salesforce revenue model

SalesforceRevenue Model & Forecast

Ankit Balyan Oumar Sy Sumeet Singh Mankoo

Agenda

1. Company Overview

2. Revenue Model – Description

3. Revenue Model – Robustness

4. Key Revenue Drivers

5. Current Revenue Breakdown

6. Revenue Forecast

A Quick Look at How Salesforce.com Makes Money

Support, Training, Consulting

Digital Marketing Platform

Cloud Application Development Platform

Fully customization support & Helpdesk

Salesforce Automation and CRM

Company Overview Pioneer and Market Leader in web-based CRM Software

Revenue2

$6.6 B

Customers5

150 K

Subscribers6

4.1 M

Market Cap3

$51 B

Sales Cloud

Service Cloud

App Cloud

Marketing Cloud

Professional Services

Key Offerings

Countries7

91

CRM Platform1

#1

1Source: Gartner 20142,3 Source: Annual Report, Salesforce.com4 Source: Nasdaq5 Source: Capterra6 Source: https://www.salesforce.com/blog/2014/10/dreamforce-by-numbers.html

Salesforce33%

Microsoft Dynamics

22%Oracle11%

SAP9%

Others25%

Market Share (2016)

Revenue Model - Description Annual Subscriptions drive 93% of the revenues with the rest 7%

coming from Professional Services

Sales Cloud

Premium Support

Service Cloud

Premium Support

App Cloud

Premium Support

Marketing Cloud

Premium Support

Professional Services

Annual Subscription Fee

Service Fee (One-off)

1. Strong Customer Retention: 60% of customers have never changed their CRM software1; 91% of Salesforce Customers renew their subscriptions2

2. Customers like to run asset-light and fast3: Salesforce requires customers to own no hardware4; 35% of salesforce implementations are completed in under 6 months5

3. Customer-data is locked-in to the salesforce ecosystem6

4. Customers satisfaction improves with duration of ownership, making them more likely to renew subscriptions7

1. Customers spread over 91 countries8

2. No single customer accounts for more than 5% of the revenue9

1. Beat SAP in 2012 to become the market leader in web-based CRM; Product launches since then: Microsoft Dynamics, Oracle, SAP

2. Consistently launching new features and product categories, which keeps customers engaged, and has been difficult for the competition to emulate

Revenue Model - Robustness The Revenue Model is Responsive, Agile, and Fairly Robust

1,3,5,7 Source: Capterra, 20162,6,9 Source: Annual Report, Salesforce.com8 Source: https://www.salesforce.com/blog/2014/10/dreamforce-by-numbers.html

Business Environment

Surviving Competitive Attacks

Risk Diversification1. Reputation and security

perception play a huge role in sales

2. Single product category; changing

Strong Weak

Very

Rob

ust

Med

ium

Robu

st

Drivers of Revenue Growth

1. Growth in Revenues (hence operations/staff) of Customers

2. Growth in IT spending of customers3. Growth in share of IT budget

allocated to CRM software

Most of the Revenues Come from the Americas Region and the Retail Sector

1 Source: Annual Report, Salesforce.com2 Source: Capterra, 2016

Retail

Business Services

Technology

Banking/Insurance/Finance

Manufacturing

18%

10%

8%

7%

6%

Top Customer Segments2

Americas72%

Europe18%

APAC10%

Revenue by Region1

1. Acquisitions2. New Product Launches

UnforeseeableForeseeable

Current Revenue Break-down by Region & Sector (2016) Most of the revenues come from the Americas region and the Retail

Sector

Source: Annual Report, Salesforce.com

Americas Europe APAC

Retail

Business Services

Technology


Manufacturing

$855

$475

$380

$333

$285

$4.7B (72%) $1.2B (18%) $0.7B (10%)

Revenue from Top 5 Sectors



Retail

Business Services

Technology


Manufacturing

$214

$119

$95

$83

$71

RetailBusiness Services

TechnologyBanking/Insurance/Finance

Manufacturing

$119$66

$53$46

$40

Revenue Forecast (2017) Considering the Impact of Forecasted Growth in Consumer Segment

SectorsAmericas Europe APAC

$4.8B (72%) $1.2B (18%) $0.7B (10%)




