Salesforce’s MuleSoft Business – Macro Impacts, Considerable Opportunity & Recent Execution Challenges

Can you provide a brief description of MuleSoft as a business and how it’s evolved? Historically, people have seen it as strictly an integration platform and set of tools. Clearly, it’s become a lot more than that, partly reflecting Salesforce’s ownership and investment.

The current economic backdrop has been described as uncertain and/or recessionary, but how have global events been impacting MuleSoft? Many people are wondering about certain classes of software solutions and whether they’re mission-critical or discretionary. You highlighted iPaaS [integration platform-as-a-service] and API [application programming interface] management, which seem to be MuleSoft’s primary product focuses. How are you assessing this given the current backdrop?

Do you think people associate MuleSoft with this concept of high and fast ROI? Obviously, you can be important and mission-critical, but you might not provide high or fast ROI. How should we think about that, especially for platforms where it becomes super integral, but probably takes time to install, connect everything, deploy it and customise? What does that process look like?

You made an interesting point about MuleSoft’s more traditional Anypoint Platform, and the related solutions that are really designed for IT teams, whereas its newer products such as Composer and RPA [robotic process automation] are specifically designed for business teams. It seems the business’s orientation and revenue mix is potentially shifting towards these latter types of products. If you consider the current product design mix being dedicated to IT vs business teams, what would you say the mix is now and where do you think the ideal is? Is it 75/25 and ideally flipping to 25/75 in five years? How should we assess that given everything you were saying?

It seems you can look at MuleSoft as helping with either integrations or APIs, and you mentioned process automation as well, which is somewhat consistent with what we discussed about RPA. How should we think about the business mix from that standpoint? Do you see it shifting over time? Based on the product introductions and where the world is going, the shift probably should be more towards APIs and API management. How important is it that MuleSoft has both of those platforms and sets of offerings, but also leads in both of those areas, unlike some of its competitors?

It seems that the mix itself doesn’t matter that much. What matters is that MuleSoft is winning business and is in a position to win business if an enterprise is interested in more iPaaS-type solutions or more API management-type solutions. Are there noteworthy distinctions in terms of the economics of the businesses and how they differ?

How should we think about the TAM at this point? Salesforce acquired MuleSoft in 2018 and I saw an indication of a TAM back then of USD 25bn-30bn. Do you think it’s comparable to what they were talking about four years ago, because maybe there were loftier expectations?

Is it unreasonable to say MuleSoft could have a USD 100bn TAM as we sit here today? Is that overly conservative or aggressive?

Some would say the iPaaS market is led in part by MuleSoft, but also note players such as Boomi, Informatica, Tibco and Workato, alongside very large enterprise software companies such as Microsoft, Oracle and SAP. For API management, we have MuleSoft, Apigee from Google, Axway and Kong, plus large enterprise players such as Microsoft again, IBM and Software AG. I list those in two categories because I’m curious how you would have us think about the primary competitors in each. Is it relevant that there isn’t much overlap? The only names that crop up more than once are MuleSoft, Salesforce and Microsoft. How should we think about the two categories in competition and then the broader competition where you’re talking about a platform and both elements being offered?

Who would you name as the one or two most formidable competitors on the iPaaS and API management segments, excluding the hyperscale or enterprise software players?

Which emerging competitors would you highlight? Who has taken a different approach when it comes to technology, go-to-market, packaging or pricing?

In September 2021, Salesforce provided some details around the success of its acquisitions and showcased MuleSoft. When the company acquired MuleSoft, revenue growth was 38%. It accelerated to 44% over the following 3-4 years, then within the next quarter or two, it disclosed some challenges pertaining to MuleSoft and indicated that revenues were up about 9% in Salesforce’s Q1. It has been publicly reported that there were some Salesforce reorganisation and execution issues. What went on there and how long could it take to correct? What happens next for MuleSoft? Should the growth rate be closer to 9% or 44%? Can you unpack the more recent performance?

Why do you think it took Salesforce or MuleSoft three years or more to start making some of the hard decisions about the organisation, go-to-market and other specifics? You alluded to how it started doing this in other regions before it began having a material impact on the financial performance, but what’s your view on the timetable here? Is it reflective of the strong demand, meaning if it isn’t broken, don’t fix it? Is it because there was a maturity to the business, so it felt safer to do it as that started to top out a little? How long do you think is reasonable for Salesforce and MuleSoft to correct these issues? They’ve been going on for multiple quarters and many people are wondering when they’ll see an inflection point.

How are you assessing MuleSoft’s near-term tactical strategy given the macro environment and execution or organisational issues? You described it as more of a premium product, which makes sense given that it leads in multiple constituent areas. Could you see it being more aggressive in pricing to hold the line and gain wallet share within certain key customers, especially if others in the marketplace – which is very crowded – could see it as vulnerable?

What do you make of the changes to the MuleSoft management team? The company appointed a new COO in February 2022, someone who was previously a long-term Salesforce executive, and a new chief revenue officer in March, another long-time executive from Salesforce. Does it strike you that the company is taking action to address some of the more recent operational and revenue shortcomings? How should we assess that going forward?

What is your 1-3-year outlook for MuleSoft? What could be its largest risk and opportunity?

Salesforce’s growth rate has been coming down. There’s the law of large numbers and an increasingly mature set of offerings, but this is a company that generated 25% revenue growth over the last year. When we’re looking into the future, maybe that’s 15-20% or so revenue growth. Should we understand MuleSoft’s growth similarly, and once everything is corrected and back on track, it should be able to grow at or above the level of its parent company?