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The Really Big Salesforce-Vlocity Deal

By Denis Pombriant CRM Buyer ECT News Network
Feb 27, 2020 10:30 AM PT
salesforce has acquired vlocity which offers industry specific cloud and mobile software

Salesforce this week announced it would buy Vlocity -- a startup with all the markings of a unicorn including a billion-dollar valuation -- for US$1.33 billion. A lot of other news came out of the company too, including co-CEO Keith Block stepping down and another record revenue and earnings announcement, but I'll focus here on the Vlocity story.

Vlocity was cofounded and led by David Schmaier, who was executive vice president at Siebel Systems in its go-go years. When Oracle bought Siebel it made Schmaier a wealthy man. He promptly dropped out of the CRM business in what proved to be one of the few times an executive said he wanted to spend more time with his family and actually meant it.

Diversifying CRM

Schmaier dropped so far off the radar that he wasn't even answering emails from guys like me. We were never tight, but I'd done some gnarly consulting for Siebel and there was that. Still, nothing -- radio silence.

Then once upon a Dreamforce, about six years ago, I ran into him on Mission or Howard Street near the Moscone center and I didn't recognize him. He'd been the picture of a buttoned-down Harvard Business School type at Siebel, but Schmaier 2.0 had grown his hair out, opened his collar and visibly gone native.

The only thing I saw that hadn't changed was the gleam in the eye of someone who easily was the smartest guy in any room he walked into.

At Siebel Schmaier spearheaded the push into vertical market CRM, and when he was through there were more than 20 versions of Siebel customized to the diverse needs of big enterprises in utilities, energy, communications, pharmaceuticals and a bunch of others.

Siebel was largely old school technology, though -- primarily a client-server application suite with all the issues of that technology. That was a challenge for anyone hoping to build a CRM set that could be diversified easily.

So Schmaier may have bided his time for almost a decade after Siebel waiting for technology and the market to come to him with a platform that could support his vision. I do not know this for sure because we have not spoken about it explicitly, but the evidence supports the correlation if not the causation.

Selling Seats

When Vlocity launched in 2014, the Salesforce platform was embryonic in some ways, but there was enough there to enable Schmaier and his partners to connect the dots. They did that in a big way, building a product on Salesforce, joining the AppExchange, and even moving into some of the same buildings as Salesforce to improve idea cross-fertilization.

It all worked, and because the Vlocity team is as at home in front of customers as in developer mode, the company -- with some assistance from Salesforce -- has been able to notch some impressive customer wins.

Schmaier's Siebel experience helped quite a bit too. Customers who had bought vertical apps from Siebel in its prime were ready for cloud computing at the same time that Vlocity was ready for them.

So, with the acquisition of Vlocity, Salesforce is placing an important marker down on the future of the industry. For a long time it has recognized the importance of delivering vertical market or industry apps, especially at the high end of the market.

As with every other endeavor the company is involved in, there's an easy understanding that the future of the business is in selling more seats. If that comes from selling core CRM, fine. But as a $20 billion company, Salesforce will forever need deals that drive seven figures or more to keep Wall Street amused.

C-Suite Opening?

So I think the significance of the Vlocity acquisition is that it ticks a big box on the score sheet. Salesforce has impressive components like Einstein, Heroku, its machine learning, workflow, Journey Builder, voice recognition and much more.

However, those components might not be the first thing that Fortune 2000 companies look for when they want solutions yesterday. That's where Vlocity fits in.

It's quite possible that Schmaier has more work to do in Salesforce too. Keith Block's departure after nearly two years as co-CEO suggests an opening in the executive suite.

Lost in the other news, Salesforce also announced that Gavin Patterson will serve as the new president and CEO of Salesforce International. There are good reasons to have a CEO of international operations, and it is a model that possibly could be used elsewhere.

Applications are a subset of the business that needs the full-time attention of a CEO-level person who can get things done in an ever-expanding bureaucracy. That easily could be Schmaier's next gig.

The opinions expressed in this article are those of the author and do not necessarily reflect the views of ECT News Network.


Denis Pombriant is a well-known CRM industry analyst, strategist, writer and speaker. His new book, You Can't Buy Customer Loyalty, But You Can Earn It, is now available on Amazon. His 2015 book, Solve for the Customer, is also available there. Email Denis.


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