Salesforce's second-largest business just hired its fourth new leader in four years as growth slows

Key Points
  • Bill Patterson is the seventh person to lead Service Cloud since it launched in 2009.
  • It's been more than a year since Salesforce announced an update to its Desk.com product for smaller companies.
Marc Benioff, CEO of Salesforce.
Mark Neuling | CNBC

Salesforce has made the fourth leadership change in four years to its second-largest business, Service Cloud, as it struggles to meet revenue goals. The company has also effectively shut down a similar product for smaller businesses, Desk.com, according to sources.

Bill Patterson, a 14-year Microsoft veteran who was most recently on the Dynamics team, has joined Service Cloud as its senior vice president and product management leader. He reports to Mike Rosenbaum, Salesforce's executive vice president of customer relationship management applications. Last week Patterson updated his LinkedIn profile to acknowledge his new job. MSDynamicsWorld was first to report the move.

Service Cloud, a piece of software that customer-service representatives can use to manage inquiries, has been one of Salesforce's main growth drivers in recent years, going from $1.3 billion in sales in 2014 to $2.3 billion in 2016. But despite its growth, Service Cloud has dealt with frequent leadership turnover and a failure to reach its revenue goals in the past several years.

Patterson is the fourth product leader in the past four years, and the seventh since Service Cloud's launch in 2009. Most recently, the position was held by Adam Blitzer, an executive VP who had been running both the Sales Cloud and Service Cloud teams since December. Patterson's hiring was in part aimed at alleviating some of the pressure Blitzer had felt, as he was managing two products that accounted for 75 percent of Salesforce's total revenue, according to the person. Now Blitzer is solely focusing on Sales Cloud.

"It's a dynamic industry, and things happen," Rosenbaum, a 12-year Salesforce veteran, told CNBC. In appointing Patterson, the idea is to assemble a "better team" that can take Service Cloud business to the next level, Rosenbaum said.

Although Service Cloud still accounts for 30 percent of Salesforce's revenue, the business' growth has slowed, going from 37.6 percent in year-over-year revenue growth in 2015 to 27.6 percent in 2016, according to Salesforce's most recent annual report. And Service Cloud has failed to reach its revenue goals for the past two years, a source said. (Rosenbaum wouldn't comment on that but did emphasize that IDC says Salesforce leads the customer service and support software market, ahead of Oracle and SAP, among others.)

The Service Cloud group has struggled when it comes to selling to small and medium-sized businesses, two people said. To go after smaller businesses, Salesforce acquired Assistly for around $50 million in 2011 and re-launched it under the Desk.com brand in early 2012.

One of the Desk.com team's assignments, a second source said, was to siphon business away from then-private Zendesk, which has grown into a $3 billion public company. Salesforce even tried to buy Zendesk, but when the effort faltered, the company went after Assistly, the second source said.

Desk.com amounted to a second customer-service tool that cost less money than Service Cloud. Some executives opposed it because it pulled down sales numbers for the bigger Service Cloud business that Desk.com is part of, while some salespeople preferred not to sell it because it left them with less compensation for the deals they landed, the second source said.

Rosenbaum challenged that assertion, saying that salespeople don't decide which types of customer service products to sell -- different sales teams go after different types of companies, he said.

At one point Salesforce had around 200 people working on Desk.com, the source said. But the company hasn't sought attention for a Desk.com product update for 17 months, and it's effectively not actively developing it anymore, according to two people. Salesforce says Asana, Bonobos and Coinbase are among the companies that use Desk.com; Rosenbaum said the company is committed to supporting the customers who still use the tool. The company's experience running Desk.com has influenced the development of its Service Cloud Lightning tool, which is suited for companies of any size, Rosenbaum said.

Patterson is the latest Microsoft executive to jump ship to Salesforce, representing a new development in the on-and-off relationship between the two longtime rivals. Last year, Salesforce brought in Tony Prophet, a marketing exec, as its first chief equality officer. Previously, it brought in Bob Stutz, former Microsoft Dynamics' head of business, and Randy Kern, an executive from Microsoft's Azure cloud business.