The case for AI & Machine Learning in the CRM market
The customer relationship management software (CRM) space became the hottest segment of the Software Market in 2017, which now represents a $39.5 billion opportunity, surpassing the database management system (DBMSs) space¹. Players in the CRM market include heavyweights Microsoft, Oracle and SAP, but the space has been dominated by Salesforce for the last five years in a role². So, what has Salesforce done to stay ahead of the curve? It understood that AI was the next natural step to increase the value delivered through its CRM platform to business, allowing them to understand their customers better and interact more efficiently.
AI and machine learning capabilities allow Salesforce to make use of the vast amount of data it has from its customers to not only organize and display it in an efficient way but to extract valuable insights for its customers to enhance their sales process. The rationale behind the use of AI in CRM is that automation in data collection and smart data analysis can increase the chances of a lead turning into a sale. But it is not only accuracy that matters but also speed, and since machine learning can process information not only automatically (freeing employees time to actually sell) but also at a faster rate than humans, it comes as a natural candidate for CRM companies to incorporate in their suite of products.
How is Salesforce developing its AI capability
Salesforce efforts to develop an AI-powered offering can be traced back to 2014 when it started making some important acquisitions of AI-related startups. Back in 2014, it acquired RelateIQ, which used searches of unstructured data from email, social networks, and calendars to automate large portions of the sales process, for $390 million³. In 2016, it acquired two other AI-related startups MetaMind, an automatic image recognition platform, and PredicionIO, an opensource machine learning server4. That year, 2016, also saw the launch of a Salesforce Research Group focused on delivering AI research across deep learning, natural language processing, and computer vision to Salesforce’s product and engineering teams5.
The combined acquisitions and internal research group resulted in the 2016 launch of Salesforce AI technology umbrella Einstein, which aims to deliver AI across all of Salesforce’s platform5. According to the company, Einstein brings more customization of the Salesforce platform to clients by leveraging on machine learning to automatically discover insights, predict future behaviors and automate tasks5. One of the key things that make Einstein very appealing is the access to the vast amount of data across the Salesforce platform and the capacity of the system to learn from this data to improve its recommendation/prioritization engine.
After the launch of Einstein in 2016, Salesforce efforts to staying ahead of AI continued with two interesting events that added to its acquisitions and internal team initiatives. In September 2016, after Einstein´s first year anniversary, the company launched a $50 million fund to invest in startups that build AI applications on top of the Salesforce platform6. Furthermore, it also announced a new partnership with IBM to connect Watson, IBM’s AI tool capable of question-answering questions posed in natural language7, to Einstein to enhance the CRM´s capability of delivering smarter and faster results8.
Staying ahead of the curve
Einstein is now two years old and is well embedded across all of Salesforce’s offering. The company announced back in February of 2018 that Einstein was producing 1 billion AI-powered predictions per day, an important milestone in terms of product effectiveness (considering it was making zero predictions two years ago)9.
Salesforce has been successful so far in staying on top of the market with its bet on AI, but it is important to understand that this has to be a continuous effort. The other competitors in this segment have not stayed arms crossed and have invested in AI too, trying to catch up to Salesforce. For example, Microsoft has been introducing AI capabilities to its Dynamic cloud offering at a faster pace in 201810. It is essential to take into account that Salesforce competitors are huge tech companies with access to large pools of resources to compete.
Taking this into account, Salesforce should keep being very aggressive in both acquiring and investing in AI companies, while at the same time focusing on attracting and developing the best-in-town AI talent.
AI is giving the CRM industry an inflection point, allowing companies to differentiate their products and escape becoming a commodity. But as tech giants such as Microsoft, SAP, and Oracle, along with Salesforce, continue to develop their AI capabilities, will AI-powered CRM offerings become a commodity too in the mid-future? Will Salesforce be able to spot the new wave of growth after AI to stay ahead of the curve?
¹ Gartner. “Gartner Says CRM Became the Largest Software Market in 2017 and Will Be the Fastest Growing Software Market in 2018”. April 10, 2018. https://www.gartner.com/newsroom/id/3871105.
² PR Newswire press release based on IDC Worldwide Semiannual Software Tracker. May 2018. https://www.prnewswire.com/news-releases/salesforce-named-1-crm-provider-for-fifth-consecutive-year-300644062.html
³ Techcrunch. “Salesforce Buys Big Data Startup RelateIQ For Up To $390M”. July 2018. https://techcrunch.com/2014/07/11/salesforce-buys-big-data-startup-relateiq-for-up-to-390m/
4 VentureBeat. “Salesforce buys hot deep learning startup MetaMind, services shutting down May 4”. April 2016. https://venturebeat.com/2016/04/04/salesforce-buys-hot-deep-learning-startup-metamind-services-shutting-down-may-4/
5 Salesforce. Press release “Salesforce Introduces Salesforce Einstein – Artificial Intelligence for Everyone”. September 2016. https://investor.salesforce.com/about-us/investor/investor-news/investor-news-details/2016/Salesforce-Introduces-Salesforce-Einstein—Artificial-Intelligence-for-Everyone/default.aspx
6 Techcrunch. “Salesforce Ventures launches $50M fund to encourage AI development on Salesforce platform”. September 2017. https://techcrunch.com/2017/09/19/salesforce-ventures-launches-50-m-fund-to-encourage-ai-development-on-salesforce-platform/
7 IBM. IBM Journal of Research and Development: Volume 56 Issue 3.4. May-June 2012. https://ieeexplore.ieee.org/xpl/tocresult.jsp?isnumber=6177717
8 Salesforce Press Release. “IBM and Salesforce Announce Landmark Global Strategic Partnership”. March 2017. https://www.salesforce.com/blog/2017/03/ibm-salesforce-strategic-partnership.html
9 Salesforce Press Release. “Salesforce Einstein Delivers More Than One Billion AI-Powered Predictions Per Day”. February 2018. https://www.salesforce.com/company/news-press/stories/2018/2/022818-a/
10 CNBC. “Microsoft is upping its A.I. battle with Salesforce”. September 2018. https://www.cnbc.com/2018/09/18/microsoft-salesforce-battle-ai-dynamics.html