Salesforce.com Inc. (NYSE: CRM) and SAP SE (NYSE: SAP) are two top providers of customer relationship management (CRM) solutions to businesses of various sizes and industries. While Salesforce sells exclusively CRM-related applications, SAP offers a whole range of business management software in addition to its CRM products. Salesforce delivers CRM solutions to its customers exclusively through the cloud and mobile apps, whereas SAP still installs some of its CRM software on clients' on-premise computers, in addition to providing its own cloud and mobile app access. For their respective CRM products, Salesforce focuses on certain key CRM situations, compared to SAP's addressing most of the CRM issues.
CRM by Salesforce
Salesforce is a pioneer in the use of software as a service (SaaS), whereby customers subscribe to software uses and pay as they go for accessing software via the cloud, as opposed to purchasing software licenses and then having the software installed on their computers. Using SaaS has both technological and financial advantages to customers, which in turn is a good selling point for cloud-based software providers such as Salesforce. SaaS allows customers to not only avoid the burden of managing their on-premise IT operations, but also to benefit from the instant scalability and customization of cloud-based software as their businesses change and grow. Financial incentives include savings from on-premise IT investments and potential costly repairs, as well as the elimination of upfront, large sums for software licensing fees.
By taking advantage of what cloud computing offers and focusing on some key areas of CRM, Salesforce has grown annual sales from $1.66 billion in 2011 to $5.37 billion in 2015, an average annual sales growth rate of over 40%. Its software solutions to clients' CRM issues center on the company's sales, service and marketing functions, and help companies automate their tasks in those respective areas. Salesforce also provides applications that companies can use to manage their communities of employees, customers, partners, resellers and distributors. On top of it all, the company's analytics solution provides companies a way of unifying data sets from multiple sources into one single form, giving them better insights and the ability to take quick actions.
CRM by SAP
Compared to Saleforce's five main categories of CRM solutions, SAP lists 36 CRM software products, including mobile apps. They address some extensive and specific CRM-related areas, covering everything from trade promotion planning to incentive administration, pricing simulation and margin management. With SAP's CRM solutions, companies can computerize and automate almost every possible CRM-related task. While the company has transitioned into cloud-based CRM applications, some of its legacy software remains available, such as the on-premise SAP Customer Relationship Management. With a wide selection of CRM products, SAP has had much higher sales over the years, including those from its other business applications. In 2015, the company's sales were about four times that of Salesforce.
The CRM Differences
SAP's average sales growth rate for the five years prior to 2016 was 10.78%, which, if sustained, can translate into substantial revenue increase going forward. The company offers business applications beyond CRM, including software solutions in financial management, human capital management, product life cycle management and supply chain management, among others. Providing a more complete suite of business applications helps sustain the company's own customer relationship, since all the solutions together could potentially meet a client's needs for task automation in every aspect of its business. Thus, it may see a positive feedback loop among its wide-ranging software products, which can further stimulate sales.
Salesforce, on the other hand, may see a slowdown in growth with its business applications offerings limited to only selective CRM solutions. The company is merely 10 years old as a public company, and its CRM-focused approach has helped it get started quickly and capture market share effectively. To continue growing, it may have to expand its software product offerings, either within CRM or into other business areas, or both. Otherwise, the company may risk becoming an acquisition target of its larger rivals.