Credit: Shutterstock photoTo see the massive growth potential that cloud computing giant Salesforce CRM has, one need only look at the company's current EPS estimates. This year, analysts expect the company to earn 19 cents per share. Next year, that number is expected to nearly double to 35 cents.
Founded in 1999, "growth" has been a pretty consistent theme for Salesforce, a leader in enterprise-level customer relationship management (CRM) products. In 2004, the company went public with just $50 million in annual revenue and 500 employees. Today Salesforce employs over 16,000 people and brings in over $6 billion per year.
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Currently, Salesforce has a Zacks Rank #2 (Buy) and is clearly one of the best cloud computing companies on the market. In this company profile, we'll look at what exactly Salesforce does, how it has reached this point, and what it needs to improve upon to continue its success.
Leading Products
As stated above, Salesforce is most known for its line of CRM products. Its CRM business is broken up into eight parts: Sales, Service, Data, Marketing, Community, Analytics, Apps, and Internet of Things.
Salesforce's primary enterprise offering is Salesforce.com, which is a case and task management tool. Building on this is Force.com, which is a "Platform as a service" (PaaS) product. In cloud computing, PaaS tools provide a platform for customers to develop, run, and maintain web applications without the difficulty of building the infrastructure that goes into developing an app.
In this case, Salesforce customers use Force.com to build add-on applications that are integrated into the main Salesforce.com interface. Force.com use two technologies that Salesforce developed. The first, called "Apex," is a Java-like coding language. The second is "Visualforce," a view control that is used to create custom pages that are compatible with HTML, CSS, and JavaScript.
Notable Salesforce products also include Salesforce1, the company's mobile application, and Work.com, a social-based website that tracks worker performance and improvement while encouraging feedback and coaching. Salesforce has also developed a third unique technology known as "Lightning" that works as a framework to build components such as the Salesforce1 app.
Innovative Leadership
One of the best things that Salesforce has going is the leadership of cofounder and CEO Marc Beinoff. Beinoff has been described as a visionary and has led the company to its current position with a unique leadership style and a relentless dedication to innovation. In fact, Salesforce currently sits at #2 on Forbes' Most Innovative Companies list and is a four-time winner of the award.
One way that Beinoff innovates is by keeping his employees inspired. Salesforce uses an internal system known called "V2MOM," which stands for "vision, values, methods, obstacles, and measures." Every product at Salesforce is tracked and mapped out for employees in V2MOM, enabling every member of the company to easily see things like project progression and sales numbers.
Beinoff also encourages employees to move around and grow within the company. Higher-ranking executives have the opportunity to be the "CEO" of individual projects that are successful, meaning they get a chance to call the shots to everyone underneath them. Even lower employees are expected to bounce around between different departments every few years, and Salesforce holds internal job fairs to expedite this.
Room for Improvement
Beinoff's leadership and the company's best-in-class products have brought Salesforce incredible success. With that said, there are some areas for improvement. One potential issue for Salesforce is its dependency on the North American market.
According to research firm Trefis , Salesforce's limited revenue from outside of the US is the "one chink in the company's armor."
"The company remains firmly rooted in North America with very limited operations in Europe, Asia Pacific and Japan," Trefis said. "For consistent long term growth, it needs to expand its horizon beyond the Americas and establish a foothold in these lucrative overseas markets also."
The numbers seem to back this up too. In its latest quarter, Salesforce received 73% of its $1.7 billion in revenue from North America. 95% of that revenue is coming from the United States.
The real issue is that international growth seems to be slowing down. Salesforce reported 17% year-over-year revenue growth in Europe, its second largest market. Last year, Salesforce's European revenue grew 37% in the same timeframe.
In comparison, rival cloud computing company Oracle ORCL gets over 40% of its sales from overseas markets.
"Salesforce's strategy of focusing almost exclusively on its home ground is in contrast to rivals like Oracle, which is steadily expanding its presence in the emerging markets," said Trefis. "While Oracle is far behind Salesforce in terms of presence in cloud, the latter still stands the risk of losing out on the first mover's advantage by ignoring overseas markets."
Bottom Line
There is no doubt that Salesforce is an industry-leading clouding computing company. Its success is undeniable, and with a leader like Marc Beinoff at the helm, the company should continue to make investors happy.
This is, however, contingent on Salesforce refusing to stay stagnant. As tech giants like Amazon AMZN , Google GOOGL , and Apple AAPL , continue to expand their presence in the cloud, it will be imperative that Salesforce stays ahead of the pack. The company has been innovative throughout its history and should continue to do so by moving forward while also working to expand in overseas markets.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
