ISG Provider Lens™ Salesforce Ecosystem Partners - Managed Application Services for Large Enterprises - U.S. 2023

Continuous growth of Salesforce and shift to Salesforce industry clouds drive demand for implementation services.

Since its founding in 1999, Salesforce has shown impressive growth and is now one of the leading providers of cloud-based application systems in the form of Software as a Service (SaaS). Its revenue growth rates have been between 24 to 29 percent in the past five years. Although the company has now reached a level where it becomes challenging to maintain this growth, Salesforce is likely to continue at the same pace in the years ahead. In the post-pandemic era, the environment has become increasingly favorable for additional investments in digital transformation of most core processes within enterprises. Salesforce is likely to benefit from this global trend.

The expected high growth rates will aggravate the limited availability of qualified resources with Salesforce expertise, which has already been a key limiting factor for the number of implementations in the past. Specifically, in the U.S., this trend led to significant consolidation pressure in the market for corresponding services, with large system integrators trying to expand their resource base by taking over other providers. Interestingly, Salesforce sped up this trend as it started to expand its own capacities for implementation services. Salesforce has acquired two large providers of implementation services, Acumen and Traction on Demand, in the past two years, and this has significantly contributed to the scope and the size of its own implementation offerings. It remains to be seen if this trend will continue and Salesforce will grow into a strong position in the market for implementations, or if these capacities will be primarily used for strategic developments conducted jointly with clients.

Another trend worth mentioning is of Salesforce has signed several partnering agreements for joint implementations with other service providers. This move offers additional opportunities to these providers, but also runs the risk of growing dependence on Salesforce. However, it is not possible to conclusively assess how sustainable the expansion of Salesforce’s own development capacities will be because, as a software business, it requires significant investments and usually has lower margins.

In addition to these strategic business initiatives, which ultimately do not generate any additional capacities in the market, many providers are focusing on reskilling and hiring qualified resources. This has become a critical success factor in the market for Salesforce implementation services. While some companies hire and train young talents to become Salesforce consultants through suitable qualification measures, others requalify experienced consultants from different areas to become Salesforce experts. Large system integrators follow this path due to the limited opportunities for additional growth by acquisitions. In its partnerships, Salesforce itself promotes companies that contribute significantly to additional implementation capacities.

Salesforce’s recent verticalization strategy has significantly changed the current market environment. This trend had started a few years ago with the introduction of industry-specific products such as the Financial Services Cloud and the Health Cloud. A key indicator of the potential shift of focus to industry clouds was Salesforce’s 2020 acquisition of Vlocity, which was an ISV of various industry-specific products based on the Salesforce platform. Following the acquisition, Vlocity’s capabilities contributed to Salesforce’s industry-specific products. Today, Salesforce offers several industryspecific clouds, all built on the Customer 360 platform, such as the Manufacturing Cloud, the Consumer Goods Cloud and the Media Cloud. It remains to be seen whether this move will be widely accepted by clients since it comes with additional licensing needs and related costs. Right now, it is too early to assess the success of this strategy shift.

Regarding the implementation methods used, the hybrid agile model remains the most common approach for globally operating customers. For these enterprises, integrating Salesforce into a complex system landscape with global operations is a mandatory requirement. The hybrid agile model is a combination of agile elements for the implementation phases with phase-oriented elements related to strategy, design, and rollout. Most providers now offer this type of methodology in their portfolios. The pure agile methodology is still suitable for an isolated implementation of Salesforce; it is primarily used by midsized customers that do not require a global rollout and have limited integration requirements.

When it comes to integrating Salesforce with other applications, the MuleSoft platform continues to be the dominant tool. Comprehensive competence regarding this platform is now an essential requirement for providers to survive in the market. Large system integrators usually operate a dedicated MuleSoft practice of considerable size that bundles corresponding capacities.

