Salesforce's
(
CRM
) market share in the customer relationship management (
CRM
) software market is rising thanks to high demand for cloud-based
CRM in which Salesforce specializes. Salesforce competes with other
CRM players like SAP (
SAP
), Oracle (
ORCL
) and Microsoft (
MSFT
). We believe that demand for cloud-based solutions can expand
faster if concerns regarding data security are addressed
quickly.
We estimate that Salesforce's CRM software business accounts for
63% of Salesforce's stock value. While we estimate the company's
CRM software market share will reach 25% by 2017, the Trefis
community anticipates a higher rise in market share, to about 31%.
The Trefis community forecast corresponds to a 16% upside to our
price estimate for CRM stock.
We currently have a
Trefis price estimate of $128 for Salesforce.com's
stock
, about 6% below market price.
Growing Demand for Cloud-Based 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. Cloud-based CRM is considered better than
on-premise because of speed and ease of implementation, low total
cost of ownership and cost-effective benefits for customers, and
ease of integration with existing applications.
Since Salesforce specializes in on-demand CRM, this has given a
good push to its CRM share - from 6.9% in 2006 to 14.2% in 2010,
with the majority of the share increase coming at the expense of
SAP which has been slow in introducing a comprehensive cloud-based
solution.
… But Security Remains A Concern
Since data in cloud-based software resides over the internet,
companies may be reluctant to use cloud services over data security
concerns. Hackers and phishing attacks have time and again hurt the
credibility of cloud-based networks even though companies like
Salesforce.com have employed security measures like data
encryption, Secure Socket Layer techniques, and firewalls to
protect data.
Trefis Community Forecast
The Trefis community forecasts that Salesforce's share in the
CRM market will increase from 19% in 2011 to 31% by the end of our
forecast period, compared to the baseline Trefis estimate of an
increase from 16% to 25% during the same period. The community
estimates imply an upside of 16% to the
Trefis price estimate for Salesforce.com's
stock
.
Our
complete analysis for Salesforce.com's stock is
here
.