Salesforce’s growth trajectory in 2017
Earlier in this series, we discussed factors that have led to Salesforce stock almost tripling in less than five years. Year-to-date, Salesforce stock has risen more than 21%. A very likely reason for the rise is the company’s consistently improving revenue guidance and its billings growth. Recently, Salesforce (CRM) was added to Merrill Lynch’s US 1 stock portfolio, which adds credibility to its growth prospects.
The cloud is paving the way for new technology
Salesforce and peers are competing for global data center growth to bring data storage and computing closer to customers. The larger the distance, the longer the delay between issuing a direction and an outcome. Establishing data center operations closer to customers will speed up performance. Therefore, Amazon (AMZN), Microsoft (MSFT), IBM (IBM), Google (GOOG), and other software players are focusing on the expansion of their data center operations and cloud offerings.
IDC Research estimates that global spending on public cloud services is expected to grow at a CAGR (compound annual growth rate) of 20.4% between 2015 and 2020. It will grow to $195 billion by 2020, compared with $96.5 billion in 2016.
According to IDC analyst Benjamin McGrath, “Cloud software will significantly outpace traditional software product delivery over the next five years, growing nearly three times faster than the software market as a whole and becoming the significant growth driver to all functional software markets.” Being one of the first companies to embrace cloud computing, Salesforce is poised to benefit from increased cloud adoption.