The world's cloud software juggernaut, Salesforce.com (CRM, Financial), is working toward expanding its solution spread in order to accelerate its sales growth and pull ahead of its competitors. The company unveiled the sixth cloud platform named âWaveâ on October 13, 2014, to enter the Business Intelligence domain.
Through this new cloud offering, Salesforce is gearing up to provide its customers with predictive analytics features by integrating its own Customer Relationship cloud offering. Wave is designed to make it easier for everyone to explore data, unravel new insights and take action instantly from any device.
Price estimates have been pegged at $55 for Salesforce.com, approximately 3.3% higher than the current trading levels of $53.
Predictive Analytics Tool to take Salesforce to New Heights
According to predictions and estimates by Gartner (IT, Financial), the Business Intelligence market is slated to grow at an average rate of 7% to 9% on a year-over-year basis currently standing at about $14.4 billion in 2013, up nearly 8% from 2012. Comparatively, 2012 also witnessed a 7% growth in the BI market on a year-over-year basis from 2011. Despite the faster growth in the BI market in 2013, investments into mainstream BI tools that generate actionable insights, was quite dull and not worth taking a note of, with significant investments being channelized into ancillary tool development such as experimental silos, infrastructure and other support services. Deployment of mainstream BI tools that leverage analytics on big data are likely to come into spotlight since the whole corporate analytics world has ended up doing rounds of BI.
German software giant SAP (SAP, Financial) is the market leader in the BI arena, with revenues of over $3 billion, indicating a market share of approximately 21.3%. Acquisitions like KXEN Inc. have made it possible for SAP to support its organic analytics tools from the Business-Objects line. Furthermore, the launch of the Business-Objects suite on HANA has further provided strength to its existing analytics portfolio. The second, third and fourth spots in the BI analytics race are held in close contention by Oracle (ORCL, Financial), International Business Machines (IBM, Financial) and SAS Institute Inc. respectively, with market shares of 13.9%, 12.7% and 11.8%, respectively.
Dan Sommer, research director at Gartner, said, "As the BI market shifts gear, we see a series of tipping points in 2014 that will accelerate adoption, but it may come from a different place. These tipping points are that half of BI and analytics spend will be business driven, half of new license spend will be driven by data discovery requirements, and half of organizations will consider deploying BI in the cloud, at least tactically. We believe predictive analytics tools that are business-driven in nature would begin to witness a significant uptick in sales going forward.â
In the face of Intense Competition in BI Sector, Salesforce can Capitalize SaS Analytics Platform
Considering the already existing extensive network Salesforce has built in its Sales and Service clouds, utilizing that data on the Wave platform to create new and in depth insights could immensely benefit its users. Companies subscribing into Salesforce can quickly deploy sales, service and marketing analytics and identify new business realms, or build customized mobile analytics apps, using different combinations of data source from their own data pool or even apply them on big data. Currently, Salesforce would offer Wave as an analytics tool for sales, service and marketing departments. However, the partner companies will be working on other domains, such as human resources and finance. The standalone Salesforce Wave tool comes in two variants - one for "builders" with access to create and manage data sets priced at $250/month, and one for "explorers" with access to viewing and sharing data insights and dashboards, priced at $125/month.
However, the BI market is currently at a very nascent stage preparing to focus on new and niche areas such as prescriptive analytics. Currently, BI platforms (both on-premise and on-demand) account for nearly 60% of the overall market, or $8.55 billion in sales. These platforms require business analysts to build huge data warehouses and device methods to access data from multiple data source. While this sector of the market has posted a healthy 9% growth over 2012, niche tools that provide prescriptive analytics, which stand at just over $1 billion in sales in 2013, seem to be a more lucrative opportunity going forward despite the fact that they have not yet gained much popularity. A recent report from McKinsey Global Institute highlighted that decisions based on data-driven insights result in 23 times more chance of customer acquisition, 6 times greater likelihood of customer retention and 19 times more probability of making profits.
Final Take on Salesforcesâ New Offering - Wave
While the entry into the analytics realm is certainly a great for the companyâs patrons and investors in the long run, the near-term ride is bound to be bumpy and an uphill task for Salesforce owing to the stiff competition in the more mature product areas by its peer group players. As niche product areas gain more spotlight, Salesforce will have the opportunity to create tools that will unsettle the traditional market trend, something it has done well in the past and turn the wind into its favor. For now as an investor it would be best to wait and watch how the new product Wave from the Salesforce shop floor pans the market and whether it is able to create wave enough to unsettle the competitor ships sailing ahead of Salesforce in the big data and cloud computing ocean.
