Salesforce CEO Marc Benioff says that its $1 billion acquisition of startup Vlocity will help it pursue a sales strategy championed by outgoing co-CEO Keith Block

• On Tuesday, Salesforce said it had acquired Vlocity, a startup that makes cloud and mobile software tailored to specific industries, for $1.33 billion.
• The news came the same day it announced co-CEO Keith Block was leaving the company.
• The acquisition of Vlocity will help Salesforce continue a sales strategy that focused on selling to specific industries, like finance, healthcare, and government - a strategy that Block first spearheaded.
• On a call with analysts after the earnings, Benioff said that Block inspired Salesforce to focus more heavily on vertical industries, and that the acquisition of Vlocity will help grow that effort.
• Benioff said that Salesforce wasn't looking to do another big acquisition so soon after Tableau, which it acquired for $15.3 billion last year, but the opportunity to bring Vlocity on board was too good to pass up.
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During its fourth quarter earnings announcement on Tuesday, Salesforce said it had acquired Vlocity, a startup that makes cloud and mobile software tailored to specific industries, for $1.33 billion.

The acquisition speaks to a strategy championed by now-former Salesforce co-CEO Keith Block - who stepped down from his co-CEO role in a surprise announcement on Tuesday -during his time at the cloud software giant. Block had just taken on the co-CEO role a year and a half ago in 2018.

Block is seen as an a leader in enterprise software sales and analysts say he had a big role in shaping what the company is today - including developing this strategy of targeting specific industries. Under Block's watch, Salesforce went from about $4 billion in annual revenue when he first joined in 2013, to doing about the same in a quarter now.

On a call with analysts after the earnings, Marc Benioff, founder and now sole CEO of Salesforce, credited Block with the strategy.

"I couldn't be more excited about amplifying the vertical strategy with them," Benioff said of Vlocity. "And I'm sure we'll have many more things that we'll be ready to announce that have honestly been inspired by Keith's tremendous vision and passion towards taking our incredible platform but delivering it by industry and also, as Keith said so well, in the language of our customers."

A vertical sales strategy

Vlocity makes cloud software for specific industries, like insurance, healthcare, and the public sector, on top of Salesforce's platform.

Salesforce currently has specific versions of its products financial services industry, healthcare, government, and philanthropy. The Financial Services Cloud and Health Cloud were both launched under Block's guidance. On the call with analysts, Block highlighted the growth in those areas and new customers Salesforce has signed on as a result.

"Approximately 3 years ago, we launched some incredible innovation with Financial Services Cloud as well as our Health Cloud and we had some amazing wins in the quarter associated with both of those," Block said.

Benioff noted that the success of this industry-specific strategy was a result of Block's leadership and initiative in the space.

He also noted that the experience Vlocity has in talking to customers in these industries will be a huge asset to Salesforce. Industries like financial services, healthcare and government, often have more rules and regulations they have to comply with, so the software they use has to be able to meet those needs.

Benioff said he had worked with many of the executives running Vlocity for decades, including its CEO and founder David Schmaier.

"Many of these executives we have worked with and worked together with for maybe 30 years or more. We know them extremely well...I'm especially excited that David Schmaier is coming into Salesforce. He's one of the finest executives who I've worked with," Benioff said.

This acquisition comes after its $15.3 billion acquisition of Tableau, which just closed in Q3 of last year. It was also the company's largest acquisition ever, and the two have just started to integrate their products.

Benioff said that Salesforce wasn't looking to do another big acquisition so soon after Tableau, but the opportunity to bring Vlocity on board was too good to pass up. He did say that the company is not going to be focusing on making any major acquisitions in the short term, instead putting focus on growing the business and hitting the goals its set, like doubling revenue by 2024 to $35 billion.

"We don't anticipate any major acquisitions in the short term," Benioff said.

A significant acquisition as Keith Block departs

Analysts say that the Vlocity acquisition is significant because it gives Salesforce a ton of extra expertise in this industry-specific sales stategy, especially amid Block's departure.

Rob Oliver, an analyst at Baird said that the Vlocity acquisition gives reassurance that Salesforce will continue going after specific industries, even though Block is leaving the company. He added that Salesforce has acquired "one of the best vertical plays on the Salesforce platform."

Rebecca Wetteman, an analyst at Valoir, said the acquisition while significant, is not surprising, given that Vlocity is built on the Salesforce platform and that the two companies have worked together for years.

"The Vlocity acquisition is significant in giving Salesforce tons of vertical CRM IP and industry chops, but not surprising - Salesforce has made a habit of acquiring companies from within its ecosystem where it's already done its due diligence. It's a lot easier to know what you're marrying if you've already dated exclusively," Wetteman said.

Arjun Bhatia, an analyst at William Blair said while Salesforce had a strong vertical strategy by itself, Vlocity has more out-of-the-box tools, which Salesforce would otherwise have to develop on its own.

"While Salesforce also has solutions that address these verticals, we get the sense that Vlocity offers more out of the box vertical workflows compared with Salesforce, which might require more custom development. Ultimately, we are positive on Salesforce's continued commitment to a vertical strategy, especially as the company looks to get more leverage on the sales and marketing line," Bhatia wrote in a research note published Wednesday.

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