Salesforce.com, Inc. (CRM) CEO Keith Block Presents at Barclays Global Technology, Media and Telecom Conference (Transcript)

|
About: Salesforce.com, Inc. (CRM)
by: SA Transcripts
Subscribers Only
Earning Call Audio

Salesforce.com, Inc. (NYSE:CRM) Barclays Global Technology, Media and Telecom Conference Call December 5, 2018 7:00 PM ET

Executives

Keith Block - Co-Chief Executive Officer

Analysts

Raimo Lenschow - Barclays

James Staley - Group Chief Executive Officer of Barclays

Raimo Lenschow

Hey, good afternoon. Welcome to our next session. I've got some feedback earlier today that apparently when I was interviewing Pat Gelsinger from VMware, I didn't get enough out of him. He didn't kind of answer as much in details. So, we're trying something new now. I have Jes Staley my CEO here, interviewing Keith Block. And apparently, you know how it goes like interview a CEO and they are like all do, the investors all ask the wrong questions, they're too short-term focused, et cetera. So, we're trying to do a different approach now. Jes will interview Keith. And hopefully, it's going to be like more now you can see CEOs talk with each other. And I do admit, I tried to convince Jes earlier to put some Q4 billings question in. Not quite sure it works. So, I’ll leave it to the two of them, and I'm looking forward to that session. Yes, thank you. Thanks for being here.

James Staley

So, first thanks Keith for coming to this conference and probably I just remember that you were one the first people to wish me when I became CEO of Barclays and you’ve been a huge supporter of the bank and you’ve been a huge help to me from day 1. So, there is a big debt of gratitude from this side, which means the questions will be really easy. Let’s first start with – go all the way back, you went to Carnegie Mellon, and you recently got a gift there, explain what you did and why did you do it.

Keith Block

Yes, thanks. So, first let me say, I appreciate being here and since we’re going to have a love fest up here, I will just tell you that I have enormous respect for what you’ve done and continue to do and I think that you’re setting an example for a lot of other CEOs. So, it’s great for me to be up here with you. So, appreciate it. Carnegie Mellon, went to school there, obviously very, very passionate, active as you are in your alma mater. And we live in this world where there is this amazing technology and there’s a lot of things that are going on and people have a lot of ideas about what’s going to happen in the world and you have Elon Musk who is predicting Armageddon and other technology and artificial intelligence.

My wife and I wanted to get back in our own way and we gave money to the Universities to start a technology for – a center for technology in society to really talk about and study the intersection of public policy and technologies. , I think we are definitely in one of these worlds where there should be some sort of a handshake and more collaboration between the public sector and the private sector, so we were happy to get back in our own way.

James Staley

Technology is such a – obviously a big part of the social evolution in the country, all good, all bad, you worried, you think you're in the right direction?

Keith Block

Well, I think we’re in uncharted waters. I think what’s different about this wave of technology from others is that they are concussive waves that’s coming faster and faster to the society and there is a private sector organization, we have to figure out how to absorb that technology and enable our people and I mean we see it every day the disruption in every industry. So, I think they are all profound implications. I like to think of it as a positive. This is good technology. It is used appropriate way as opposed to maybe some of the examples that we see right now. We have some issues around trust and data privacy. So, I’m hopeful and trying to be optimistic about where this goes, but I think it’s just such early days and the technology is so powerful now, and I think we just have to be smart about this stuff.

James Staley

But you are Co-CEO now?

Keith Block

Yes.

James Staley

And from the outside and also from the inside I have seen you and Mark are making this work. So, what is the secret, because generally most people don't say yes, because that is an easy stick that can be a tough road.

Keith Block

You know, it’s interesting, we’ve known each other a long time. We started at Oracle a long, long time ago back in 1986 and we got to know each other pretty well over the last decade I would say and obviously over the last five years working together. Mark is a unique person, great guy, we’ve got a very strong relationship that starts with trust. I think we recognized what our strengths are and we respect that and it really does start with trust, and I think that’s a good foundation for us.

James Staley

How often do you guys talk?

Keith Block

How often don't we talk. I mean, whether it’s a text message or FaceTime or phone call or face-to-face meeting, I would say at least once a day.

