Salesforce aims for $20 billion in annual revenue: Six reasons it'll get there

Salesforce delivered a strong second quarter, a run rate topping $10 billion and big plans to double sales again. Here's a look at the moving parts.

Salesforce's strong second quarter set it up for annual revenue topping $10 billion, but the road to $20 billion will require focus, more platform growth, artificial intelligence and industry-specific applications.

The company is projecting fiscal 2018 revenue of $10.35 billion to $10.4 billion, up 23 percent to 24 percent. Salesforce beats Q2 targets, subscription revenue up 26 percent

Here's a look at the key takeaways going forward.

A $10 billion run rate is great, but $20 billion will require focus and discipline. Benioff's goal is to get Salesforce to the $20 billion annual revenue mark. Benioff has studied the enterprise software history.

I think a lot of mistakes that the other entrepreneurs have made, and I can go through each one in an enterprise software specifically, is not to really double down at this point again on the customer, get absorbed in your own myopia, get absorbed in your corporate politics, get absorbed in your corporate bureaucracy and yourselves and try to break out of yourself and recognize the most important thing continues to be the customer.

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It's the platform (and the metadata). Salesforce's platform approach has evolved over time, but the company has built its roster of independent software vendors. Benioff said that Salesforce's approach to metadata has allowed easier integrations. He said:

Platforms are incredibly important because they let customers enhance their system in a highly specialized way. Platforms are also extremely important because they drive down attrition. I think we just ran our numbers for this management conference that I mentioned 2 weeks ago. We look at our attrition rate over the last 10 years. And one of the reasons we've been able to drive it down is because of our platform.

Assessing Salesforce's platform and ecosystem

And on the metadata front, Benioff said:

We really built our platform in a way that let us built our core applications and let our customers extend them. And that is why so much metadata has been built inside of Salesforce. I don't think a single customer has the same implementation of Salesforce.

It's also worth noting that Salesforce has a ton of data in its systems, but also has a broad ecosystem that also connects.

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Einstein is Salesforce's shiny new object. Benioff said Einstein is exceeding expectations. Salesforce's obvious plan is to embed Einstein throughout its clouds. Benioff said:

The branding choice that we made with Einstein also exceeded our expectations because it let us rapidly communicate to our customers that we've extended our core platform with artificial intelligence. As we kind of head towards Dreamforce, you're going to see a lot of exciting things with AI. I have seen some amazing things in financial services. I just saw some amazing things in health care. I'm not going to go into the details on the call because some of the results are still early, but we've seen some amazing breakthroughs in using artificial intelligence with health care. I think this is going to be one of the huge new drivers of growth.
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But Einstein is becoming material. While Einstein and Salesforce's artificial intelligence business isn't broken out, executives noted that the system is driving sales. Mark Hawkins, CFO of Salesforce, explained the growth potential.

Einstein is early days. But with that being noted, we do see opportunity. Some of the Einstein capability is built into all aspects of our clouds, and some of it is incremental SKUs where there is -- that the value is such that there'll be incremental money in those SKUs as well to deliver that specific value. And so that'd be a combination of those two. Everything gets smarter, and then some things will have even more SKUs that will create even more solutions for our customers, which, obviously, if done well, creates great growth opportunity for us.
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Salesforce is getting traction with its focus on applications for specific industries such as financial services, health care and government. On the government front, Benioff noted that Salesforce landed the Veterans Administration as a customer. "I think we started to see government spending come back online this quarter really for the first time. And so we're very excited about what the future can mean as the government looks to kind of build next-generation systems, looks to move to the cloud and provide better service and support to its customers," said Benioff. Salesforce Commerce Cloud gets AI updates, Android Pay integration | Salesforce lands Transamerica as Financial Services Cloud customer, adds Einstein AI | Salesforce builds out ecosystem for Health Cloud, adds better patient targeting, risk scoring

Keith Block, president and operating chief at Salesforce, added that the U.S. government is stepping up its digital transformation efforts.

AWS is a key partner, but Salesforce is also building out its partner channel. Salesforce launched on AWS infrastructure in Canada and has plans for the second half of the year for an Australia rollout. Block said AWS is critical to Salesforce's international expansion plans. Benioff also noted that Salesforce is increasingly deploying integrations with IBMs. Salesforce adds turnkey tools for partner relationship management to Sales Cloud | IBM, Salesforce announce AI partnership

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