It can be hard to know what to make of the world today. On the one hand, unemployment is at close at an all-time high, and many businesses are either shut down or crippled. On the other hand, as a group, SaaS stocks and companies are at an all-time high:
The root cause may be as simple as most of the decacrorns in SaaS seem to be getting a “Covid boost”. Zoom, Atlassian, Slack, RingCentral, Five9, etc. all support work-from-home. Some security vendors have become even more important as we’ve moved from having a few offices to in essence, 1000s (for each employee in WFH), e.g. Zscaler. eCommerce has been pulled forward by years, e.g. Shopify. Even companies like VMware are getting a Covid Boost.
But most SaaS companies aren’t exactly like these Covid Beneficiaries. I think most are more like the 2 Grand Old Leaders of SaaS — Salesforce and Workday. Most of us are like Salesforce and Workday in that our broad customer base includes customers that are benefiting from the change, but also, many customers that are hurting from it.
And what’s happening to Salesforce+Workday is probably a good proxy for what you can expect if you have a similarly diverse customer base. And a good example of what a fair, reset benchmark and set of KPIs might be for you and your team:
What Workday just reported:
- Workday is still growing, but 30%+ more slowly than before: “Workday has lowered its subscription revenue estimates by up to $85m for fiscal 2021 in response to the COVID-19 crisis.”
- Workday’s travel, hospitality, and healthcare segments are down / pushed out. “We saw higher than normal deal push-out, particularly in industries most affected, including travel, hospitality, and healthcare.” Like you, they had heavily impacted customer segments. Not all of their customers. But a material number.
- They are currently modeling Q2+Q3 being tough, but improvement in Q4. I guess that might as well be your model, too. 😉
What Salesforce just reported:
- Salesforce grew an impressive 30% in Q1, but, “This has been such a challenging quarter,” Benioff said. Salesforce isn’t getting any Zoom/Shopify/Zscaler boost.
- Salesforce similarly lowered guidance about 30% for the next quarter and the year, just like Workday. “Sales in fiscal 2021 will be about $20 billion, down from an earlier projection of as much as $21.1 billion, the San Francisco-based company said Thursday in a statement. Analysts, on average, estimated $20.7 billion.”
- Put differently, Salesforce is now projecting 17% growth for this year vs. 23% before. A big drop, but on the other hand, still real growth.
- Salesforce still managed to close its largest deal ever during Covid-19 with AT&T. So no excuses there, folks.
So what are the takeaways for you? Well, if you have a heterogeneous customer base like Salesforce, and are seeing challenges in your customer base but also growth in some segments, maybe use the Salesforce+Workday experience as your model for Q2 and Q3:
- Allow the team some leniency on growth (you probably already have), but maybe don’t go too far. Maybe lower the plan by 30% or so in a mixed-impact environment, absent data to suggest otherwise.
- Big deals can still happen if they move the needle. So no excuses for giving up here.
- It’s going to be harder. If Mark Benioff says its harder, then surely it is. Be empathetic, and set a reasonable goal that can be hit. That doesn’t give up. That isn’t full of excuses. But that recognizes some deceleration for now.