Software-as-a-Service — or perhaps we should be simply calling it software, because that’s the way it mostly gets delivered now — had a pretty good week last week. Whether it was Salesforce reporting yet another great quarter, Box moving past a run rate of over .5 billion in revenue, or Dropbox announcing its intent to go public and an upcoming partnership with Google; it was mostly good news for SaaS.
SaaS is finally starting to mature
It’s taken some time for SaaS to mature, but led by Salesforce, it’s certainly found its footing. Salesforce has blown through a $10 billion run rate, a number that is so enormous it’s easy to forget just how hard it is to achieve that level of success as a cloud software company. Making a billion is a pretty big deal, making $10 billion is other worldly.
And that point certainly wasn’t lost on Salesforce Chairman and co-founder Marc Benioff, who recognized the magnitude of achieving such a goal while taking aim at $20 billion in an interview with CNBC’s Jim Cramer. “I think that because of this incredible quarter, you’re going to see us really have a huge dream of getting to $20 billion faster than any other software company ever,” Benioff told Cramer.
Box had more of a mixed bag as they passed a half billion in revenue, a bit more modest than Salesforce, but then Salesforce is much further along in terms of company maturity. CEO Aaron Levie still felt good about the number in the earnings call with analysts last week. “Fiscal 2018 was another great year for Box as we achieved a number of key milestones. We grew revenue 27 percent year-over-year to more than $0.5 billion,” he told analysts.
He also pointed out that in the fourth quarter year-over-year revenue grew 24 percent and billings grew 28 percent. All that sounds positive, but on the flip side, the company had lighter than expected projections for the upcoming quarter and Wall Street was unhappy with that news. The stock plunged more than 13 percent overnight and has yet to recover.
CEO Aaron Levie defended the guidance, suggesting it was due to a transition to more of a platform play over the coming quarters and insisted the company was still well on track to crossing a billion in revenue by 2020, which wouldn’t be too shabby if it comes to pass.
The Dropbox factor
Meanwhile while Box stock was dropping, Dropbox was dropping news that it would IPO, and further, that it was planning a big partnership with Google. The former was a long time coming, but the latter was more of a surprise because, after all, Google has its own storage product in Google Drive.
Yet as we have seen repeatedly, cloud companies do partner when their customers demand it, and apparently Dropbox and Google customers have both been hankering for more compatibility from these companies.
Regardless, Dropbox indicated it already had $1.1 billion in yearly revenue and when you combine that with the news that Box just crossed the .5 billion mark and Salesforce’s $10 billion yearly revenue, that clearly illustrates that SaaS is a big and growing piece of the cloud — and last week was a pretty good indication of that.
Photo: nathanmac87 (Salesforce). Used under CC BY 2.0 license via Wikimedia Commons