Demandware enhances Salesforce’s position
Earlier in this series, we discussed how Demandware complements and bridges the e-commerce product gap in Salesforce’s (CRM) offerings. With Demandware, Salesforce can target the fashion retail and e-commerce space.
Its peer, Oracle (ORCL), already has an e-commerce platform, Commerce Cloud. Known for quoting Oracle and SAP (SAP) while discussing its performance, Salesforce cofounder and CEO Mark Benioff stated that “I think that one of the reasons that we are doing so well is because Oracle and SAP are doing so poorly in the cloud.”
Salesforce chief operating officer Keith Block said that “the walls between sales, service and marketing have come down.” With Demandware in its portfolio, Salesforce can now blend commerce, CRM (customer relationship management), and marketing together for its customers.
Adobe leads the marketing cloud space. This could be why Adobe (ADBE) is suspected to be the other bidder for Demandware. After losing Demandware, Adobe may focus its energy and funds on buying e-commerce vendors such as Shopify or Magento.
According to Pacific Crest analyst Brendan Barnicle, “In channel checks, we have heard that when Oracle wins in marketing deals, it wins because of its e-commerce solutions, which are very strong. Salesforce and Adobe did not offer e-commerce functionality. As a result, we expected that both of them would likely do acquisitions to fill that hole. Demandware is the leading cloud e-commerce solution, so it will be a strong addition for Salesforce.”
Demandware will enable Salesforce’s entry into fast-growing areas
Although Salesforce is growing faster than its peers, its growth is slowing. The Demandware transaction gives it exposure to the fast-growing e-commerce space, which has been growing by 12% annually. The global cloud computing business has been growing by 18%. This gives a good indication of how much potential growth Salesforce sees in the space.
Investors who wish to gain exposure to Salesforce could consider investing in the Technology Select Sector SPDR ETF (XLK). XLK has a ~38% exposure to application software. It invests ~1.1% of its holdings in Salesforce.