Salesforce CRM Market Share Could Rise Beyond our Estimates

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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 .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: CRM , MSFT , ORCL , SAP

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