Will Salesforce.com Be Crushed By Oracle Corporation And Microsoft Corporation

  • Oracle is beefing up its ERP portfolio, while Microsoft is pushing in the CRM space.
  • Salesforce stands to lose in SaaS as both companies grow their offerings.
  • Can Salesforce stand up to this two-pronged onslaught from the software giants?.

Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NYSE:ORCL) and Salesforce.com Inc.'s (NYSE:CRM)) recent acquisitions and deals clearly show that these three companies are ready to take on each other in the business management software segment. With Windows revenue on the decline, Microsoft is increasingly looking towards beefing up its as-a-service revenues with cloud-based services, and business management software is one area where the company has been slow for a really long time. Now, however, things are changing rapidly for the company, and this is already starting to cause pain for Salesforce.

Salesforce.com’s Current Position

Oracle and Salesforce are already on a collision course in this segment. Salesforce holds all the aces when it comes to the Customer Relationship Management software and the company holds nearly 20% of the market, which is still highly fragmented with top players holding only 45.6% of the market. In the last ten years, Salesforce, which was founded in 1999 by ex-Oracle employee and current CEO of Salesforce Marc Benioff, has built a huge list of services that companies can use to manage their entire sales lifecycle.

Also read: Will The New China Strategy Drive Microsoft Corporation Growth?

The biggest advantage that Salesforce had from the very start was that it was operating a Software-as-a-Service (SaaS) model, which had significant advantages over the traditional software licensing model followed by most of the companies at that time. With the increased use of cloud technologies, the world is now moving towards SaaS and PaaS offerings, but Salesforce was there well before other software providers realized the importance of delivering software on the cloud.

But the edge that Salesforce had and still has is increasingly coming under pressure from two fronts - Oracle and Microsoft.

The Competition and Other External Forces

Oracle, whose traditional model of selling software and hardware to companies to manage their infrastructure, knows that their model won't fly ten years down the road. As a result, they have jumped on the cloud bandwagon, offering cloud infrastructure services as well as Saas and PaaS. With Amazon, Microsoft, IBM and Google already holding fort in the cloud infrastructure segment, Oracle is pushing deep into the SaaS and PaaS segment where it already has the expertise. They do offer infrastructure as well, but they aren’t betting on it as the future of the company.

Also read: Does SaaS Progress Make Oracle Corporation Stock A Buy?


During the most recent quarter the company reported $690 million in revenues for the SaaS and PaaS segment, which recorded a huge growth of 66% compared to previous quarter. In contrast, cloud infrastructure as a service brought in $169 million during the quarter, growing a mere 5% YoY. Oracle co-founder Larry Ellison reiterated the company’s focus on this segment during the fourth quarter earnings call:

In the fiscal year just started FY 2017, Oracle has two specifics points of focus. First, we would like to accelerate our SaaS and PaaS growth and make sure we’re at least double, growing at least double the rate of our closest competitors. And we think we have a fighting chance to be the first SaaS company to make it to $10 billion in revenue. We’re the second largest SaaS company in the world now and we think we can be the largest SaaS company, including our – by the time we hit $10 billion, we’re going to be the first one there.”

Towards that end, Oracle bought NetSuite for approximately $9.3 billion in July. Netsuite is one of the leading cloud ERP (Enterprise Resource Planning) software providers in the world with more than 30,000 clients. Apart from giving a nice boost to Oracle’s top line, NetSuite will strengthen Oracle’s SaaS portfolio.

Also read: The Surprising Acquisition Of NetSuite Is A Smart Move By Oracle Corporation

This is significant because CRM (Customer Relationship Management) and ERP (Enterprise Resource Planning) have long been two of the most important segments in the business management space, while office productivity is slowly increasing its presence as well.

The Case for Microsoft and Oracle

As you can clearly see, Salesforce is sitting on top of the CRM market and Oracle has now moved to the top of the ERP market, while Microsoft will hold tight in the office productivity segment - and all of them will deliver products over the cloud.

Also read: Microsoft Corporation Is Closer To Its 'Cloud First Mobile First' Dream

For now, they are all playing to their strengths while acquiring capabilities they didn’t have before. Cases in point are Microsoft’s acquisition of LinkedIn, which gives it a more firm base in the enterprise market segment, and Oracle’s acquisition of NetSuite, which gives it an edge over long-time rival SAP in the ERP domain.

Microsoft recently bagging HP as a client for its CRM product Microsoft Dynamics is a sign of things to come. Why is this significant? Because HP has been a client of Salesforce since late 2011. The battle lines between these companies are being drawn, and it will be a thrilling game to watch as each tries to one-up the other two over the next several years.

Shudeep Chandrasekhar Shudeep Chandrasekhar   on Amigobulls :
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