James Staley

And do you divide responsibilities up or [do you do]?

Keith Block

Yes, we do. Again, I think the beauty of this model for us is it allows for us to focus on areas of interest and our strength. You know Mark is very much focused on strategy of the company, very focused on products largely, and our culture. And you can see that in some of the positions that we take at the company and they were both very aligned on the stuff. And I have essentially the rest of the company. So, the go-to-market function the MuleSoft acquisition, the back-office function finance, employee success, services et cetera. So, I have more of the operational role and the customer facing role and Mark is more of the culture, product and strategy role. But it's a high degree of collaboration.

James Staley

With regard to the culture and the full disclosure to the audience, we had the Executive Committee members of Barclays sat with us the last couple of days and we went and spent about 3.5 hours with a large chunk of Keith’s management team. And we are talking today about that meeting. What is the similarity in sort of the cultural issues brought by everyone from Salesforce wo talked to you, how do you work on culture and do you have a description of Salesforce to the culture?

Keith Block

One-word description would be difficult. I will tell you this. A lot of people talk about culture and when I came to Salesforce, I have heard a lot about the culture, I didn’t believe it. I had heard it’s an amazing culture it’s highly philosophic, but you don't really realize how strong the culture and how real and genuine the culture is until you get here. And it’s a culture that’s really value based and the number one value is trust. So, trust is everything in life because it’s your personal life, your professional life are trust with our customers and great partners. Like Barclays, and then number two is customer success.

Everything for us is focusing on the customer and making sure that they are successful and of course our business model is predicated on customer success. Innovation is our third value. So, we’re recognized as one of the most innovation companies in the world. We have put a premium on innovation as part of that culture with the beginner’s mind that we bring to everything that we do and then the last thing is the quality. We want to make sure that everybody who is in the world have equal opportunity, equal access. We put a premium on a quality and we’ve made some very strong positions on that around LGBTQ widely publicized with our conflict with then Governor Pence, ironically.

And then, most recently equal pay. Every year, we adjust our payrolls to make sure that everybody is paid the same for the same job, no matter what their gender is, no matter what their background is. It’s amazing that we have to keep doing this, quite frankly, part all of those things really contribute to our culture. And it’s really become an asset for the company.

James Staley

Do you pay a price for some of the – because you guys have been on the forefront, I think of a major business takings and very strong value proposition?

Keith Block

I don't think we’ve paid the price. I think we absolutely benefited from it and I think there’s a – lot of people have different opinions on this. I think we’re now in this world where people talk about the act of a CEO. I mean you get this, where maybe the governments aren't doing everything that they should, you can't completely rely on the government, but you can completely rely on the private sector, so there's got to be the gap that is bridged. So, CEOs get more and more engaged in things that are important and I think that has contributed to our culture. It certainly helps us in retaining employees and absolutely helps us in tracking employees.

James Staley

So, this whole issue of work for talent, got to believe at Salesforce it’s got to be one of the talents that you guys faced. What are some of the ingredients to winning that work for talent?

Keith Block

Well, I think the culture is the number one card that we play. We compete, I mean we are in a hotbed for innovation here. We compete with Facebook and Google and Amazon and a thousand start-ups within 3 miles of this place. So, it’s absolutely gold rush. The go-go days, we’ve had times like that in Wall Street, we had times like that in the .com era, but people want to be here because they like our values. And I could give you examples of people who have taken great jobs here who have paid more in other tech companies, but they just appreciated the value and the transparency that we bring.

James Staley

That’s amazing. And you guys supported some very controversial referendum in the State of California, right?

Keith Block

Yes. So that was proposition C, which was, I would also say fairly devices and this is really about the homeless because in San Francisco we’ve got a serious homeless situation. Just to give you some statistics, you could be in New York, New York essentially has 10 times the population and it has half the homeless people that San Francisco has. I mean, all of you who live in San Francisco or walk around the city you can experience this, just walk down mission on market. And, first of all the right thing to do that we supported Prop C because we should be taking care of people who can’t take care of themselves. So, but for our customers and our partners and our employees we want a safe environment, we want people to be able to walk down the street, and so we're very active. Mark was very, very active with Prop C, it was a little bit of and open – wherever, conference with Dorsey, but at the end of the day we thought it was the right thing to do.

