When customers need to contact a business, they want the process to be simple, fast, and productive. They don’t want to talk to several different agents, repeating themselves with each new interaction. In other words, they expect a great experience. And when it comes to managing the customer relationship, salesforce.com (NYSE: CRM) is the best in the business.
Over the past year, the pandemic has made it even more critical for brands to effectively engage and retain their customers. This catalyst has driven the Salesforce share price up 27% over the past 12 months. But this company still has a bright future.
Here are four reasons Salesforce is a buy.
1. Massive market opportunity
Salesforce’s Customer 360 Platform is the AI-powered foundation that supports the company’s various cloud-based software tools. These solutions help businesses work together to deliver high-quality customer experiences across marketing, sales, commerce, and customer service. This translates into greater customer satisfaction and loyalty, both of which could be the difference between a successful business and a forgotten business. In other words, Salesforce is a powerful partner.
As a result, management expects the company’s market opportunity to reach $ 175 billion by fiscal 2025, more than eight times Salesforce’s revenue over 12 months. This gives this software giant a lot of room to grow.
2. Strong sales growth
According to International Data Corp. (IDC), Salesforce is clearly the market leader in the field of customer relationship management (CRM). The company holds almost 20% of the market share, while the second place Oracle has just over 5%. This has helped Salesforce onboard more than 150,000 customers, which has resulted in strong revenue growth.
Q3 2021 (TTM)
$ 10.5 billion
$ 20.3 billion
However, as digital transformation continues to reshape the world, one thing that won’t change is the importance of customer-centric business models. In fact, it is increasingly essential for businesses to understand their customers in order to be able to provide top notch service. This should help Salesforce grow its revenue for many years to come.
3. Large network of partners
Salesforce works with consulting partners such asAccenture and Deloitte Digital to help potential clients develop and implement CRM solutions. Additionally, Salesforce enables developers to build apps for the Customer 360 platform.
These partners helped create Salesforce App Exchange, a collection of thousands of third-party tools that integrate with the company’s CRM platform. For example,Twilio can be used to send SMS from Salesforce, and Shopifymerchants can integrate data from multiple storefronts to create a unified source of customer information. In short, these third-party solutions extend the functionality of Salesforce, helping customers to customize the platform according to their needs.
Plus, these add-ons can be installed with just a few clicks, and this simplicity has led to widespread adoption. In fact, according to Salesforce, 86% of customers use at least one App Exchange product. Even more impressively, research firm Forrester recognized Salesforce App Exchange as the market leader in Software as a Service (SaaS), outperforming larger competitors like Amazon Web services.
4. A story of smart acquisitions
In 2019, Salesforce acquired data analytics specialist Tableau for $ 15.7 billion, which was the company’s largest acquisition at the time. With the move, Salesforce added Tableau’s analytics capabilities to Customer 360, combining AI-powered insights with its own customer data to improve sales and marketing. Despite the price, the deal was a success. In fact, CEO Mark Benioff recently called the acquisition the most successful in the history of the software industry. Additionally, in the second quarter of fiscal 2021, Tableau’s contribution to revenue jumped 41%, fueling 66% growth in Salesforce’s platform and other segment.
Recently, Salesforce acquired a collaboration specialist Slack Technologies (NYSE: WORK) for approximately $ 27.7 billion, which is now the largest acquisition in the company’s history and the second-largest acquisition ever in the software industry. During the last company’s earnings call, Benioff said Slack will become the new user interface for Salesforce Customer 360, improving communication between employees, customers and partners.
Going forward, management estimates that Slack will grow its revenue by 38% per year through fiscal 2026, allowing Salesforce as a whole to reach $ 50 billion in annual revenue over the same. period. Investors should watch this merger as it could be a game-changer for the CRM specialist.
One last word
Increasingly, Salesforce and Microsoft (NASDAQ: MSFT) compete for the same customers. Salesforce was a pioneer in the SaaS and CRM space, but Microsoft is pushing its own CRM solution, Dynamics 365. And of course Microsoft and Slack had an intense rivalry before the acquisition, which has now been inherited by Salesforce.
Of the two, Microsoft is much bigger and more profitable, but Salesforce invests heavily in its operations and the business grows faster. Investors should keep this situation on their radar. If Microsoft’s Dynamics 365 starts moving the Salesforce 360 client, that could be a red flag.
Despite this rivalry, Salesforce is one story of incredible growth. Since its initial public offering (IPO) in 2000, the company has already achieved a market capitalization of over $ 220 billion. And given the company’s massive lead in CRM, Salesforce is expected to be a major player in the enterprise software market for many years to come.
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