to Deliver
. Enterprise Bet Pays Off for SurveyMonkey
. SAP Bets Big on Experience Management
. Twilio Steps up Investment in 2020 to Preserve Growth Momentum
. Zendesk, Freshworks Focus on Marketplaces and Integrations
. Proofpoint Targets Insider Threats Through Acquisition
. RingCentral's Powerful Partner Strategy Would Augment with PaaS
. Qualys Counts on Google and Microsoft for Growth
. Shopify Soars on Improved Merchant Offerings
. HubSpot Believes in the Importance of PaaS
. BlackLine Remains Focused on SAP Integration
. Recently Public Cloudflare has New Edge
. GoDaddy is on a Shopping Spree
. Intuit Targets Online User Base Through Acquisition
. Should Palo Alto Networks Acquire ZScaler?
. Why Salesforce Buying Vlocity Proves the Growing Importance of PaaS
. Datadog Performing Well Post Recent IPO
. Workday Should Open Up About its PaaS Success
. Anaplan Focuses on API Connectors for its Platform
. Veeva
. Five9 Strengthens its PaaS Focus
. RealPage Brings AI and SaaS to Real Estate
. Splunk Should Open up About its PaaS Metrics
. Okta Benefiting from App Diversity
. Oracle Sees Growth Momentum
. Xero Focuses on a PaaS Strategy
. DocuSign Resilient to COVID-19
. Smartsheet Looking up to Enterprise Customers for Growth
. Paylocity Delivers Solid Results
. Q2 Holdings Expands TAM with Acquisitions
. New Relic Focuses on PaaS
. AppFolio Leverages AI for Product Enhancement
. Will Adobe Open Up About its PaaS Statistics?
. Change Healthcare Pushes APIs
. Dropbox Needs to Share API Metrics
. Upwork Improves Monetization
. MongoDB has Miles to go
. Nutanix Needs to Define a PaaS Strategy
. Cloudera Focuses on Hybrid Cloud
. Atlassian Gears Up for Growth, Unfazed by Covid-19
. Shopify Helps Merchants Pivot to Online Stores
. ServiceNow Steady in Turbulent Seas
. RingCentral Sees Strong Traction
. Twilio Hits 52-Week High Amidst COVID Crisis
. HubSpot Lowers Outlook Amidst Virus Concerns
. Proofpoint Acquiring Even Amidst Crisis
. BlackLine Looks Solid At The Face of Covid-19
. GoDaddy Continues to Acquire
. Qualys Expands Cloud Offerings to Soar to New Highs
. Zendesk Struggling Amidst the Downturn
. Alteryx Bounces Back Despite Low Outlook
. Palo Alto Networks Continues to Acquire
. Workday Extends its PaaS Strategy
. Splunk Rides High on Cloud Initiatives
. Salesforce Partners with Workday to Address the New Normal
. Veeva Scales New Highs
. Is Smartsheet’s Pullback a Buying Opportunity?
. MongoDB Soars Even in the Crisis
. Okta Reiterates Outlook
. Is Anaplan a Prospect for Oracle, SAP?
. Oracle Relies on Autonomous Offerings
. Adobe Shifts its Focus
. Paycom Confident Under Current Conditions
. DocuSign Soars to Record Highs
. Paylocity Acquires Amid Crisis
. Datadog's Integrations and Upgrades Help it Soar
. AppFolio Improves Offerings for Current Conditions
. SurveyMonkey Should Get Into PaaS
. Model N Soars to a Record High
. Appian Focuses on RPA for Growth
. Slack Beefs up its Portfolio
. Coupa Expands into Treasury Services
. CrowdStrike Soars to Record Highs
. Guidewire Expands Cloud Offerings
. Dropbox Should Focus on PaaS
. Talend Expands Data Offering Through Partners
. IBM Expands Cloud Partners
. One Medical Supports COVID-19 Care Digitally
. Microsoft Rides High on Teams and Gaming
. Investors Say Yes to nCino’s IPO
. Nutanix Focuses on Government and Media Verticals
. SAP Rethinks Qualtrics Acquisition
. Tenable Expands Into Industrial Cyber-Security
. ServiceNow Expands Ties with Zoom
. Cloudera Powers its Data Platform with Partnerships
. Atlassian Continues to Acquire from PaaS Ecosystem
. Shopify Soars to an All-Time High
. The PaaS Landscape
. HubSpot Focuses on the Enterprise Segment
. GoDaddy Restructures During COVID
. Akamai's Security Solutions Thriving
. Blackline Needs a PaaS Strategy
. Twilio - A Successful PaaS Story
. Zendesk Invests in the Future
. Qualys Continues to Acquire Indian Startups
. ZoomInfo Lists Despite COVID-19
. Analysis of Alteryx PaaS Strategy
. Fastly Needs to Diversify from TikTok
. Way to Go, Salesforce
. Intuit Continues to Acquire
. VMware Continues Buying Spree
. Analysis of Five9's PaaS Strategy
. Okta Expands Alliances to Attract Enterprises
. Palo Alto Continues to Acquire
. Analysis of Splunk's PaaS Strategy
. BigCommerce Goes Big with IPO
. Analysis of Workday's PaaS Strategy
. Analysis of Anaplan's PaaS Strategy
. Sees Strong Demand
. Analysis of MongoDB's PaaS Strategy
. Analysis of Wix's Platform Strategy
. New Relic Product Upgrades Deliver Growth
. What Should Proofpoint Acquire?
. Smartsheet Should Follow Atlassian’s Example
. Adobe's Relentless Growth Continues
. SurveyMonkey's PaaS Prospects

Hacker News
() Comments

Featured Videos