In May 2016, Salesforce acquired Demandware for $2.8 billion, the biggest purchase in its history, bolstering its eCommerce and retail applications offerings. Demandware's revenues will be counted toward Salesforce Commerce Cloud.
Ownership: Public - CRM : NYSE
Key Verticals: Automotive, Banking and Financial Services, Communication, Construction and Real Estate, Consumer Packaged Goods, Distribution, Education, Government, Healthcare, Insurance, Leisure & Hospitality, Life Sciences, Manufacturing, Media, Non Profit, Oil and Gas, Professional Services, Retail, Transportation, Utility,
Salesforce Key Enterprise & Cloud Applications
Sales Cloud, Service Cloud, Marketing Cloud, Community Cloud, Analytics Cloud, Salesforce1 Platform (Force.com and Heroku), AppExchange, Data.com, Work.com, and Pardot
In 2016, Salesforce reiterated its focus on Sales Cloud with first price hike in 14 years. The move is expected to help accelerate growth of its flagship sales force automation apps. Together with its Marketing, Service and App Clouds, Salesforce has created one of the most robust platforms for customer-facing Cloud apps. Its App Cloud, a key plank of its partner, ISV and AppExchange strategy, allows for further wallet share expansion among key clients that aim to leverage everything from Salesforce and its partners.
Examples abound with Medallia offering customer feedback management on top of Salesforce, while FinancialForce's financial apps also leverage the App Cloud platform. Through its robust distribution system, Salesforce's tentacles now reach beyond the CRM marketplace. That's particular evident with its May 2016 decision to acquire Demandware for its eCommerce applications for $2.8 billion, its largest purchase to date. The purchase is expected to help boost transaction-processing capabilities of Salesforce, paving the way for the vendor to steer large volumes of purchases, customer inquiries as well as payments through its system. That in turn could translate into a staggering amount of data that Salesforce can sift through in order to determine how commerce will be handled in years to come.
That followed its release of analytics products in 2014, further extending its reach into the enterprise applications marketplace by helping its clients better understand the breadth and depth of customer data that they have accumulated. Its Analytics Cloud exemplifies the kind of advanced business intelligence companies want to leverage by enabling its employees to harness customer data to better support their decision making across all devices.
As the biggest Cloud applications vendor, Salesforce has established a built-in advantage over its competitors because of its large installed base of customers, an army of ISV partners as well as a robust infrastructure that sustains its growth. True to its name, sales force automation, which has been fueling much of Salesforce growth, remains its cash cow.
Its two other major product lines - which include Service Cloud for customer service, support, and help desk management as well as Marketing Cloud creating cross-channel customer journeys - have also grown by leaps and bounds through acquisitions and cross-selling and upselling successes. All of its Cloud applications are powered by a plethora of platform offerings from Force.com to Heroku to AppExchange, providing extensibility as well as added functionality from its development partners.
When it comes to all manners of customer engagement from selling to marketing and from service provisioning to channel building, it’s hard to find any product segment not being offered by Salesforce or its partners. For a company that has helped make online software delivery a reality, Salesforce is beginning to reshape the way customers are being served in different industries.
Salesforce Revenues, $M:
|Type/Year||2011||2012||2013||2014||2015||YoY Growth, %|
|Total Revenues, $M||2266||3050||4071||5374||6667||24.06%|
|Enterprise Applications Revenues, $M||2126||2868||3824||4268.5||5170.9||21.14%|
|Cloud Applications Revenues, $M||2071||2742||3262||4268.5||5170.9||21.14%|
* Enterprise Applications Revenues = License + Support & Maintenance + SaaS
** All revenue figures are estimates based on public records, Cloud and Non-Cloud business models in Apps Run The World's vendor database, and annual survey results including vendor feedback.
