Salesforce dominates the salesforce automation (SFA) and customer relationship management (CRM) space and controls 30% in a highly fragmented market by the end of 2019. The company has added legs to the business clouds, including customer service, marketing automation, e-commerce, analytics, and artificial intelligence. The management has put more emphasis on expanding margins across the clouds.
Salesforce has assembled a front-office empire that it can build on for years to come. Thanks to the company’s revolution, business software is increasingly accessed through a web browser and delivered over the internet, so inventing the Software-as-a-service (SaaS) software delivery model. Salesforce also offers customers a platform-as-a-service (PaaS) solution, complete with the AppExchange, to rapidly create and distribute apps. This further strengthens the substantial community of Salesforce users.
Salesforce is widely considered a leader in its served markets. The tight integration among the solutions and the natural fit they have with one another makes for a powerful value proposition. Indeed, more than half of enterprise customers use multiple clouds. Moreover, customer retention has gradually improved over time.
Salesforce paved the way for the software industry as it exists now by first selling the concept of SaaS to prospective customers and then selling the actual SFA and CRM products. The SaaS model, and SFA and CRM applications, rose in popularity as customers were able to avoid high up-front costs. SaaS vendors benefited from predictable revenue streams, the elimination of piracy, and supporting only one product version.
Salesforce has gone from no product to 33% market share over the last 20 years. Customers view salesforce as the clear front-runner in a category that increases the productivity of sales representatives. The mission-critical software indeed helps drive revenue for users. Also, customers are reluctant to switch away from the sales cloud because of the time, expense, and lost productivity of retraining the workforce on a new platform. The corporate risk of making a change is high, as executives engage in self- serving behavior. In fact, executives can jeopardize their own careers by pushing to switch from a leading solution that is functioning well and meeting their corporate needs.
Other than the sales cloud, service cloud includes a set of solutions aimed at helping an enterprise deliver customer service and support at scale. Customer service is another mission-critical function that directly helps a company retain customers. Similar to the sales cloud, customers are also reluctant to invest the time and expense of converting a critical revenue-driving function from one application to another. It is often more expensive to find a new customer than it is to retain an existing customer.
Salesforce has initiated the marketing cloud as one segment under is business clouds umbrella. Marketing automation creates mass-customized cross-platform campaigns to targeted audiences. The company was early to the market with a cloud-based application development platform for customers. Use of the platform provided the low-investment benefits of a SaaS product, allowing for immediate and smooth integration with salesforce.com’s solutions, in which developers can sell or give away the applications they developed on the AppExchange. A variety of publicly traded companies started out as apps developed on the platform and initially distributed on the AppExchange. In fact, AppExchange was a novel idea and predated Apple’s App Store by two years as it was revolutionary and enticing to developers.