Salesforce looks to reinvent itself again with its fledgling AI business

By Jon Swartz

Software giant bets that generative-AI revolution will transform the company, along with industry as a whole

Salesforce Inc. helped usher in the software-as-a-service and cloud eras. Can it pull off a trifecta with generative AI?

That is among many debates in the fast-evolving latest boom in tech. Salesforce (CRM) vehemently insists it's as well-placed as any enterprise company, despite sniping from some of its rivals who are also furiously jockeying for dominance in an estimated $40 billion market. Bloomberg Intelligence expects the gen-AI market to skyrocket to $1.3 trillion over the next decade.

"Usage of AI is going off the charts. The whole industry woke up when ChatGPT was shipped in late 2022," David Schmaier, Salesforce's president and chief product officer, said in an interview.

Salesforce has been in a dead sprint for the past few months delivering Einstein Copilot, a generative-AI assistant for CRM, in February, and Einstein 1 Studio, a set of tools that let developers customize Einstein Copilot, in March amid a mad scramble of enterprise software companies catering to their customers and attempting to lure new ones.

Salesforce's Einstein AI delivered 1 trillion transactions last week, Chief Executive Marc Benioff told MarketWatch, to customers like Gucci, Automatic Data Processing Inc. (ADP) and McLaren Racing. Meanwhile, Salesforce's technology partners include Amazon.com Inc.'s (AMZN) AWS, AI startup Anthropic, Microsoft Corp. (MSFT), Alphabet Inc.'s (GOOGL) (GOOG) Google and OpenAI.

"Generative AI is all about productivity. But enterprise vendors have to take a systematic view, and in that aspect, Salesforce has a lead," Michael Fauscette, chief analyst at Arion Research, said in an interview. "They enable the whole process across all functions in an organization. They have laid the right foundation."

After many consumers stormed to embrace gen AI, enterprises are now trying to integrate the fast-evolving technology into their existing digital platforms for sales leads, data coalescing and customer service.

Marissa Scalerico, vice president of sales operations at Carnegie Learning, said the education-technology curriculum company is using gen AI to comprehensively and quickly summarize sales accounts and opportunities.

"This could be the biggest impact on our sales team from Salesforce," she said.

BACA Systems, a small business that designs and makes stone fabrication equipment, is using gen AI in much the same manner, according to Andrew Russo, a Salesforce architect at BACA.

Indeed, two-thirds of marketers are using generative AI and more than half expect it to significantly transform their industry within the next year, according to a recent Adobe Inc. (ADBE) survey of 400 U.S. marketers on their usage of Gen AI.

'A moving and evolving target'

The frenetic AI boom is currently hyper-charging hardware makers like Nvidia Corp. (NVDA), Super Micro Computer Inc. (SMCI) and Advanced Micro Devices Inc. (AMD) that provide chips and servers for AI's heavy workloads. Software is harder to quantify, with the exception of Microsoft Copilot. Earlier this month, Oracle Corp. (ORCL) reported a big hike in cloud services revenue as it builds out more data centers to keep up with the increased demand for cloud computing, in part because of AI.

The unfolding AI arms race has led to sniping among some industry pundits that Salesforce, Apple Inc. (AAPL) and others are vulnerable.

"They are really trying to push themselves hard to keep pace in the next round of AI evolution," Rowan Curran, a senior analyst at Forrester, said in an interview. "I certainly think there are no indicators they are falling behind competitors."

Salesforce's hard pivot to gen AI is a natural extension of its product cycle, following its push into cloud technology a decade earlier. "You don't have to be a data scientist to harvest all of your data across the enterprise," Salesforce's Schmaier said. "This is a whole next level for companies, with gen AI."

With huge upside comes high risks, however, said Paula Goldman. Salesforce's chief ethical and humane use officer who oversees efforts to ensure a trusted approach to AI.

"Customers are excited about AI, but want to make sure the risks are mitigated," Goldman said in an interview. "Trust unlocks customer adoption, and building trust into product features (security, privacy, prompt defense). We need to keep humans in the driver's seat."

In Salesforce's earnings call last month, Benioff warned of AI's dangers. Some AI models, he said, are "very confident liars, producing misinformation and hallucinations."

"There's a danger for companies, for enterprises, for our customers, that these are not trusted solutions," Benioff said. "These [public] models don't know anything about the company's customer relationships and, in some cases, are just making it up."

Benioff said there are three "essential components" that enterprises can build into their gen-AI bot strategy to deliver trusted experiences: A compelling user interface, a world-class AI model and a huge data set.

If Salesforce pulls off its latest tech reinvention, it will not only reshape the company but lead to another wave of accelerated growth, said Schmaier.

"This is a whole next level for companies," he said.

-Jon Swartz

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-25-24 1711ET

Copyright (c) 2024 Dow Jones & Company, Inc.