Salesforce Revenue Breakdown By Type, $M:
|Type||License||Services||Hardware||Support & Maintenance||SaaS|
|% of Total Revenues||0%||6.92%||0%||15.52%||77.56%|
2015 Enterprise Applications Revenues By Functional Markets, $M:
|Split by Functional MArkets||% of Total Revenues||2015 Enterprise Apps Revenues, By Functional Markets, $M|
|Analytics and BI||0%||0|
|Customer Relationship Management||99.95%||5145|
|Enterprise Performance Management||0%||0|
|ERP Financial Management||0%||0|
|ERP Services and Operations Management||0%||0|
|Human Capital Management||0%||0|
|IT Service Management||0%||0|
|Project Portfolio Management||0%||0|
|Sales Performance Management||0.05%||25.9|
|Supply Chain Management||0%||0|
|Treasury and Risk Management||0%||0|
2015 Enterprise Applications Revenues By Verticals, $M:
|Split by Verticals||% of Total Revenues||2015 Enterprise Apps Revenues, By Verticals, $M|
|Aerospace & Defense||0%||0|
|Banking and Financial Services||15%||775.6|
|Construction and Real Estate||2%||103.4|
|Consumer Packaged Goods||5%||258.5|
|Leisure & Hospitality||4%||206.8|
|Non Profit||2%||103.4||Oil and Gas||1%||51.7||Professional Services||10%||517.1||Retail||5%||258.5||Transportation||5%||258.5||Utility||0.5%||25.9|
Salesforce Revenues By Region, $M
|Region||% of Total Revenues||2015 Total Revenues, $M||2015 Enterprise Applications Revenues, $M||2015 Cloud Applications Revenues, $M|
Salesforce 2015 Direct vs Indirect sales
|Region||Direct Sales||Indirect Sales||Total|
No. of Customers: 150000
No. of Enterprise Applications Customers: 150000
No. of Cloud Customers: 150000
No. of Cloud Subscribers: 10 million
Through aggressive expansion of its sales force and a series of acquisitions, Salesforce.com has grown its installed base of customers from 1,500 at the end of fiscal 2001 to more than 150,000, including the 6,000 it picked up from its acquisition of ExactTarget in July 2013.
The 2016 purchase of Demandware added another 331 customers along with 1,500+ eCommerce sites including brands like Adidas, Coach and Hugo Boss. Among its customers are Omnicom Media Group, JetBlue, GE, NBCUniversal, Wells Fargo Bank, Philips, Time Warner Cable, Virgin America, Facebook, Avon, Belkin, BMC Software, Canon, Delta Air Lines, DenMat, Financial Times, GE Capital, IAVA, Japan Post, Kimberly-Clark, Leviv, Nikon Instruments, State of Colorado, Thomson Reuters, Vodafone, Zimmer, Schwab, etc. ExactTarget customers include Microsoft, Toyota, Molson Coors, Intuit, Expedia, Mashable, Forrester, CNBC, Deloitte, MAAWG and others.
Over the past year, Salesforce cozied up with a number of partners including Sage for SMB push after ending its relationship with Intuit. Additionally, Salesforce strengthened its ties with Informatica, allowing its BI visualization product Wave to integrate with tools from Informatica. Both moves are expected to help drive greater adoptions of Salesforce products into new markets.
A rapidly growing area for Salesforce is Community Cloud. Community Cloud was launched in June, 2013 to provide customers with secure, reliable, and scalable communities that allow customers to expose business processes built on Force.com--or integrate data from any system--to external parties. Salesforce has named three key use cases: Customer Communities, Partner Communities, and Employee Communities. In the product’s first two years, Salesforce has seen tremendous growth in customer adoption, and commitment from the partner ecosystem.
Over the past few years, Salesforce has started making major acquisitions in the areas of social media(Rypple, Radian6 and Buddy Media) and ExactTarget for marketing automation, while shoring up its infrastructure with purchase of Heroku now a key component of its Platform As A Service strategy as well as a nine-year OEM agreement with Oracle for its database and complementary technologies such as Exadata, Java and Linux.
On the marketing side, its biggest move was the 2013 purchase of ExactTarget, covering an array of email marketing, mobile marketing, personalization, and customer journey mapping technology for $2.5 billion. By acquiring ExactTarget, Salesforce plans to derail the combining forces of Oracle and Eloqua, its former partner in email marketing and social CRM.
Despite its OEM deal with Oracle, Salesforce.com continues to compete with the database vendor in the CRM apps market. With a full portfolio of social CRM apps from ExactTarget, Salesforce can control its customers within its sphere of influence. Customers that still want to switch back and forth between Salesforce.com for sales force automation and Eloqua for emarketing will have to decide whether they want to support both platforms.
