Salesforce.com's (
CRM
) share in customer relationship management (
CRM
) software market has increased from around 7% in 2006 to around
14% currently, gaining share at the expense of SAP (
SAP
), Amdocs and other smaller players like NetSuite and RightNow. The
CRM market consists of both on-premise software and on-demand
(cloud-based) software. But Salesforce offers only on-demand.
We forecast that Salesforce's share in the CRM software market
will continue to increase due to an on-going shift to cloud-based
on-demand software which will benefit Salesforce.com.
While we expect Salesforce's CRM share will rise close to 25%,
Trefis members predict Salesforce's share will reach 29% by the end
of Trefis forecast period. The member estimates imply a potential
upside of 9% to our price estimate for CRM stock.
We currently have a
Trefis price estimate of $128 for Salesforce.com's
stock
.
On-Demand Growth Will Benefit Salesforce.com
The global on-demand CRM software market has grown from
less than $500 million in 2005 to $2.3 billion in
2009, representing an average annual growth rate of 46%,
compared to single-digit growth for the on-premise segment of the
CRM software market. Gartner had forecast worldwide software as a
service (SaaS) revenue within the enterprise application software
market to reach $9.2 billion in 2010, up 15.7 percent from 2009. It
expects stronger growth in 2011 with worldwide SaaS revenue
totaling $10.7 billion.
Gartner estimates that 75% of the current SaaS delivery revenue
could be considered cloud service, and that could exceed 90% by
2014 as the SaaS model matures and converges with cloud services
models. Given Salesforce's focus on cloud offerings in CRM, we
believe it will benefit significantly from this shift.
Salesforce.com Will Be a Tough Competitor for
SAP
SAP has historically concentrated on providing on-premise
solutions to its customers. Its slowness in coming up with a
comprehensive cloud-based solution has cost it in terms of CRM
market share. SAP's market share in the CRM market has declined
from 26% in 2006 to 22% in 2009.
After several rollout delays, SAP's cloud-based solution
Business ByDesign was launched in 2010. Most of the features of
SAP's new product such as real-time analytics, support for
multi-tenancy with a single-tenancy option, support for mobile
devices, and a rich web user interface have been present in
Salesforce for a long time. SAP will have to offer some exciting
innovative features in order to make a mark in the on-demand CRM
market.
See our full analysis and $128 price estimate for
Salesforce
Trefis Community Forecast
Trefis members expect Salesforce's share in CRM market will
increase from 16.3% in 2011 to 28.8% by the end of the Trefis
forecast period, compared to the baseline Trefis estimate of an
increase to 24.8% during the same period. The member estimates
imply an upside of 9% to the Trefis price estimate for
Salesforce.com's stock.