Sector Growth IT Spending Growth CRM Spending Growth

Total So Far: $7.2 B

Retail

Business Services

Technology


Manufacturing

$872

$492$404

$337$

292

Retail

Technology

Manufacturing

$215$124

$99$83

$72

Retail

Business Services

Technology


Manufacturing

$69$125

$56

$50$42

Source: Euro monitor, Bloomberg, World Bank, Gartner, Statista

Revenue Forecast (2017) Considering the Impact of Forecasted Growth in IT Spend Across

SectorsAmericas Europe APAC

$5.1B (72%) $1.2B (18%) $0.7B (10%)





Total So Far: $7.7 B

Retail

Business Services

Technology


Manufacturing

$935

$528$433

$362

$313

Retail

Business Services

Technology


Manufacturing

$232$134

$106

$90$78

Retail

Business Services

Technology


Manufacturing

$134$74

$60

$45$53


Revenue Forecast (2017) Considering the Impact of Forecasted Growth in CRM Spend


$5.6B (72%) $1.3B (18%) $0.8B (10%)



Revenue from Top 5 SectorsRetail

Business Services

Technology


Manufacturing

Retail

Business Services

Technology


Manufacturing

Retail

Business Services

Technology


Manufacturing


Total Revenue in 2017: $8.2 B (+25%)

$1004$566

$465

$388$336

$248

$144$114

$96$84

$143$80

$64

$57$48




$6.6B (71%) $1.6B (18%) $0.9B (11%)




Business Services

Technology


Manufacturing

Retail

Business Services

Technology


Manufacturing

Retail

Business Services

Technology


Manufacturing



$1175$674

$567

$453$396

$288

$173$137

$112$98

$173$96

$79

$71$59




$7.7B (71%) $1.9B (18%) $1.2B (11%)




Business Services

Technology


Manufacturing

Retail

Business Services

Technology


Manufacturing

Retail

Business Services

Technology


Manufacturing



$1377$802

$693

$528$466

$288

$173$137

$112$98

$173$96

$79

$71$59


Consolidated Revenue Forecast Cost of Subscriber Acquisition $350

2016 2017 2018 2019Subscription $

6,205.59 $

7,740.01 $

9,150.31 $

10,816.13 Retail $ 1,117.01 $ 1,395.47 $ 1,636.60 $ 1,920.66 Business Services $

620.56 $ 789.75 $ 943.46 $ 1,127.77

Technology $ 496.45 $ 643.51 $ 783.00 $

953.31 Banking/Insurance/Finance $

434.39 $ 542.13 $ 635.33 $ 745.28

Manufacturing $ 372.34 $ 468.12 $ 552.52 $

652.59 Others $ 3,102.80 $ 3,901.03 $ 4,599.40 $ 5,416.53

Professional Services $ 461.61

$ 541.80

$ 640.52

$ 757.13

Total Revenue $

6,667.20 $

8,281.81 $

9,790.83 $

11,573.26 Avg. Subscription Price1 $

150.00 Total No of Subscribers 4,137,060 5,160,005 6,100,207 7,210,756 Attrition2 8.5% Retention Rate3 91.5% Lost to Attrition 351,650 438,600 518,518Retained Subscribers 3,785,410 4,721,405 5,581,690New Subscribers 1,374,595 1,378,803 1,629,067 Marketing & Sales Budget4 $ 4,140.90 $ 4,895.42 $ 5,786.63 Cost of Acquisition $

301.25 $

355.05 $

355.21

1Source: Capterra2Source: Annual Report, Salesforce.com3Source: Annual Report, Salesforce.com4Source: Annual Report, Salesforce.com

Questions?

thank y u

Industry Size, IT Investment & CRM Spend Growth Rates

Industry Growth US EU APAC

Retail 2.00% 1.00% 5.00%Business Services 3.60% 5.20% 5.00%Technology 6.30% 4.50% 6.10%Banking/Insurance/Finance 1.50% 0.75% 8.00%Manufacturing 2.50% 1.95% 6.20%Others 2.50% 1.95% 6.20%

IT Investment Growth US EU APAC


CRM Spend Growth

(Enterprise Software) US EU APAC


Source: Euro monitor, Bloomberg, World Bank Source: Gartner

Source: Statista

Which CRM do you currently use? Is your CRM web-based or on-premise?

Were you using a different CRM before purchasing your current software? Satisfaction rate by length of CRM use

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