Another big opportunity lies in Salesforce1, its beefed-up mobile strategy to support different devices, which in turn will be able to access a central repository of customer database originating from a raft of Salesforce.com mobile and desktop applications. The cumulative effect is expected to turn Salesforce.com into a persistent layer that sits between its users and their connected devices, all of which will be dependent on the data served up by Salesforce.com to optimize the end to end business processes for sales management, marketing and customer service.
Other offerings that could drive its mobility strategy especially for mobile app development to new heights include Force.com (employee facing mobile apps), Heroku (customer facing mobile apps), a Mobile SDK (custom mobile apps), the Salesforce1 app container for iOS, Android, and HTML5 browsers and upcoming support for Windows. Salesforce1 Lightning provides business analysts and developers a component framework and exchange for building mobile apps with responsive design, a drag ; drop interface for automating business processes inside mobile apps, and point ; click tools for connecting any external data source with their mobile apps.
With Salesforce's mobile development tools, users can write apps for any device in any framework, use a rich set of secure mobile backend services across the Salesforce1 Platform, and integrate data from other systems and APIs. Salesforce offers a full MBaaS, that allows easy storage of data with RESTful endpoints, provides a rich identity and security model, plus a range of services such as workflow, integration services, reports, and analytics.
The 2016 purchase of Demandware, its biggest purchase to date, poses a number of challenges for Salesforce. For one thing, Demandware was a grab bag of eCommerce and retail apps. In addition to eCommerce apps, Salesforce is picking up point of sale apps from Demandware's 2015 Tomax purchase to better compete with other retail-specific vendors such as Oracle Micros. Moreover, Salesforce is getting Mainstreet Commerce order management apps, which Demandware bought for $19 million in 2014.
Founded in 1981, Tomax had a number of on-premise and Cloud applications, resulting in a mishmash of software environments that would entail considerable integration issues. After the purchase of Tomax, Demandware saw its services revenues rising to 15% of its revenues in the first quarter of 2016, compared with 14% in year-earlier period. For Salesforce, any increase in professional services revenues could make the turnkey-selling pitch of its Cloud products less attractive.
There is also the steep price that Salesforce paid for Demandware. After paying $2.3 billion for the rights to sell into ExactTarget's 6,000 clients, or $383,000 a piece, Salesforce now pays $2.8 billion for Demandware's 331 customers, or $8.5 million each.
Then there’s the increased tension between Salesforce and other vendors that have come to depend on the non-compete stance of a platform vendor, which is what Salesforce has become. Like many eCommerce vendors, Shopify, one of the largest in the lot, has been making available a number of integrations for Salesforce-based apps such as SalesforceIQ (RelateIQ ). In its AppExchange, it has a large number of apps that integrate with one’s Salesforce system. Salesforce’s ownership of Demandware could change that.
Already, Salesforce’s $300 million purchase of Steelbrick for Configure Price and Quote apps in February 2015 has made other CPQ vendors weary of their place within the Salesforce’s ecosystem. Apttus, a Salesforce partner that for years has spent big dollars in such activities at Dreamforce, struck a deal in April 2016 with Microsoft to make its Intelligent Cloud for CPQ available for Microsoft CRM customers. The Salesforce’s aggressive acquisitions to mop up certain market segments could make its platform strategy less hospital for some of its ISV partners.
Salesforce has thousands of consulting partners who can refer leads to the vendor. This network includes global consulting firms, systems integrators and regional partners. Salesforce typically pays these partners a fee based on the first-year subscription revenue generated from the customers whom they refer, primarily in emerging markets.
This subscription revenue is also credited to each partner and enables them to progress to higher tiers of the Consulting Partner Program, with access to greater levels of benefits continues to invest in developing additional distribution channels for its subscription service. Salesforce.com’s global strategic partners are Accenture, Cognizant, Deloitte, Capgemini, Cloud Sherpas, Appirio, PwC, IBM, NTT Group, and Acumen Solutions.
Salesforce Cloud Infrastructure InsightsForce.com
Data used in research reports are derived from publicly available documents, continuous surveys of applications vendors, customers, resellers, Independent Software Vendors, systems integrators and other verifiable sources.
Vendor shares and market forecast results are based on a combination of existing databases as well as demand side and supply side research conducted throughout the year with validation from vendors, customers, channel partners and documentations such as earnings releases and 10Q and 10K filings, vertical industry studies, regional and country-level statistics from public and private institutions(i.e. colleges, universities, government agencies and trade associations).
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