Salesforce looks to the HCM and ERP market for new expansion opportunity and as a necessary part of competing against Microsoft
In June 2020, during the height of the pandemic and peak of business closures throughout the world, Salesforce launched Work.com as a solution that would help businesses, schools, and cities reopen safely.
There were 5 core components to the Work.com product along with the Workplace Command Center:
‘It’s a lot like CRM’, said Rob Seaman, SVP of Product for Healthcare and Life Sciences, ‘you’re trying to identify and understand relationships’.
Tools that enable businesses to keep workplace density at a minimum while still meeting the staffing and scheduling needs of the business.
This app within the Work.com experience is catering to cities and public health officials, helping to allocate the necessary resources across public sector and healthcare.
These are core Salesforce.org products repurposed for Work.com, designed to coordinate volunteer sign ups & scheduling, track grants and fundraising, and analyze ongoing philanthropic efforts using Einstein Analytics.
Salesforce surveys via a mobile app to mentor employee wellness.
While there was some traction - State of Rhode Island, University of Kentucky - and a few Salesforce Consulting Partners lined up to be specialists in Work.com implementations - West Monroe Partners, Cadalys - Salesforce knew the core product wouldn't have longevity once the pandemic's impact subsided.
So, in June 2021 it was announced that Salesforce would be re-launching Work.com as a Human Capital Management (HCM) / Employee Experience solution to help companies manage all touch points of an employee's journey at the company.
(If Salesforce helps end customers manage the 360 degree customer relationship, it's only logical they would extend this competency into managing 360 degree INTERNAL relationships as well, right?)
While we anticipate the offering to expand in the months and years ahead, Salesforce has re-launched Work.com as an Employee Experience tool with 3 primary product areas:
This product area is aimed at improving overall employee wellness. The tool will have features geared toward both individual employees and their managers. On the employee side, users can complete confidential wellness checks, access resources for reducing stress and managing productivity in a balanced way, and connect with other employees adjusting to the new workplace.
Powered by Salesforce Trailhead, the free online learning platform, Talent will give employees and overview of their skills help set development & career planning goals, and proactively devise their desired career roadmap. The ultimate goal is for this tool to offer employees with personalized guidance and provide greater visibility into internal opportunities that could be of interest.
This could prove to be a significant tool in both workforce upskilling and employee retention.
These are the 'traditional' features found in an HCM product, helping to automate employee on-boarding, payroll setup, navigating benefits etc. Employee Service will have a catalogue of internal products / services helping employees access everything they need on a day-to-day basis: ordering a new laptop, desk chair, software installs etc.
The market for HCM was more of less created by SuccessFactors. Founded in 2001, they were an exciting and innovative upstart the had a clear vision in the talent management software market and pursued an aggressive growth strategy to become the #1 vendor.
Workday launched in 2008 and leapfrogged every existing vendor to become the top HCM provider by offering a native cloud-based, easy-to-use solution with simpler integrations to existing enterprise applications.
While the HCM market pales in comparison to the global CRM market, vendors have started jockeying for position with SAP making substantial acquisitions in the space (Concur, Callidus, and Qualtrics). The market is expected to grow and shift dramatically as we move to new distributed work models and the overall logistics surrounding employee experience and workforce management evolve.
For many years, Workday and Salesforce have had a complementary relationship and a tight integration between their products. Many look at Workday as 'the Salesforce of HCM', given they entered the market 10+ years after SuccessFactors and sit as the #1 HCM vendor with a market cap north of $50B. This could turn into a partnership or bitter rivalry.
The rivalry between Oracle and Salesforce has gone on since the early days. In the HCM space, Oracle has grown through acquisition, initially purchasing PeopleSoft in 2004 and then most notably acquiring Taleo in February 2012 for $1.9B to boost the talent management side of the application.
The competition between these two giants is in its infancy and only heating up in the years to come. Industry experts believe Salesforce's $27.7B acquisition of Slack in December 2020 was largely to give them a product that could compete with Microsoft Teams (145m+ users and growing). While Microsoft had made some inroads in HRTech with the December 2019 release of Dynamics 365 HR, the bigger move was the March 2021 release of Microsoft Viva.
Not long after, Salesforce re-launches Work.com and officially enters the market...
While Salesforce has deep integrations to back-office applications (SAP, Microsoft Dynamics, Netsuite, FinancialForce etc.) the core product focus for Salesforce has always been front-office applications - Sales, Customer Service, Marketing etc.
In recent years, we've seen Salesforce expand into entirely new product areas in order to capture additional revenue within existing accounts:
These are all markets that have a direct relationship (from a technology integration standpoint) with Salesforce, particularly in enterprise accounts. It's a logical expansion strategy and 1 that has proven effective given that MuleSoft and Tableau account for ~$6B in annual revenue and are the fastest growing product segment within all of Salesforce.
Since Salesforce already invested the resources building the core architecture and features of Work.com, re-designing small parts of the solution and launching Work.com comes as a relatively low risk way to evaluate the HCM market.
If Salesforce doesn't see traction and struggles to compete against Workday, SAP, and Microsoft then sunsetting the product comes at a lower cost given much of the Product Development resources had been previously allocated for the COVID-specific solution and not with the intent of competing in HCM.
However, if their Sales team proves effective at closing Work.com deals and building a footprint in existing customers, we could the next step for Salesforce go in a few different directions.
Here are a few predictions if Salesforce does, in fact, see early traction in the HCM market:
The most likely outcome is for Salesforce to follow their standard playbook and acquire their way into a new market segment.
There are several HCM / ERP vendors built natively on the Force.com platform, which would make for an especially easy integration to the core roadmap. (We saw this play out with Vlocity, an Industry focused SaaS vendor with a suite of native Force.com products, which was acquired by Salesforce in February 2020 and is now Salesforce Industries).
The native vendors at the top of our list would be:
However, there are also a number of attractive, non-native HCM vendors that bring product expertise, a customer base, and a reasonable price tag. Some of these could include Rippling, Sage, and Vibe HCM.
Another option for Salesforce would be to continue the slow march into the market. The acquisition of SteelBrick (now CPQ Cloud) was a big step into the back-office, given that it's a critical layer connecting front office Sales / Revenue Operations applications to the Finance and Billing teams. A logical next step could be acquiring a Billing tool like Zuora, giving exposure to back office technology without committing to a full ERP product build.
As of July 2021, Salesforce sits with a market cap of ~$225B.
If they determine that moving into back-office applications more aggressively is a key piece to remaining competitive against Microsoft, Oracle, SAP and others then it's conceivable to see a larger scale acquisition. Workday currently sits at a $55B market cap and is likely out of range but a player like Infor, valued at ~$11B, gives enough scale to make an impact on revenues while still being affordable.