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How can a SaaS-based market leader in customer relationship management leave the competition further behind, even in the dust? Salesforce just acquired one of the fastest-growing companies in one of the fastest-growing sub-segments of CRM.
Salesforce's newly announced acquisition of Demandware for $2.8 billion may well be the largest for the software-as-a-service CRM company so far. It's also one that is likely to further solidify the company's leadership position in customer resource management and add a new capability that Salesforce had been missing -- e-commerce.
Gartner released a new set of marketshare numbers for the CRM market in May that showed Salesforce remains at the very top of the market in CRM and continues to pull away from the rest of the pack. Salesforce's plan to buy digital commerce platform provider Demandware makes Salesforce's position even stronger. The Gartner report provides both an overall view of the market as it is today, and also some clues as to why Salesforce targeted Demandware.
Salesforce commanded a 19.7% share of the CRM market in 2015, an increase from its 2014 marketshare of 18.2%, according to Gartner's "Market Share Analysis: Customer Relationship Management Software, Worldwide, 2015." What's more, the number two and three vendors in the space saw marketshare declines year-over-year. Number two SAP went from 13.0% in 2014 to 10.2% in 2015. Number three Oracle went from 9.1% in 2014 to 7.8% in 2015. Number four Microsoft and number five Adobe gained a small amount of share -- with Microsoft moving from 4.1% in 2014 to 4.3% in 2015 and Adobe moving from 3.2% in 2014 to 3.6% in 2015.
[Looking for more insight into Salesforce's strategy in the months ahead? Read Salesforce Taps AWS for Global Expansion Plans.]
The SaaS model -- cloud -- drove significant growth for the CRM market in 2015.
"CRM growth is driven by cloud service revenue, which, in the application space, uses SaaS as the major delivery model," said Julian Poulter, research director at Gartner and author of the report. "SaaS revenue grew 27% year-over-year, which is more than double overall CRM market growth in 2015. On-premises new license revenue declined 1% for the same period."
Gartner's marketshare report also provides some additional insight into why Demandware in particular represented a strategic opportunity for Salesforce. For instance, the digital commerce platform segment grew 13.8% year-over-year, outpacing the overall CRM market, which grew at 12.3%. The top five vendors by revenue in that segment of the market were SAP, Digital River, Oracle, Demandware, and IBM.
Gartner also noted that among all the vendors evaluated in the report, Demandware was number five in terms of fastest growth at 37.8%. The company provides a SaaS platform for multi-channel (online, mobile, social, and physical store) retailers, and it includes brands such as Design Within Reach, Lands' End, L'Oreal, and Marks & Spencer among its customers. Gartner said that Demandware showed good growth in the US in 2015 and also expanded into some international markets.
Demandware's CEO said in a blog post this week that the acquisition means an expanded reach for his company.
"With Salesforce's broader reach and complementary technologies, we will accelerate expansion of our addressable market and delivery of a unified commerce platform to connect retailers with consumers through any channel, anytime, anywhere," Demandware CEO Tom Ebling wrote.
Salesforce's acquisition of Demandware continues a flurry of merger and acquisitions activity in the CRM market. Gartner said that the market experienced more than 30 notable acquisitions in 2015, including Salesforce's buy of SteelBrick.
"This has resulted in increased competition at the top end of the CRM market, with the continued focus of global vendors' sales forces driving good growth worldwide in all CRM sub-segments but only for cloud or SaaS applications," Poulter wrote in the report. "They are still realigning their product portfolios and repositioning/repackaging their solutions, as well as their channels and sales resources, to fit the requirements of local markets."