Cloud computing needs installed based planning

From the July-August 2023 edition of Supply Chain Management Review.

July-August 2023

Most business people have heard the phrase “move fast and break things.” But how do you move fast, break things, and remain profitable? Inside this issue of Supply Chain Management Review are the answers—we…

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In 1997 I joined Advanced Manufacturing Research, a co-founder of the Supply Chain Council. It was renamed AMR Research (and is now part of Gartner Inc.). I was fortunate enough to be in the right place at the right time because supply chain management (SCM) was growing and fueling the growth of the SCM software industry. This made for a wonderful career for me, tracking and advising about SCM business processes and enabling software.

Dark clouds in cloud computing

While I am no longer in the business of tracking tech companies, I have certainly marveled (from afar) at the growth of the social media companies such as Meta/Facebook and Alphabet/Google, as well as e-commerce giant Amazon.com. But the one software company that really caught my attention has been Salesforce.com, a customer relationship management (CRM) company, focused on supporting marketing, sales, and aftermarket services. Founded in 1999, it has grown much bigger than a typical niche player (vis a vis to a full enterprise suite).

I did not focus on it until this past January when I started reading articles in the Wall Street Journal because Salesforce was announcing that it would be cutting a significant amount of its workforce. The following titles were several of them.

• “Salesforce’s Business Model Faces Test” (Jan. 24, 2023)
• “New Salesforce Has to Keep Selling” (Feb. 28, 2023)
• “Salesforce Profit Goals Focus on Efficiencies” (March 8, 2023)

It sells subscription-based “software to mid-size-to-large companies, [and] has always run at a high cost compared with its peers.” Wall Street rewarded the company with increasing stock prices because of its rapid growth with little regard to profitability. The founder ran it like a family-oriented lifestyle business and did not prepare it for a time when the growth would slow. I’ve had experience with subscription-based businesses. A lesson I learned is that when as you grow a business—for example at 25% a year, such as Salesforce—continuing to grow subscribers at a double-digit percent rate eventually becomes very hard to achieve.

Other cloud computing-based businesses have been experiencing a similar plight. A WSJ article (March 21, 2023) was titled “Amazon Extends Layoffs to Cloud, Ad Businesses.” The next month another article was written, “Amazon Rebounds, But Woes Hit Cloud” (April 28, 2023). In its highly profitable cloud division, AWS (Amazon Web Services), it saw “signs of cooling.” Meanwhile, Microsoft woes were reported in “Microsoft Growth Is Muted as Cloud Cools Off” (April 26, 2023). In addition to these companies, Meta and Alphabet were also downsizing.

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