Why Salesforce Feels Threatened by Microsoft
SaaS is expected to be fastest growing cloud service
Earlier in the series, we learned that though Salesforce (CRM) leads the CRM (customer relationship management) space, the competition is heating up. Technology players are increasingly targeting CRM, as it’s the largest component of SaaS (software-as-a-service), the fastest-growing sector in the cloud computing space.
According to the Cisco (CSCO) Global Cloud Index, SaaS is expected to be the fastest-growing cloud service through 2018. SaaS is expected to grow at a compound annual growth rate (or CAGR) of 33%, whereas the cloud market as a whole is expected to grow at a CAGR of 24%. This explains Salesforce’s, Microsoft’s (MSFT), and Oracle’s (ORCL) increased initiatives to strengthen and scale up their positions in the CRM space.
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Bidding wars are expected to intensify
Earlier, we also learned that Salesforce pushed Microsoft to raise its price for LinkedIn. Salesforce also faced a bidding war during its acquisition of Demandware, its largest acquisition to date. Market research company Stifel suspects that the other competitor in the Demandware bidding war was Adobe (ADBE). Not stating directly whether this was the case, Salesforce CEO Marc Benioff stated that it “was a very competitive deal.”
Bidding wars are only expected to become fiercer in the technology space, which is currently on an acquisition spree. In the words of Wedbush Securities analyst Steve Koenig, increased mergers and acquisitions are an “existential necessity” for companies in the tech space in order to achieve growth.
As mergers and acquisitions increase, so might companies’ initiatives to outbid one other, giving rise to increased bidding wars.