Salesforce have announced today that they will be laying off approximately 10% of their workforce over the coming weeks, as well as closing some offices. This is in addition to roughly 1,000 employees who were let go in November 2022.
The news was announced today after Marc Benioff sent a letter to employees citing that they “hired too many people” throughout the pandemic.
Salesforce Layoffs
I was sad to see the announcement of around 1,000 employees being laid off at Salesforce in early November. It’s even more unfortunate to learn that around 7,000 of Salesforce’s 70,000+ employees will be laid off today and over the coming weeks.
This round of layoffs seems to be in direct response to Salesforce’s latest quarterly earnings; at 14%, this meant the lowest year-on-year growth in recent memory. Prior to these quarterly earnings in November, Salesforce have seen – roughly – a +20% growth rate each quarter for the last decade. This is coupled with the fact that we might see a declining economic climate throughout 2023.
As many businesses scrambled to move into the cloud during the COVID-19 pandemic, tech companies like Salesforce saw huge demand for their services. This led to a massive surge in tech share prices, revenue growth, and hiring.
In August 2022, Salesforce advised in a company filing statement that headcount had risen by 36% in the past year “to meet the higher demand for services from our customers”. In January 2022, the total was 73,541 employees.
Since then, we’ve seen a global economic slowdown, war, rising prices, and currency fluctuations, meaning that for a lot of tech companies, layoffs have been necessary to better reflect the current economic climate, not the boom of 2020-2021.
In his letter to employees, Marc Benioff said the following:
“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that.”
What Does This Mean for the Ecosystem?
There has been a steady stream of negative news coming out of Salesforce over the coming weeks, layoffs, a mass-departure of executives, and a share price that has not been seen since 2019 levels.
This can all be pretty scary if you work in the Salesforce ecosystem, and whilst it’s important to keep track of what is going on at the company itself, you can separate this news from the Salesforce job market, for example.
The Salesforce share price is currently 56% down from its COVID-19 highs. Whilst many tech companies have seen a similar drop, Salesforce is struggling to keep investors happy with the way the company is currently being run, especially when compared with rivals such as Microsoft and Oracle.
But is Salesforce and the healthy job market it’s built up going to disappear? Far from it…
Salesforce have a whopping 22.9% share of the CRM market, which is more than Samsung or Apple have in the smartphone market, at 21% and 16% respectively. And unlike smartphones, which are switched out every few years, Salesforce is a platform that is deeply embedded within the organizations that use it; Salesforce helps businesses to increase revenue, remove inefficiencies, and ultimately make their customers happy.
So, whilst the recent news of layoffs and slow revenue growth isn’t great for the short-term future of Salesforce, it doesn’t change the fundamentals of Salesforce – 150,000 global customers, a best-in-breed suite of products, a rich ecosystem of partners, and one of the most innovative low-code platforms out there.
What this does mean, however, is that over the past four months or so, Salesforce have been selling less, as reflected in their quarterly earnings. This could have a direct impact on some newly created Salesforce roles intended to run internal implementations, as well as consulting partners and AppExchange partners who will have fewer new Salesforce customers to sell into. But again, this does not affect the 150,000+ customers who are still out there somewhere.
This will also likely directly impact the Salesforce IDC Study from 2021, which cited $1.2 trillion in new business revenues, and 9.3 million new jobs for the Salesforce economy.
Summary
It’s a real shame to see this news come out of Salesforce today, but it is encouraging to know that all employees affected will be supported by Salesforce, and receive generous remuneration packages.
At the time of writing, Salesforce’s share price is up over 4%, meaning that these layoffs have been very well received by investors. If you want to learn more about the current goings on inside Salesforce, I recommend this article by TechCrunch, which gives some insight into the current health of the company against the current economic climate. I will leave you with this comment from the article:
“Our first goal was to understand Salesforce’s health. It’s perfectly fine, even if it’s enduring the growth crunch that all SaaS companies are dealing with right now.”
Comments: