) makes the majority of its revenues through subscription and
support fees associated with its cloud-based software that provide
customers with access to applications that can systematically
record, store, and act upon business data. The company has grown
its customer relationship management (
) market share over the past few years, from about 7% in 2006 to
about 14% in 2010. We expect this number to continue to climb
towards 24% by the end of our forecast period. Salesforce mainly
competes with SAP (
), Oracle (
), Microsoft (
) and IBM (
) in the cloud-based software market.
We currently have a
price estimate of $116 for CRM stock
, roughly 15% below market price.
Demand for Cloud-Based Software Boosts Salesforce's CRM
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. The favorable factors for this tremendous
growth compared to on-premise segment are: a) speed and ease of
implementation, b) low total cost of ownership and cost-effective
benefits for customers, and c) ease of integration with existing
Salesforce.com, which specializes in delivering CRM software
on-demand, is expected to benefit more than its competitors as
demand for cloud-based CRM software remains high. The majority of
Salesforce's market share growth will likely come at the expense of
SAP, whose share declined from 26% in 2006 to 22% in 2009.
Security concerns related to cloud services, however, do exist.
Since data in cloud-based software resides outside the company,
customers must have confidence in the security of data and the
reliability of data storage.
Given the booming market for cloud-based CRM software and
Salesforce.com being a significant beneficiary, we pose the
What Percent of Salesforce's Stock Value Comes from
Cloud-Based CRM Software?
See our full analysis and $116 price estimate for