In the new era of cloud environment, various companies of all sizes are deploying their application software to cloud. Salesforce.com (CRM) is an established company with global footprint in providing cloud enabled solutions. The company provides CRM (customer relationship management) solutions on cloud as a SAAS application with a sturdy product portfolio with over 100,000 customers spread across the globe. The company has been known for recording steady revenue growth. The leading spenders on CRM enterprise software are communication industry, Media and IT services, followed by Manufacturing and Banking sectors.
In the recently declared Q4-2014 results, it crossed the $1 billion mark by recording revenue of $1.15 billion, 37% year over year growth. Total revenue $4.07 billion was recorded for fiscal 2014 which again is a 33% year over year growth.
Salesforce major revenue is generated by its SAAS application that is leased to customers against a recurring licensing fee. This business model of the company is the driving force of the constant revenue growth with new customers adding on to existing customers. Acquisition of Exact Target was catalytic to revenue growth of Salesforce.
Salesforce acquired Exact Target last year for $2.5 billion. The company is also focused on cost cutting. 200 jobs were cut off last year after acquiring exact target as a cost saving measures. This resulted in cost saving that was influenced the bottom line of Q4-2014 results. The acquisition of exact targeted was also the main cause of this job cutting due to the over lapping manpower for cloud marketing. With the acquisition of Exact Target Salesforce further firms its grip on SAAS enabled CRM solutions market. Analysts and researchers believe that 40% of the CRM is now being marketed as SAAS, and this market is always helping companies like Salesforce.
Salesforce.com is in no doubt about its growth. The guidance for fiscal 2015 is further raised by $100 million to records in the range of $5.3billion. Growth of CRM application software market stands at top among all other enterprise software categories. The CAGR is projected at 15.1% from 2012 – 2017, this growth was revised from 9.7% that was estimated in the first quarter of fiscal 2013. It is also projected that by 2017 ERP solutions software will be eclipsed by CRM enterprise software’s.
As per the research companies (Market Moniker), Cloud computing market revenue is projected to increase by 36% CAGR and will be a $20 billion market by end of 2016.
Salesforce.com is an established name in the cloud space and is readily accepted by its customers due to its quality, support, and features offered. Services offered by Salesforce.com are focused on reducing costs by saving manpower cost and capital cost, and reduced business complexities for cloud customers.
Over the next five years Salesforce's earnings are expected to grow at a CAGR of almost 28%, which is significantly above the industry average of 16%. The company's alliances and huge customer base should it achieve this impressive growth rate.
Why customers are opting
Reduced implementation time with an accelerated return on investment are the main reasons why various corporate organizations are embracing Salesforce.com for cloud computing.
Salesforce's recent synergistic tie up with Oracle (ORCL) speaks to its capabilities and market strength. The tie-up enables Salesforce to use Oracle's software and hardware, opening up a gateway for Salesforce to serve a wider customer base. With companies like Oracle, endorsing Salesforce vreate a higher brand value and customer confidence for using saleforce.
Salesforce also entered into an alliance with Workday (WDAY) recently. The new features and products that customers will receive from this alliance are still not clear. However, Workday is a well-known player in the cloud and a tie-up with Salesforce looks like good news for both companies.
Salesforce is expected to grow at a fast clip in the future, so investors should take a closer look at them. The more conservative investor should consider Salesforce since it is profitable on a non-GAAP basis. Investor should also consider future market growth of cloud enabled software companies and Salesforce can always be a safe bet.