For IT service providers the yardstick used to measure whether they should invest in building a practice goes well beyond the amount of money a particular vendor generates in terms of net income and revenue. Case in point is Salesforce, which after some 14 years of effort seems to finally be hitting its financial stride.
The future of Salesforce
In its latest third quarter, Salesforce reported revenues of $1.7 billion, a 24 percent increase year-over-year. For the full fiscal 2016, Salesforce expects to generate revenue in the $6.6 billion to $6.7 billion range. The company also forecasted that it expects to generate revenue of $8 billion to $8.1 billion in fiscal 2017. Perhaps more significantly, Salesforce for the first time appears to be on the cusp of being consistently profitable.
As compelling as those numbers may be, however, it’s a report from IDC that Salesforce commissioned that should generate the most amount of interest among IT service providers. The IDC report estimates the value of the Salesforce ecosystem to be at about $272 billion based on its impact on GDP worldwide. The report also estimates that the Salesforce ecosystem currently generates 2.8 times the revenues of Salesforce itself and is expected to grow to 3.7 times as large as Salesforce.
The opportunity for IT service providers
That’s a lot of opportunity for IT services providers when the amount of professional services revenue that Salesforce itself generates is taken into account. In the latest quarter professional services only accounted for seven percent of the company’s overall revenue, which would suggest the amount of conflict in the Salesforce channel is fairly minimal.
Driving all that growth, of course, has been a significant expansion in the products and services that Salesforce offers. The next challenge Salesforce faces is actually increasing the number of people that have certified Salesforce expertise. To that end the company has created a Salesforce Badges initiative, dubbed Trailhead, through which individuals are recognized for watching, for example, a one hour video on how to master a specific function. Short of actually taking a test to be certified, the Salesforce Badges initiative creates a pipeline of IT professionals that will be more inclined to actually take a certification test in the future.
The effect of the Salesforce ecosystem
The end result should be a significant expansion in the pool of Salesforce expertise and talent that IT services providers can draw from. In fact, the IDC report forecasts that the Salesforce ecosystem will result in another million jobs being created within the Salesforce ecosystem by 2018.
There’s no doubt that Salesforce is now riding high on the general shift to the cloud. One the one hand, there are very few companies that have been positioned to take advantage of that shift longer than Salesforce. On the other hand, competition across the cloud is about to enter a new level of ferocity as rival application providers such as Oracle, SAP, and Microsoft expand their offering and, as a result, become more aggressive in this space than they have been to date.
Regardless of who ultimately wins, it’s apparent that Salesforce has now achieved a level of altitude in the cloud that will make it a force to be reckoned with for some time to come.