Subscriptions, support generate ~93% of Salesforce revenues
On May 20, 2015, Salesforce.com (CRM) announced its fiscal 1Q16 results. Salesforce generated ~93% of its fiscal 1Q16 revenue from the subscription and support fees that are associated with cloud services. This underscores the company’s huge investment in cloud-based application services.
Salesforce’s CRM (customer relationship management) solutions enable enterprises to track and plan sales, marketing, and customer service activities. Salesforce offers systemic solutions for cloud-based CRM for enterprise users.
The following chart shows the contribution of various cloud offerings toward subscription revenues in 1Q16.
Rapid SaaS growth should benefit Salesforce
As reported in Louis Columbus’ May 22 article in Forbes, Gartner noted that in 2014, 47% of the CRM software sold was based on SaaS (software-as-a-service). Further, the global CRM market grew to $23.2 billion in 2014, compared with $20.4 billion in 2013—an increase of 13.3%.
In 2014, Salesforce led the worldwide CRM market with an 18.4% market share. Its revenues registered a growth of 28.2% between 2013–2014. Salesforce is followed by SAP (SAP) and Oracle (ORCL), which have market shares of 12.1% and 9.2%, respectively.
Salesforce pioneered the SaaS model. SaaS is a subscription-based service that enable companies to access the software online and only pay for the services and applications used. SaaS serves as a cost-effective solution for companies with limited IT budgets. Employing SaaS can help companies save on the cost and time involved in purchasing, installing, and upgrading expensive software packages.
According to IDC (International Data Corporation), Salesforce, ADP, Intuit (INTU), Oracle, and SAP together constituted 35% of the global SaaS enterprise applications market in 2013.
In the SaaS enterprise applications market, Salesforce led the space with a 14.3% market share. It is followed by ADP and Intuit, with 6.4% and 5.8% shares, respectively. Oracle and SAP are among the top five players in the SaaS enterprise applications space, with market shares of 4.8% and 4%, respectively.
In 1Q16, subscription revenues from Salesforce’s Sales Cloud and Service Cloud services stood at ~$630 million and $408 million, respectively. The Salesforce1 Platform and ExactTarget Marketing Cloud products generated revenues of ~$224 million and $143 million, respectively.
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