New theme:
Salesforce is instructing its sales teams to go after adjacent markets in which the company has product/capability but has traditionally left to smaller companies. Previously, the company had tolerated the growth of an ecosystem around their core products. No longer. It would seem CRM has declared an end to symbiosis.
We think this is a big deal. Salesforce is an 800-lbs gorilla in the market for application software, and many smid-cap growth software companies will face tougher competition and slower growth as a result of the change in strategy in the quarters ahead. We understand that Analytics (Tableau) and niche parts of Sales cloud (Apptus, Callidus, others) have been targeted directly in the Northeast region, but the new approach applies broadly to the Salesforce ecosystem.
Why is this happening now?
Is growth slowing and the directive has come from the top to end all (previously tolerated) revenue leakage? Are they realizing that at their size they are now hemmed in by AWS/MSFT with no clear greenfield new markets to attack? Are they losing development clout to faster growing companies? Eating your ecosystem is a natural occurrence in tech when growth companies reach a certain size. IBM did it. MSFT did it...is it Salesforce's turn? We don't know the 'why' just yet, but the 'what' will impact many companies in tech.
This quarter we will host a Black Book to present an in-depth look at the top themes we have highlighted in our Sunday notes. Themes to be addressed include this week's theme, the next ~3 Sunday theme notes, as well as several we have previously highlighted, including:
Hedgeye Technology Review | Table Stakes | Large Analytics Cycle Ahead
Hedgeye Technology Review | Hybrid Hype: which wAy-W-S?
Hedgeye Technology Review | Software: What Comes Next, Part 1
Hedgeye Technology Review | Semiconductor Indigestion
Hedgeye Technology Review | Overcapitalization
Among others...don't miss it.