James Staley

So, the other thing that we went over yesterday with our two teams that we talked about today and one of the big takeaways, and so we're going to connect with you is Trailhead. Can you talk about that?

Keith Block

Yes. So, we, about four years ago we started this product and it was really to train our own employees, it was a learning platform called Trailhead and that was the original goal. We are on boarding so many people, we’re growing so quickly, you know we hire thousands of people every year, how do you get them up to speed and get them all productivity and help contribute to drive that growth? Chronic portfolio was expanding so quickly, we found that we had hard time getting our people to really get us to feed. So, we started this Trailhead, which is really a fun way to learn badges and gamification, it’s perfect for the millennial's, but it’s an easy way to learn and it’s very much self-service.

And that has become very, very strategic for us because we are growing so fast, we created this ecosystem with demand for Salesforce skills in the marketplace, but there is always going to be a supply challenge whether it’s our more partners or center staff is growing practice and Salesforce Deloitte PwC and they have to cannibalize their existing practices by retraining those people from Oracle, SAP, and Microsoft into Salesforce so we want to be able to help them out with that. And then the story that we talked about yesterday was that as we go through this age of disruption and companies are restructuring and there are some issues around workforce development and placement of workers we started to build programs specifically for the corporation to say, look we want to help you rescale these people that may be leaving your organization or your company with Trailhead, so that they can have a new carrier.

You know there are stories, I mean crazy stories about people who are hairdressers and now they are VPs in consulting firms. There is a gentleman named Zac Otero who is working 100 feet underground and in a meat packing plant in St. Louis, true story. And all of a sudden, he has got a great career as a Salesforce admin. So, that’s what Trailhead is really, really all about. It’s extraordinary balance between doing the right things for people who work for you and people who work for your customers and clients, but also, what we heard about this morning is the real value of elevating the digital knowledge inside of your firm to one person at a time is really powerful. It’s worked out really, really well and we’re very pleased with it. I think the biggest opportunity for us is, how do we go from going company by company like an insurance company in the middle of the country or a Bank in Australia and it’s some of these one-off programs, how do we help people learn. And it’s not exclusively Salesforce content, you can use this to load your own company content into Trailhead and hopefully people will get up speed faster?

James Staley

Going back to game when you guys came out of Oracle and set up Salesforce, what did you see that was basically the Genesis of Salesforce today?

Keith Block

You mean when I decided to come here?

James Staley

Yes.

Keith Block

You know, I’m a history guy. I like to read history. I like to study the history of industries, and I had been in the tech industry my entire career and I looked at this and probably found this in the financial services institutions, you look at the icons or who can be the iconic brand or who is going to change the world type stuff, and I thought, if I was going to go to a company, I wanted to go to a company that I thought would really be the most inspirational company in the world. I know that sounds crazy because we’re a tech company, but I did think that Salesforce was going to do things a different way. So, it wasn't just that this audience may or may not like this, shareholder value is very important, obviously, but stakeholder value is also important, and I thought it would be really something to, not just be one of the most admired technology companies in the world, but one of the most inspirational companies. And I thought the Salesforce culture was a way to do that. I really liked Mark’s vision. I knew a lot of the people that were here. As I said before, but I wanted to be part of the place that could do both things. Not just like great results, but also make a difference. And I thought, I'm going to finish my career and have a long trajectory here. I want to be part of that sort of environment.

James Staley

On the technology side, was there a view towards the Cloud or some of that that was sort of part of the strategy in Salesforce that you guys believed in?

Keith Block

Yes. I mean it was kind of interesting being at Oracle. Because I would sit at the executive committee meetings and we would be talking about the market and competition and then nobody was successful as Salesforce [ph] seriously. And I would get the reports from the sales organization and people would say, well you know we competed against Salesforce 10 times and we won 7 out of 10. And I kept on saying, what about the other thousand places that we're not in. And, but 70%-win rate, so nobody had 70%-win rate. I mean that would be great.

