Salesforce Investors Applaud European Startup Plans

Shares of Salesforce were up Thursday as it gained momentum from investors cheering on its plans to invest US$100 million into European startup firms.

The company on Tuesday announced that its Salesforce Ventures corporate investment unit had allocated $100 million to fund startups in the European market and improve customer service in the region.

Salesforce already has partnerships with a number of European firms, including NewVoiceMedia, Carto DB and CloudSense.

Its decision to make a major commitment to European expansion was driven by increased competition from major U.S. rivals like Microsoft and SAP, observed Denis Pombriant, managing principal of Beagle Research Group. [*Correction – Oct. 16, 2015]

Salesforce needs to raise its profile in the European marketplace, suggested Rebecca Wettemann, vice president at Nucleus Research.

“Europe is a big opportunity,” she told CRM Buyer, and companies are scrambling to meet the needs of a multilingual, multicurrency customer environment.

“This is going to get them even closer to partners who are important for driving adoption and sustaining a cloud customer base,” Wettemann said.

Shares of Salesforce were up 2.79 percent to $77.69 a share in late trading on Thursday, near the company’s 52-week high of $78.46 a share.

Embracing the Cloud

Cloud computing growth in Europe is increasing at a rapid pace, and the market could reach more than 33.3 billion euros by 2019, according to a forecast by IDC.

Salesforce has invested in more than 150 cloud startup firms since 2009, it said, and on Wednesday the company announced plans to partner with Toronto-based Maropost, a digital email and marketing firm.

Salesforce last year announced plans to invest heavily in Europe — opening new data centers in the UK, France and Germany, and providing 500 new jobs in the region. It had relationships with several major European brands, including BMW Group, Pernod Ricard and Zeiss, the company noted.

European Expansion

It opened its first major data center in the UK a year ago, and announced plans to expand its European footprint with additional data centers in 2015, including in France and Germany.

Salesforce reported fiscal second-quarter revenue of $1.63 billion, a 24 percent increase from a year ago.

Businesses generally are behind in making new investments in Europe, due to a lingering economic crisis that has stifled corporate spending.

“The European SaaS/Cloud market is not as advanced as in the U.S., and local investment in startups is more restrictive,” said Jeffrey Kaplan, managing director at ThinkStrategies.

The Salesforce announcement will send a signal to potential European partners that the company is ready and able to get deals in motion, and that it remains committed to growing and expanding in that marketplace for the foreseeable future, Kaplan told CRM Buyer.

“You have to separate where they are as potential customers and where they are financially,” noted Beagle’s Pombriant, in light of the recent economic conditions that stifled spending in the private sector.

“Europeans didn’t have the same resources to invest in cloud computing,” he told CRM Buyer.

The strategy behind expanding overseas is that Salesforce essentially needs to be always on for its customers in order to compete with much bigger rivals like Oracle, Microsoft and SAP.

“Frankly, Salesforce is turning into a utility — I think very much like cable television recently,” Pombriant said. “As a utility, you have to provide very close to 100 percent service. The appearance of uptime comes in redundancy.”

*ECT News Network editor’s note – Oct. 16, 2015: Our original published version of this story incorrectly attributed to Salesforce the statement that its “decision to make a major commitment to European expansion was driven by increased competition from major U.S. rivals like Microsoft and SAP.” It was Beagle Research Group’s Denis Pombriant who made that observation.

David Jones is a freelance writer based in Essex County, New Jersey. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.

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