Adobe, Microsoft Combine To Take On Salesforce's CRM Dominance

Competition has been escalating in the customer-relationship management space (CRM) as behemoths like salesforce (NYSE:CRM) , Microsoft (NASDAQ:MSFT) , Adobe (NASDAQ:ADBE) , Oracle (NYSE:ORCL) , IBM (NYSE:IBM) and SAP (NYSE:SAP) vie to grab market share.

Notably, all these companies are gearing up with frequent launches of products and services to target the CRM market. Further, shift in focus of traditional enterprise software application and platform vendors to cloud computing is intensifying competition in the space.

These companies are also entering into strategic partnerships to not only challenge salesforce but also fend off competition from new entrants. Recently, Microsoft and Adobe joined forces to take on salesforce, the incumbent in CRM space.

Notably, Adobe’s marketing software will be used to find potential customers for business goods on Microsoft-owned LinkedIn (NYSE:LNKD) and then Microsoft's sales software could be used to close the deal.

salesforce Dominates CRM Market

According to IT Intelligence Markets report, the Global SaaS-based CRM software market is projected to grow at a CAGR of more than 20% over the forecast period of 2019-2026.

Per reports, CRM is currently the largest and fastest growing enterprise software market outpacing operating systems, ERPs (enterprise resource planning) and databases.

Coming to vendors, salesforce has been a frontrunner for a long time, owing to its early foray into the cloud-based CRM space. Shares of salesforce returned 40% in the past year, outperforming the S&P 500’s gain of 7.5%, as well as Microsoft, Adobe, Oracle and SAP, which gained 31.8%, 24.2%, 17.4% and 10.6%, respectively. During the same time period, IBM lost 7.7%.

One-Year Price Performance

We believe salesforce’s diverse cloud offerings, expanding partner base and considerable spending on digital marketing to be the key growth drivers. The company’s strategy of frequent product launches and cloud services are helping it expand clientele, thereby driving top-line growth. Moreover, the company continues to win customers in the international market, which in turn, is helping it deliver strong growth internationally.

Additionally, acquisitions have always been one of salesforce’s key growth strategies, strengthening its position in the CRM solution-providing space. Notably, the company’s acquisition of MuleSoft is a major positive.

Management is extremely optimistic about enhancement of customer experience (CX) that has aided growth of the cloud segment. Its focus on AI and substantial progress with the launch of Einstein Analytics makes us optimistic. Moreover, salesforce's recently-launched Customer 360 platform is a tailwind.

Given the initiatives, the company looks set to play a major role in the expansion of cloud computing, AI, and other newer areas of tech innovation.

Competition Heating Up

salesforce faces stiff competition from Microsoft and Oracle in the cloud-based CRM market.

Oracle has strengthened its cloud position through various strategic acquisitions. The company is striving to enhance the functionalities of cloud-based applications, which bode well. Oracle’s move to ramp up its cloud offerings is in sync with the company’s evolving CX strategy.

Microsoft has added various key companies like LinkedIn to its portfolio, in a bid to beef up its Dynamic CRM platform. Additionally, Microsoft offers special pricing for its Dynamics CRM Online service, which is helping it lure salesforce’s customers. Growing momentum for Dynamics 365 software applications has further intensified competition.

Further, the recent tie-up of Microsoft and Adobe, which aims to boost the sales and marketing capabilities of both companies, is a significant threat to the king of CRM.

Notably, Adobe had acquired Magento last year to improve its competitive position in e-commerce marketing dominated by salesforce, which led to the LinkedIn partnership. Furthermore, the recent launch of Adobe’s Commerce Cloud, which is part of its Experience Cloud, is likely to help it gain a competitive edge.

Also, recently, SAP purchased market-analytics startup — Qualtrix International — for $8 billion to gain a competitive edge in the CRM battle. With this deal, the company aims to integrate ERP expertise with CRM capabilities, in order to provide a comprehensive solution that will likely be better than salesforce, which is solely focused on CRM.

Moreover, IBM is strengthening its grip on the cloud-computing software market with its web-based collaboration software for businesses, including contact management, instant messaging and file-sharing programs. The company had acquired Optevia in 2016 to expand its SaaS CRM solutions and improve competitive prowess.

Zacks Rank

While SAP carries a Zacks Rank #2 (Buy), salesforce, Microsoft, Oracle, Adobe, and IBM carry a Zacks Rank #3 (Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>