The battle for space in the Enterprise Management Software or Business Management Software segment has gotten a bit intense of late, with Salesforce ( CRM ), Oracle ( ORCL ), Microsoft ( MSFT ) and SAP ( SAP ) fighting to increase their market share.
Salesforce is the only niche player in the segment, with a heavy focus on the Customer Relationship Management segment. The company came from behind to beat leaders of the segment, Oracle and SAP, and have more than $6 billion in annual revenues to show for their efforts. The CRM market is estimated to reach $36.5 billion in size in 2017, with Salesforce in pole position.
Oracle has recently upped its focus on this segment, as the company wants to race against Salesforce to be the first SaaS/PaaS provider to reach ten billion dollars in annual SaaS sales. Oracle is more of a horizontal player in the segment, with hands in CRM, ERP, HCM and SCM. The company recently bought Netsuite for $9.3 billion because it gave them a solid footing in the cloud ERP market.
During the second quarter of 2017 Oracle had $878 million in revenue from its SaaS and PaaS units, a growth of 81% compared the to the prior period. To hit ten billion dollars in revenue their quarterly revenues have to go over $2.5 billion. Even if the company were to continue its current growth rate, it will easily take them two more years to get there. It's possible, but Oracle has to remain aggressive if its wants to beat Salesforce to $10 billion, because Salesforce revenue grew 25% during the recent third quarter results to reach $2.14 billion, with subscription and support revenue touching $1.983 billion.
But whoever gets there first is only going to get the bragging rights, and nothing more. The fact remains that Salesforce is still a very strong player in its niche and will stay that way for a long time. Oracle is astutely going after multiple areas in the enterprise management software segment because a head to head collision is only going to slow things down for them.
Microsoft is also slowly beefing up its capabilities in the enterprise management segment through Dynamics. It is the smallest player of the three right now, but Microsoft has nothing to lose by moving into a segment they see as a natural extension of their office collaboration suite of products. Thanks to Office 365 and its growing portfolio of offerings, it makes sense to dig deeper and wider into the enterprise market with asset management tools.
Moreover, with LinkedIn, they're sitting at arm's length from millions of businesses that are potential clients, so it's natural for the software maker to drive their strategy in that direction. In fact, that was very likely their intention behind acquiring the professional network in the first place.
The enterprise management software market is dominated by large vendors, with some niche players in the mix. Due to the size and growth pace of the segment, all of them will be able to show revenue growth in a sustainable manner.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
This article first appeared on GuruFocus .