So, I think that was my first aha moment like this cloud thing is real and again, I started talking to customers, joint customers and talked about how they felt about the technology, but this Cloud thing, you know nobody took it seriously, even five years ago if I went to Germany everything – nobody is ever going to go with Cloud. Times have changed even in Germany. So, it’s here to stay.

James Staley

We were sitting down last night having dinner and talking about our industry and one us brought a slide that basically over a five-year increment, you know the five large largest market cap companies over last 20 years or so. And, you might have one tech company in there, but it was always dominated by an oil company or a major conglomerate like a GE and it was like clockwork. And all of a sudden, and even five years ago, there is only one tech company in the top five market companies in, I would say till now. It is a run. It is all tech. This whole digital transformation, how big is it, is it as big as those market cap and your market cap and growth rate show?

Keith Block

I think it’s very real. I mean we’ve talked about this. The digital transformation, it is a global phenomenon. I think few years ago, you and I will be walking around in a conference and people will say digital transformation and nobody really knew what it meant. And now, it is a compliment to you, I look at the transformation that you are driving at Barclays with a great executive team, but I feel like you're the Chief Transformation Officer, but Barkley’s. You appreciate the value of technology and I think smart CEOs get that. This is very different to me than what we saw at the turn of the century. I mean, I can't believe I just said that, but this is very different. I mean, I think that whole ERP with around Y2K and the early 2000s was kind of a cross stake-out simplification play with old technology.

Now we have another shift, which is what Amazon and Google and maybe Microsoft are doing in terms of infrastructure and that is also across stake-out, but that’s to me very – that’s not going to drive growth. It might enable growth, but it’s not going to drive growth, and I think what we're seeing with this whole digital transformation wave is, everything is located around the customer. Every company that is a B2B company is trying to become a B2C company. Everybody is trying to consumerize their business, no matter what their industry is. I mean, financial services is certainly not in for this. The government is not into this. And there is just a demand, people can vote by switching. Disruption is so high, so I think, if you are a CEO, and you have not embraced digital transformation, or you don't have a strategy for digital transformation you’re in trouble. So, I think most people are starting together.

James Staley

And do you think that digital transformation is having more impact on a couple of industries than others or you think it’s across the board?

Keith Block

I think it’s across the board. I think the first big explosion was retail and that was Amazon. And I think we’ve all seen the profound impact on brick and mortar retail than Amazon had, but that is spread across every industry and you feel financial services or in retail and consumer banking you see it again in the government, we do a lot of work for the government with the veterans administration and making sure we are taking care of our vets and providing them a higher level of service, and you look at the level of service you can do for a veteran where the mobile device as opposed to, I have been on the phone for three hours and nobody is helping me, and not only is that the right thing to do for veterans, but it’s the way we should modernize government. I don't think there is any industry that’s really into this at all.

James Staley

Why is it the West Coast? Why has all the stuff happened here?

Keith Block

Funny you asked that question. Because I grew up in Boston and those, I grew up in a time where it was America’s hi-tech highway and there were a lot of really good computer companies that are no longer around, but San Francisco, whether it is the roots of companies like Hewlett-Packard, which were such a traditional technology companies, you know what Apple has done, if you look at the four Horsemen of the Internet back 20 years ago, you know you had Cisco, you had Sun, you had Oracle, you had AMC which was a Boston-based company, they are just in so much technology innovation and I think there was so much momentum and then there is so much – frankly there is so much money to invest out here.

And then you have some great Universities. I think that has just become a great cocktail for innovation. The biggest thing is that you now start to see other cities popping up. That probably would never be like San Francisco unless the local government makes it so difficult to live here, but you know, New York has come back with technology. Boston has comeback. We'll see what happens with Amazon, now that they are splitting HQ too. In Europe, Berlin is a hotbed. So, we'll see what happens, but I think it’s been a perfect cocktail for innovation out here.

James Staley

And China, how big of a challenge to U.S. technology is China?

