How Amazon Could Pose a Threat to Salesforce



Amazon is indirectly posing a threat to Salesforce dominance in CRM space

Previously in this series, we discussed expectations for Salesforce’s (CRM) fiscal 4Q16 and 2016 results. Salesforce has always attracted attention in the enterprise software space due to its healthy revenue growth.

According to a recent Business Insider article published in February 2016, Amazon is likely to present competition to Salesforce. On the surface, it seems a little strange, as Amazon itself doesn’t sell any CRM (customer relationship management) offerings. However, Amazon (AMZN) has partners who offer CRM solutions via its AWS (Amazon Web Services). It appears that instead of buying a CRM offering separately, certain customers are “choosing these apps to piggyback along with AWS services such as data storage and compute power.”

According to Jeffries, an investment research firm, Salesforce partners have identified Amazon as the “3rd biggest threat to Salesforce,” after Microsoft (MSFT) and Oracle (ORCL), as the above presentation shows. Salesforce leads the global CRM space with ~18% market share, as stated by Gartner.

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Before considering Amazon’s increasing threat to Salesforce, it should be taken into consideration that this survey by Jeffries only includes the opinion of 85 Salesforce partners that primarily cater to medium-sized businesses. However, considering Amazon’s dominant position in the cloud space, it cannot be ruled out that the company could pose a significant threat to Salesforce.

Investors who wish to gain exposure to Salesforce can consider investing in the SPDR S&P 500 ETF (SPY). SPY has an exposure of ~29% to application software. It invests ~0.23% of its holdings in Salesforce.


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