A look at the suite of products offered by Zendesk (NYSE:ZEN) lately makes it clear that the company wants to provide much more than customer support -- technology once known as help desk software.
There's Zendesk Connect for data-driven email marketing; Zendesk Explore for analytics and reporting; Zendesk Sell for sales force automation; and Zendesk Sunshine, its customer relationship management (CRM) platform.
As Sunshine and other new products rise, Zendesk's past as a provider of help desk software is fading. We've seen this story before: Salesforce.com (NYSE:CRM) has grown well beyond its historical roots in CRM to provide a cloud-hosted business computing platform for some of the world's largest businesses. Zendesk is on a similar trajectory.
A compelling comparison
That doesn't necessarily mean Zendesk is the next Salesforce. Rather, what we're seeing is that customers that might need the features Salesforce offers in the cloud -- but not at the scale at which it prefers to operate these days -- are gravitating to smaller cloud players. Zendesk appears to be positioning itself to be a primary beneficiary.
|Company||Customer Accounts||TTM Revenue (Millions)||Market Cap (Millions)||Number of Employees|
Here's what this table shows:
- Investors already see the similarities between Salesforce and Zendesk. How do we know? The difference between market cap (Salesforce is 11.7 times larger) and headcount (Salesforce is 11.9 times larger) are strikingly similar, which tells me the market sees the relative value of one Zendesk employee as similar to one Salesforce employee -- specifically, $3.42 million in market cap for each Salesforce employee versus $3.46 million in market cap per Zendesk employee.
- Zendesk isn't yet in the same league as Salesforce, and it'll take awhile to get there. Divide total revenue by the number of customer accounts and you get a whopping difference: $93,200 per account for Salesforce versus just $4,486 for Zendesk -- a multiple of almost 21 times. That's a Grand Canyon-sized chasm between the two.
Zendesk appears more than ready to bridge the gap. CEO Mikkel Svane, CFO Elena Gomez, and vice president for strategy Marc Cabi described their suite of products in the first-quarter letter to shareholders by saying, "Our investments to broaden our product portfolio and platform with seamlessly integrated omnichannel experiences and enterprise-scale capabilities -- all on the open, modern cloud -- have significantly strengthened our competitive position and driven high revenue growth."
The Foolish bottom line
While there's no guarantee that Zendesk will continue growing as fast as it has, the pattern should be pretty clear to investors. Svane and his team aren't just aiming to dominate the small- to medium-sized market; they want to at least scale to be Salesforce's peer. I wouldn't bet against them.