Keith Block

I will tell you, I'm not a China expert, but my opinion on this is, I think everybody talks about IT, and I think that’s something that the government has to really take a hard look at. And the Chinese have made a stated position that technology is very important to them, artificial intelligence is very important to them, but they want to be the leaders in AI in the future. I think that the United States need to really focus on that to make sure that we're more competitive and stay a world leader in technology. I think it’s our competitive differentiator. Technology is more prevalent in our life than it has ever been, and I don't think that trend is going to change. I think this is the way it is.

James Staley

And how integrated are you at the U.S. Government or how much work you do for them?

Keith Block

We do a fair bit with the government. Five years ago, we weren't doing any work for the government to speak off, now it is one of our fastest growing businesses. One of the things say what you want about the policies and the politics of the current administration, but there's a huge push on modernization. There is a gentleman named Chris Liddell, who is part of the White House staff that is really focused on modernizing all the systems in the government really for two reasons. One is, the enormous cost to maintain these systems, I mean some of the, it is incredible to see the legacy technology in the government. I mean, there are people still maintaining COBOL code. I mean it's just unbelievable. But then ultimately the government is here to service the citizens and so we want to be part of that.

James Staley

So, you guys recently built a new building where you can sort of look at outside? Why did you come downtown? Why did you build the building that you did? Talk about it's obviously going to be enormous landmark for San Francisco. What was the rationale behind it?

Keith Block

You know, we think real estate is kind of a weapon in terms of our culture. And we like real estate. It is, I think real estate on to itself people can make their judgement about it. It’s a very strong competitive position for us. It is a big part of our culture and people want to come to work at Salesforce because they are work in a cool environment. Our customers like to come and go to the 61st floor of the Salesforce tower and have an experience. We actually open up the top floors on the weekends to the .orgs so that they can enjoy it as well. So, it’s a big part of the community, it’s a big part of the ecosystem in the economy, here in downtown San Francisco and of course it’s great branding, you know we want to make sure that we have the lion share with a lot of people, but at the end of the day real estate for us is all about culture.

James Staley

How many people do you employ? How…

Keith Block

We have about 35,000 people. We have about 10,000 people in San Francisco.

James Staley

So, what do you make about the idea that technology is driving people out of their jobs and is one of the reasons why we have income inequality? What's your whole view of that? And if the answer is yes in-part, what do we need to do to sort of get back on track?

Keith Block

Yes. It is a huge disruptor. It’s unlike anything that we’ve ever seen. I mean, we talk about the fourth Industrial Revolution and every Industrial Revolution has had some level of disruption and some level of job displacement and society is pretty resilient. I mean, these people get new jobs, they get re-training, there is pick-ups along the way. What’s different this time again is the frequency of the waves. The number of waves that are coming in terms of this technology. So, I think the government frankly and incorporations have to be mindful of taking care of people. Because if we have income or quality now, if we don't make smart decisions about policy around technology and workforce development and people investing in the community it’s really going to get bad and that is not going to be good for anybody. I mean that will have profound economic conditions in the world. And then we’ll have real serious – more than we do now with quality issue.

So, I think the government have to get involved again. This is part of the reason why Suzanne and I made that contribution with Carnegie Mellon was to help bridge that gap and we've actually done some pretty cool stuff with the University with leveraging technology with partnership with Uber. So, there’s a secular Pittsburgh that is underserved and underprivileged that could be any city and those people – single family homes, maybe there is two parents, not a lot of jobs, and all the jobs are in another part of the city, but there is no public transportation really to get them there that is either reliable or safe.

So, the center for technology in society commissioned to study, working prototype if you will with Uber to provide free transportation for those families from the underserved areas over to the places where we could get jobs and see what would happen. And you can think, if people have opportunity to get jobs you can see that’s under-served area that is not good, all of a sudden, good things start to happen. So, I think we have to do a lot more of that at scale and if we do have that partnership, I think it'll be a outcome.

James Staley

Keith, we’ve run over. I kind of say, Salesforce is lucky to have you and I think we as a bank are lucky to have Salesforce, but also say a better community that we all live in. I think your focus on values and doing the right thing and getting back exceptional for all of us. So, thanks.

Keith Block

Thanks, Jes. Thanks for having me. Really appreciate.

Question-and-Answer Session

Q -