Cloud computing requires installation-based planning

From Larry Lapide ·

July 3, 2023

In 1997, I joined Advanced Manufacturing Research, co-founder of the Supply Chain Council. It was renamed AMR Research (and is now part of Gartner Inc.). I was fortunate to be in the right place at the right time as Supply Chain Management (SCM) was growing and fueling the growth of the SCM software industry. This has made for a wonderful career for me, monitoring and consulting on SCM business processes and enabling software.

Dark clouds in cloud computing

While I no longer track tech companies, I’ve certainly marveled (from a distance) at the growth of social media companies like Meta/Facebook and Alphabet/Google, as well as e-commerce giant Amazon.com. But the one software company that really caught my eye was Salesforce.com, a customer relationship management (CRM) company, focused on supporting marketing, sales, and after-sales services. Founded in 1999, it has grown much larger than a typical niche player (vis a vis a full enterprise suite).

I didn’t focus on it until last January, when I started reading articles in the Wall Street Journal because Salesforce was announcing it was cutting a significant amount of its workforce. The following titles were
many of them.

• Salesforce Business Model Face Test (January 24, 2023)
• The New Salesforce Must Keep Selling (February 28, 2023)
• Salesforce Profit Goals Focus on Efficiency (March 8, 2023)

Sells subscription software to medium and large companies, [and] it has always operated at a high cost compared to its peers. Wall Street has rewarded the company with rising stock prices due to its rapid growth with little focus on profitability. The founder ran it as a family-oriented lifestyle business and didn’t prepare it for a time when growth would slow down. I have experience with subscription based businesses. One lesson I’ve learned is that when you’re growing a company, say, 25% a year, like Salesforce, continuing to grow subscribers by double-digit percentage eventually becomes very difficult to achieve.

Other cloud-based companies have experienced a similar situation. A WSJ article (March 21, 2023) was titled Amazon extends layoffs to cloud, advertising firms. Another article was written the following month, Amazon Rebounds, But Woes Hit Cloud (April 28, 2023). Its highly profitable cloud division, AWS (Amazon Web Services), has seen signs of a cooling down. Meanwhile, Microsoft’s problems were reported in Microsoft Growth Is Muted as Cloud Cools Off (April 26, 2023). In addition to these companies, there were Meta and Alphabet
also scaling.

From Larry Lapide ·

July 3, 2023

In 1997, I joined Advanced Manufacturing Research, co-founder of the Supply Chain Council. It was renamed AMR Research (and is now part of Gartner Inc.). I was fortunate to be in the right place at the right time as Supply Chain Management (SCM) was growing and fueling the growth of the SCM software industry. This has made for a wonderful career for me, monitoring and consulting on SCM business processes and enabling software.

Dark clouds in cloud computing

While I no longer track tech companies, I’ve certainly marveled (from a distance) at the growth of social media companies like Meta/Facebook and Alphabet/Google, as well as e-commerce giant Amazon.com. But the one software company that really caught my eye was Salesforce.com, a customer relationship management (CRM) company, focused on supporting marketing, sales, and after-sales services. Founded in 1999, it has grown much larger than a typical niche player (vis a vis a full enterprise suite).

I didn’t focus on it until last January, when I started reading articles in the Wall Street Journal because Salesforce was announcing it was cutting a significant amount of its workforce. The following titles were
many of them.

• Salesforce Business Model Face Test (January 24, 2023)
• The New Salesforce Must Keep Selling (February 28, 2023)
• Salesforce Profit Goals Focus on Efficiency (March 8, 2023)

Sells subscription software to medium and large companies, [and] it has always operated at a high cost compared to its peers. Wall Street has rewarded the company with rising stock prices due to its rapid growth with little focus on profitability. The founder ran it as a family-oriented lifestyle business and didn’t prepare it for a time when growth would slow down. I have experience with subscription based businesses. One lesson I’ve learned is that when you’re growing a company, say, 25% a year, like Salesforce, continuing to grow subscribers by double-digit percentage eventually becomes very difficult to achieve.

Other cloud-based companies have experienced a similar situation. A WSJ article (March 21, 2023) was titled Amazon extends layoffs to cloud, advertising firms. Another article was written the following month, Amazon Rebounds, But Woes Hit Cloud (April 28, 2023). Its highly profitable cloud division, AWS (Amazon Web Services), has seen signs of a cooling down. Meanwhile, Microsoft’s problems were reported in Microsoft Growth Is Muted as Cloud Cools Off (April 26, 2023). In addition to these companies, there were Meta and Alphabet
also scaling.

July 3, 2023

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