An important factor that Salesforce clients sometimes underestimate is the high degree of standardization that goes along with the use of a SaaS product like Salesforce. In many cases, clients learn that the standard functionalities and the available options to configure the solution do not cover their specific requirements. Since the SaaS platform cannot be subject to changes by the clients, there is a need for additional products that cover these requirements. There are many ISVs that offer additional solutions on the Salesforce platform. These solutions are typically offered as independent products, licensed separately and made available through a Salesforce-powered portal called the AppExchange Store. Salesforce ensures that the individual apps meet the basic software quality requirements, including for troubleshooting, maintenance cycles and compatibility with Salesforce products, among others.

Therefore, for all service providers, whether they are systems integrators or boutique vendors, a strong network of ISV partnerships within the Salesforce ecosystem remains of great importance. This applies not only to the implementation but also to the subsequent continuous support of ongoing operations.

In this year’s study, the definition of most quadrants remained unchanged. Only the following two changes have been applied:

• The quadrant for Implementation Services for Analytics Solutions on Salesforce was replaced by the Implementation Services for Industry Clouds quadrant, recognizing the strategic shift of Salesforce mentioned above.

• The quadrant for Implementation Services for the Marketing Cloud Midmarket is renamed to Implementation Services for Marketing Automation Midmarket to better reflect the high degree of automation requirements that are in most cases characteristic to implementations in marketing.

The results by quadrant can be summarized as follows:

In the Multicloud Implementation and Integration for Large Enterprises segment, the support of global rollouts and the coverage of complex integration requirements are the key success factors for providers to achieve a leading position. Accenture, Capgemini, Cognizant, Customertimes, Deloitte Digital, HCLTech, IBM, Infosys, TCS and Wipro qualified as Leaders this year. As a Rising Star, LTIMindtree has the prospect of qualifying as a leading provider in the future.

In the Implementation Services for Core Clouds Midmarket segment, the early phases of development, including strategy development, design and planning of a roadmap have become increasingly important skills for providers’ success in this area. Birlasoft, Coastal Cloud, Hexaware, Perficient, Persistent Systems and Silverline qualified as Leaders this year. As Rising Stars, Brillio and Coforge have the prospect of qualifying as leading providers if they continue to grow.

In the Implementation Services for Marketing Automation Midmarket segment, which was renamed and remains unchanged in terms of content, the following providers have qualified for a leading position this year: Coastal Cloud; Dentsu; Perficient; Persistent Systems; Silverline and Slalom.

In the comparatively young Implementation Services for Industry Clouds segment, expertise and availability of predefined solutions and accelerators are important success factors for service providers to achieve a leading position. The companies that qualified as Leaders this year are Accenture, Capgemini, Coastal Cloud, Cognizant, HCLTech, IBM, Infosys, Perficient, Persistent Systems, TCS, and Wipro. As Rising Stars, LTIMindtree and Tech Mahindra have the prospect of becoming Leaders in the future.

The market segment for Managed Application Services for Large Enterprises, like the corresponding segment for implementations, is largely dominated by large and global system integrators. Several other players occupy significant sub-areas, but Accenture, Capgemini, Cognizant, HCLTech, Infosys, LTIMindtree, TCS, Tech Mahindra and Wipro were able to qualify as Leaders in this space. Although they have favorable cost structures due to their global supplier models, the large system integrators do not have a significant role in the Managed Application Services for Midmarket quadrant. This is mainly because the market has less complex requirements and the companies mentioned above do not prioritize this market. The companies that qualified as Leaders for this segment include Birlasoft, Brillio, Hexaware, Perficient, Persistent Systems and Silverline.

Here are some concluding general remarks about leading providers in this study:

• The leading providers analyzed in all quadrants closely collaborate with multiple stakeholders to ensure solutions are targeted at the continuously changing market needs.

• Leading providers focus on using Salesforce as a platform for continuous innovation, broad integration across different applications, and end-to-end application lifecycle management.

• These providers combine technological innovation with domain and process expertise.

• Leading providers are willing to fund innovation, enter into co-development agreements and engage in outcome-based pricing models.

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