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This company is powering modern business
In many ways Salesforce.com was ahead of its time. The customer relationship management or CRM provider was just another player in an increasingly popular space except for one key difference. The group was among the first CRMs to be delivered in a web browser, rather than via a downloaded program as was the rage in the early 2000s.
Salesforce.com was founded in February 1999 by Marc Benioff who surprise, surprise, had experience working as a programmer at Oracle Corporation. The group is widely considered as one of the first to embrace the Software as a Service or SaaS model that every small tech company claims to be today. The difference was that this was revolutionary in 2000, less so today.
What do they do?
Essentially, Salesforce.com automates or simplifies every task that modern businesses and their employees hate doing. They support all aspects of the customer acquisition and retention process whether that is for an energy retailer, accounting firm or even a local council.
Their business is split across three key ‘cloud’ divisions being Sales Cloud, Service Cloud and Marketing Cloud, where the majority of revenue is generated. The Sales Cloud remains the most important part of their revenue due to the massive efficiencies it affords to businesses large and small. The system all accessed via a web browser is able to automate and streamline the processes associated with selling goods and services, from finding leads and opportunities, contacting them, tracking conversations and even clicks on your market emails.
Essentially, Salesforce.com allows its users to have all the information about you in a single place at the press of a button. They know your purchase history, whether you open marketing emails and what products you have clicked on. As you can appreciate, this data is incredibly valuable for all businesses. But even more valuable, is the efficiency this creates for fast growing businesses in the digital age.
This sort of information was either lost or remained in the minds of a business’s leading salespeople. Similarly, most sales-oriented businesses still struggle with following up and outbound correspondence being tracked and delivered at the appropriate time; all parts of the Salesforce.com CRM service. Such has been the strength and quality of this application that it has grown from nothing to 33 per cent market share in its twenty years of existence. This has seen the market cap now exceed US$255 billion.
It isn’t all about ‘acquiring’ business though, with the lesser-known Service Cloud growing in popularity. This part of the business is all about increasing the likelihood of retaining customers once they are on board. When both systems are used side by side, the Service Cloud system takes over to support regular check ins, service updates and prompts to ensure everything is working as expected. In age where switching provider has never been easier, businesses are clearly jumping at the opportunity to maximise their retention.
Representing just 15 per cent of revenue, but what may well be the biggest long-term growth driver of the business is the Marketing Cloud, through which many readers have likely been contacted. One of the most difficult tasks for businesses large and small is to first tailor their digital marketing, such as emails, to specific parts of their audience, but also to deliver it on a consistent basis, with as little manual input as possible.
This is where the Salesforce Marketing Cloud comes in through users are able to tailor communications based on your previous history of clicks, what you may be interested in and ultimately delivered more relevant content to you as a customer.
Not unexpected, the company is seeing significant growth and currently trades on a forward price earnings ratio of 73 times along with a price to sales ratio of 10 times, the preferred measure of high growth investors. Is this justifiable? Well in August the company reported its fifth straight quarter of 20 per cent revenue growth with three of those five also delivering a profit margin of 20 per cent. It is clearly still on a growth trajectory.
Revenue exceeded US$6 billion for the first time and whilst the core Sales business is ‘slowing’ to a rate of 15 per cent revenue growth, marketing is catching up quickly jumped 28 per cent for the year. But the real opportunity lies in the ability to cross sell between these platforms and most importantly their massive ongoing investment in improvement. It is their ability to continue to innovate their products that remain key to their 90 per cent customer retention.
In a similar vein to Xero, Salesforce.com was originally set up with small businesses in mind, but is seeing growth among massive enterprises and governments all of whom are seeking to gain a better understanding of their data and ultimately drive business efficiencies. With recent deals to acquire Slack messaging and Tableau data analysis, the group is poised to remain at the forefront of the technology boom.
