Salesforce ends 2022 in an unusually turbulent position

When Salesforce announced during its most recent earnings call that it wouldn’t be providing a revenue forecast for next year, it was a bit of a shock, especially coming from the most successful SaaS company in the world.

With revenue of over $7.8 billion for the quarter and a goal of reaching $50 billion by its fiscal 2026, the company hasn’t exactly been doing poorly. Still, when you combine the lack of a forecast with the recent executive exodus, it begins to paint a picture of unusual instability at the CRM giant.

First, let’s look at that forecast — or the lack of one. It seems the economy has become so uncertain that Salesforce opted out of a forecast for its fiscal 2024 altogether (the three months ending October 31, 2022, comprised the third quarter of the company’s fiscal 2023). We use the word unprecedented these days an awful lot, but it’s pretty darn unusual for a company like Salesforce to tell investors they’re punting on a forecast, and it’s the first time the CRM giant has ever done it.

Here’s what Salesforce CFO Amy Weaver told investors during the earnings call:

Before I close, I’d like to share a few thoughts on Fiscal Year ‘24. As discussed, we are experiencing a very unpredictable macro environment, as our customers are working to ensure their businesses are also healthy for the long term. Compounding that dynamic is an unprecedented foreign currency market. Therefore, at this time, we believe it would be premature to provide revenue guidance for the next fiscal year.

That would be enough to make anyone who has followed this company raise their eyebrows. But consider that Salesforce simultaneously dropped the bombshell that co-CEO Bret Taylor plans to step down.

The reason for that exit, ostensibly, was that Taylor was tired of life inside the big corporation and wanted to return to his roots as a company builder — to get back to basics, in other words. But that might not have been the whole story. The Wall Street Journal reported tension between the two leaders and that the resignation might not have come as far out of left field as we were led to believe. (You can pull your jaw off the floor; this is not the first time a company has tried to spin bad news as neutral.)

There were other shoes left to drop. The smaller of the two clogs was Mark Nelson, CEO at Tableau, announcing he was leaving. (Salesforce bought Tableau back in 2019). The more dramatic news item quickly followed: Slack co-founder and CEO Stewart Butterfield told his flock that he wanted to spend less time running a business and more time gardening and taking care of his child.

Slack quickly announced that Lidiane Jones, who had been GM of Salesforce’s Commerce Cloud, Marketing Cloud and Experience Cloud (yes, that’s a lot of clouds), would replace Butterfield.

Let’s not forget that even prior to all of this, Salesforce had to deal with activist investor Starboard Value breathing down its neck, never a comfortable position. (The company stressed its cost-cutting efforts in its latest quarterly call, it’s worth noting.)

On paper, that feels like a lot of disturbing news in a short time. But what does it mean to the underlying financial stability of the company? As part of our year-end roundup at TechCrunch+, we decided to take a peek under the hood and see what’s happening. Is this a short-term glitch in a bad year for all SaaS companies or a series of moves that could be indicative of something more worrisome at Salesforce?

Inside the numbers

We have three goals: First, to look at Salesforce’s recent quarterly performance to see what we can infer about its health. Second, to wonder whether other companies are reporting similar results and forecasts. And, third, to ask if there is a lesson here for us technology watchers, especially regarding startups.

Salesforce ends 2022 in an unusually turbulent position by Ron Miller originally published on TechCrunch

With IT spending forecast to rise in 2023, what does it mean for startups?

Although we’re in a period of economic uncertainty, I come bearing good news: All signs point to IT spending going up in 2023. By all rights, that should be outstanding tidings for startups. But it’s not all rosy, however, because in times of turbulence, startups really have to prove their worth.

Companies recognize that they must keep one eye on the future and that innovation tends to happen at new companies, not those supposedly trusty older ones. Sure, the tried and true may have solid balance sheets, but they also perhaps stagnated in the idea department sometime around 2012.

CIOs need to balance established players with startups as they set their IT budgets for next year. And startups building essential services in an innovative way should have fewer worries.

“Lots of strategic CIOs have used the combination of remote work and the downturn to modernize their stack and replace legacy systems with more modern solutions.” Casey Aylward, a partner at Accel

Execs clearly want to invest in your startup’s innovation, but they are wary, especially in times like this, of putting all their eggs in your startup basket. It’s understandable, so you have to show that you’re in it to win it.

We spoke to a number of CIOs, venture capitalists and analysts to get their perspective on what’s coming for enterprise startups in 2023.

With IT spending forecast to rise in 2023, what does it mean for startups? by Ron Miller originally published on TechCrunch

All signs point to IT spending rising in 2023

You don’t need to be a genius to see that we are in a period of great economic uncertainty. For startups, however, a key predictor of future results is the direction of IT spending, something that we can track. When companies are spending money on tech, the reasoning goes, both established and younger companies should benefit. And if they’re not, both should suffer.

The good news is that, for the most part, signs point to an increase in IT spend in 2023, and that’s true whether you talk to CIOs, enterprise companies or analysts. It bodes well for the entire technology industry.

“The main thing we’re hearing from CIOs is that technology is part of solving the business challenges that a recession brings.” IDC analyst Rick Villars

Consider what Broadcom CEO Hock Tan said during last week’s earnings call: “We have been talking to multiple CIOs from among our largest enterprise customers we have out there. We have not seen them talk about a reduction in their IT spending,” he said. While some mentioned flat spending, few were talking about cuts, and that’s an encouraging trend heading into the new year.

That perspective fits with what IDC analyst Rick Villars is seeing. “Spending on core IT infrastructure, business software, professional services to implement and operate the systems – even if the economy stays flat, we expect to see continued healthy growth in the 5% to 6% range in aggregate for those spaces. It would take a more severe economic downturn from what we’re seeing for that to change,” Villars told TechCrunch.

That’s right where Gartner’s prediction comes in as well: an increase of 5.1% in global IT spend in 2023. That’s up from 0.8% growth in 2022, but well down from the 10.2% increase the previous year.

Where are they spending?

All signs point to IT spending rising in 2023 by Ron Miller originally published on TechCrunch