Salesforce changes the face of an industry— again.
As one of the first implementation partners for Salesforce in the nonprofit sector, who remembers when Salesforce.org had only three employees, I feel a need to throw in my two cents on the recent integration of Salesforce.org with Salesforce.com.
First, let’s clear up fact from fiction.
This comes directly from the original press release cited above:
Salesforce.org will convert from a California public benefit corporation into a California business corporation
Salesforce will pay a one-time cash purchase price of $300 million for all shares of Salesforce.org.
The $300 million will be distributed to the independent Salesforce.com Foundation, a California nonprofit public benefit corporation and 501(c)(3) organization, for further distribution by the Foundation for future philanthropic purposes.
Finally, This is new territory and no one fully understands how this will all play out.
There are two clear motivations I see for this purchase:
First, to remove bureaucracy. Working within a nonprofit can be difficult to scale. By removing Salesforce.org from this environment they are able to reach more nonprofits faster and ultimately increase efficiency. A key component for the growth of any product.
Second, to increase the value of the Salesforce.com. It is important to note that Salesforce.com’s total revenue is roughly 13 Billion, $300 million is a drop in the bucket. It also seems that the initial purchase will not produce any immediate value. That said, the real value will come over time. Salesforce.com noted on a recent investor call that there is a $13B addressable market in the sectors currently supported by Salesforce.org. The long game seems obvious. Whatever the case, this should not have been a total surprise. Salesforce.org has been transforming itself into a “Salesforce.com posture” for the last five years. This can be seen most clearly with the increase of sales staff. Five years ago Salesforce.org employed roughly 60 staff, they are now 600, many of which are sales staff. Much of this shift has been facilitated by Rob Acker— a person with a strong business acumen grounded in the private sector.
What deserves analysis is the effect of the purchase.
What does it mean for the nonprofit sector? What does it mean for the future of nonprofit technology? And what does this mean for the Salesforce nonprofit community at large?
First, this represents a clear monotonization of the nonprofit sector. A Fortune 500 company has seen real value in a sector that has traditionally been undervalued. This purchase says that there is money to be made in the nonprofit sector and they are going to engage this sector to do just that. The nonprofit space is valued number three when evaluating payroll and growth (A standard market analysis related to the value of a sector). Any business looking to grow would be foolish not to consider expansion in a growing vertical like the NonProfit space.
While this is not a new revelation, we are talking about a clear commitment to engaging the value of the sector. Expect others to follow with a similar aggressive posture. Including, but not limited to, Oracle, Sap, IBM, and without a doubt, Microsoft (who has already begun). Jobs will increase and so will education. Nonprofits are going to be recognized as the primary industry which ultimately means more money all around.
Second, we can expect some serious technological gains in the nonprofit sector. You thought Salesforce was a boon for the nonprofit sector— you haven’t seen anything yet. This purchase is an invitation to other large companies to enter the space. Competition is going to be fierce and encourage innovation. It’s going to be exciting and empowering for nonprofits. Make no mistake, we have entered a new stage of innovation the likes of which we haven’t seen since people were talking about cloud computing over 12 years ago.
Third, a larger shift is happening in the Salesforce nonprofit community to a “grow and expand” mentality. At first blush, this may feel unnerving. Traditionally Salesforce.org has been dedicated to serving the “little guy” most notably with its Power of Us 10 gifted licenses offering. Now Salesforce will be expanding with a focus on not just helping nonprofits to maintain, but to grow.
Similarly, nonprofits are reaching a new era of maturity where they realize they need to diversify funding and show impact in bigger ways, and they are demanding technology that meets this challenge. Expect more private sector mentality (from selling to buying, to expectations) being applied within altruism and purpose. Solutions and nonprofits alike will be held accountable to the bottom line and top line but they will do so through thoughtfulness and care. This will mean different sales tactics and outreach efforts for Salesforce and nonprofits respectively.
Bring on the change.
14 years ago we led one of the first Salesforce deployments for a nonprofit (American Himalayan Foundation). Salesforce was the obvious choice: it required little to no infrastructure; they gifted their solution, and it was easier to use than competing technology. In 14 years none of that has changed. What has changed is the financial commitment to technology.
Salesforce has done more with this purchase than acquisition a solution...it is changing the face of an industry— again.