) recently announced the availability of the cloud version
of Microsoft Dynamics CRM (Customer Relationship Management)
software, called the Dynamics CRM Online. With this move, most of
Microsoft's competitors SAP (
), Salesforce.com (
) and Oracle (
) will feel the heat.
With CRM online, Microsoft is not only undercutting on license
pricing, but also giving incentives to Oracle and Salesforce.com
customers should they decide to switch. If Microsoft is
successful in gaining share in the CRM market, it could impact
Salesforce stock the most with SAP only slightly impacted.
We have a
$128 Trefis price estimate for Salesforce.com
, which is about 3% higher than the current market price.
Salesforce.com stock most dependent on CRM
Companies often target all customers equally, irrespective of
their needs, and this often leads to resource allocation
inefficiencies and customer dissatisfaction. CRM is a software
which helps companies acquire and retain customers, gain marketing
and customer insight. Without the help of the CRM software, it
becomes almost impossible to keep track of individual
Cloud-based CRM software constitutes around 63% of our estimate
for Salesforce.com stock, and its market share in the CRM market
has rapidly increased from around 7% in 2006 to 14% in 2010, and we
estimate that it could continue to increase to around 25% by the
end of Trefis forecast period.
However, Microsoft Dynamics CRM online is directly aimed to gain
market share mainly at the expense of Salesforce.com. It has openly
announced that eligible customers will receive up to $200 per user
as rebate if they switch from Salesforce.com or Oracle to
Microsoft. Additionally, new customers that sign offer by June 30
can receive promotional pricing of $34 per user per month for the
first year. This pricing is much less that what Salesforce.com and
Oracle currently offers to its customers. Salesforce.com currently
offers $65 per user for Professional edition and $125 for
Enterprise edition. For Oracle, the pricing starts at
around $75 per user.
There could be a downside of more than 10% to our estimate
for Salesforce.com stock if its CRM market share increases slowly
to reach around 20% by the end of Trefis forecast period.
Upside to Microsoft stock and downside to SAP
Microsoft Dynamics is a business software suite and consists of
CRM and ERP software. We estimate that Microsoft revenues from
Dynamics software has increased from $0.9 billion in 2006 to $1.4
billion in 2010, and it will continue to increase to $2.4 billion
by the end of Trefis forecast period. Since the Dynamics revenue
contribution to Microsoft is small, the upside from faster Dynamics
revenue growth is also small.
Although 21% of SAP stock value comes from CRM software, SAP is
still a small player in cloud computing market and hence
Microsoft's foray into the cloud CRM market is not a potent threat
to SAP in the near term. (See
Leveraging SaaS Market Growth Critical for SAP
) Hence market share loss for SAP, if any, should be minimal and
hence we foresee limited downside to its stock.
You can see the complete $128 Trefis Price
estimate for Salesforce.com stock here