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Salesforce (CRM) Rides on Increased Cloud Adoptions, Buyouts

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Zacks Equity Research
·3 min read
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Salesforce CRM is benefiting from a robust demand environment as customers are undergoing a major digital transformation. Moreover, the company’s sustained focus on acquisitions and partnerships is helping it enhance its product offerings and expand across newer markets.

Accelerated Cloud Adoption Boosts Demand

The rapid adoption of cloud-based solutions is spurring demand for Salesforce’s products. The company’s focus on introducing more aligned products per customer needs is driving its top line.

Management believes that digitization is reinforcing the company’s strategic relationships. Its ability to provide an integrated solution for customers’ business problems is the key driver. The firm’s products like Trailhead and myTrailhead are helping companies through their transformation processes as well as increasing business scale with modern technology.

Salesforce believes digital transformation will consistently open up a huge growth opportunity for the entire industry. As enterprises progress with digital transformation efforts, the use of cloud services is expected to significantly shoot up in the upcoming period.

According to Gartner estimates, spending on public cloud services will grow from $258 billion in 2020 to more than $362 billion by 2022. Per a Grand View Research report, the global CRM software market is projected to witness a CAGR of 14.2% during 2020-2027. With its SaaS-based CRM and social enterprise applications, we believe Salesforce is well positioned to lead the market.

Acquisitions: Key Growth Strategy

Acquisitions have been one of the key growth strategies, fortifying the company’s position in the CRM solution-providing space. Notably, the buyouts of Tableau, ClickSoftware, Mulesoft, Datorama and CloudCraze over the last couple of years have been significantly beneficial for the company.

The acquisition of Tableau is in sync with the company’s strategy to diversify beyond customer relationship management and provide more data insights to the clients. The buyout contributed $652 million to Salesforce’s fiscal 2020 revenues.

Additionally, last June, the company announced completion of the acquisition of tech start-up Vlocity, which builds cloud and mobile software on Salesforce platform. The acquisition is anticipated to help Salesforce enhance its capabilities, and expand its customer base across the communications, media, healthcare, energy, insurance and financial services, and entertainment industries.

Later in December, Salesforce announced a definitive agreement to acquire Slack Technologies WORK in a cash-and-stock deal worth $27.7 billion, making it the largest ever acquisition for Salesforce after Tableau.

The acquisition is expected to enhance Salesforce’s team collaboration software capabilities and add a massive number of global customers. Moreover, the buyout will help Salesforce in better competing with Microsoft MSFT, which is growing as a chief rival with its Dynamics CRM apps.

We believe Salesforce’s sustained focus on expanding its business through strategic acquisitions and investments will fuel growth over the long run.

Expanding Global Footprint With Partnerships

Salesforce's partnership agreements with the likes of Amazon AMZN and Alphabet for the firms’ cloud services have been helping it expand its international operations. The company has also entered into an alliance with Apple, through which it is offering new apps for iPhones and iPads.

Salesforce has also expanded its global strategic alliance with Amazon Web Services to focus on new product integrations that will simplify secure data sharing and synchronizing across AWS and Salesforce services.

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