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Behind Salesforce’s Increase in Software Spending in 2017

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Dec. 4 2020, Updated 10:53 a.m. ET

Cloud to drive IT spending

According to a Gartner report published on January 12, 2017, global IT (information technology) spending is projected to reach nearly $3.5 trillion in 2017. The confluence of cloud computing with emerging digital technologies like AI (artificial intelligence) and blockchain will likely fuel this surge.

As we’ve already discussed in this series, key technologies are expected to drive the IT spending forecast during the next computing cycle. This explains why major acquisitions announced by Microsoft (MSFT), IBM (IBM), Oracle (ORCL), Google (GOOG) and Salesforce (CRM) have hovered around AI, ML, and IoT (Internet of Things).

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According to CNBC, Wells Fargo Securities analyst Philip Winslow stated: “Software spending is expected to outpace other IT segments and grow at a CAGR of 7.1 percent from 2016E to 2020E, compared to the overall CAGR of worldwide IT spending (excluding software) of 3.5 percent over the same period.”

Factors driving cloud and SaaS growth

One factor that has significantly contributed to the growth of cloud computing is the slowdown in the economy, which generally urges businesses to reduce costs, shrink their technology budgets, and extract more efficiency from shrunken budgets.

The rapid transition of companies toward the cloud reflects this trend. SaaS continues to be the fastest-growing segment in the overall cloud space. In SaaS, CRM is one of the fastest-growing subsegments.

Business2community reported that, according to a Nucleus Research study, the ROI (return on investment) from CRM could reach $8.71 for every one dollar spent. Another study done by TrackVia showed that investing in CRM could elevate revenue by 41% for every salesperson.

As a dominant player in CRM and SaaS, Salesforce will likely benefit from this ongoing trend.

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