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The Big Business of Customer Relations


The concept of customer relations being an integrated process built around flow charts and spanning industries is turning into a fast-growing multi-billion-dollar software business.

The company is working hard to utilize social-networking Web sites and to lock up a dominant role in mobile CRM. It's a leader of the migration to the cloud, as can be seen in the way its CRM suite is broken down:

  • The Service Cloud enables companies to create and track cases coming in from every channel, and automatically route and escalate what's important. For their part, customers have the ability to track their own cases 24 hours a day.
  • The Sales Cloud provides sales representatives with a complete customer profile and account history, allows the user to manage marketing campaign spending and performance across a variety of channels from a single application, and tracks all opportunity-related data, including milestones, decision makers, customer communications, and any other information unique to the company's sales process.
  • The Data Cloud leverages crowdsourcing via its member community to create a highly accurate worldwide business contact list. Sales leads, changes of contact information, and organizational profiles can be viewed within the Salesforce application, all generated from up-to-the-minute data created by real business interactions.
  • The Collaboration Cloud utilizes the type of features embraced by Facebook and Twitter users, and with it employees can tap into social, mobile, and real-time technology to collaborate on documents, business processes, projects, and application data. Components include profiles, status updates, and real-time feeds.
  • The Custom Cloud is a platform that allows external developers to create add-on applications that integrate into the main Salesforce application and that are hosted on Salesforce's infrastructure.

For its efforts, Salesforce has been amply rewarded. It's jumped from nothing to over $2 billion in revenues in 13 years. Its CAGR for the past five years has been 22.2%. It led the field in market share addition in 2010-2011, with a 2.8% increase.

Since it IPOed at $11 in June 2004, its share price has rocketed to around $145 today, a rise of better than 1,200%. And along the way, it steadily buttressed itself (and dampened competition) through strategic acquisitions, gobbling up 24 other companies between 2006 and 2012.

Though nothing in this fast-evolving space is certain, of course, the consensus is that Salesforce will continue to eat market share. With Oracle (NASDAQ:ORCL) and SAP (NYSE:SAP) losing market share, Salesforce and Microsoft (NASDAQ:MSFT) seem poised to benefit the most.

But what about other potential competitors, those that make up the 40% not controlled by the Big Four? Might some serious challengers arise?

The Future
Whither from here for CRM? There are probably as many answers to that question as there are those giving them. But a few themes emerge.

One of these is the integration of social media with corporate CRM. It's even got its own buzz term, "SocCRM." And one logical extension of SocCRM is what is generally referred to as "value co-creation."

No positions in stocks mentioned.
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