While everything is possible and while Oracle and SAP could theoretically topple Salesforce as CRM kingpin, where Oracle and SAP could really put a hurt on Salesforce’s latest booster rocket is in the booming industry-cloud market.
On my weekly Cloud Wars Top 10 rankings, Salesforce is #4, SAP is #5 and Oracle is #6.
But on my Industry Cloud Top 10, Salesforce is #1, Oracle is #3 and SAP is #5.
Due in large part to its February 2020 acquisition of industry-solutions specialist Vlocity for $1.33 billion, Salesforce reported that for its fiscal Q2 ended July 31, its Industry Cloud revenue rose 58%. According to my calculations, that means Salesforce’s red-hot industries business reached almost $800 million in revenue in its fiscal Q2 and put Salesforce’s industry-cloud business on an annualized revenue run rate of almost $3.2 billion. For more on that, please see Salesforce Industry Cloud Revenue Soars 58% to $790 Million.
While most of the big cloud providers do not disclose their industry-cloud revenue, I have no doubt that Salesforce’s $3.2 billion run rate is at least 2X higher than anyone else in the Industry Cloud Top 10.
And therein lies the opportunity for the world’s two largest vendors of broad-based enterprise applications: SAP and Oracle.
Fusing traditional apps with industry-cloud apps
Here’s where SAP and Oracle have a chance to cut into Salesforce’s dominance in the fast-growing industry-specific apps business, which I believe will be the hottest segment in the entire cloud industry:
- I believe the major apps vendors will dramatically accelerate the fusion of their traditional apps and their new purpose-built industry apps, with that blending going on both directions: the standard LOB apps will be bolstered with some industry-specific capabilities, and the industry apps will be further fortified with some of the workhorse capabilities of LOB apps.
- Now of course all 3 software hotshots can do that, and indeed each has begun to do so. It’s been a big point of emphasis for Salesforce, which is a terrific achievement on their part. But Salesforce, by its own admission, has confined its overall product strategy to the CRM category, where it is the runaway leader. So no matter how aggressively Salesforce looks to fuse its new industry apps with its traditional apps, and no matter how large the CRM category is, Salesforce’s opportunity in this new industry-plus-traditional boomtown is conscribed by the fact that it plays in only one of the 3 big LOB categories.
- SAP and Oracle, however, are very active in all 3 major enterprise-apps categories—CRM, HCM, and ERP—and that breadth gives each company the chance to aggressively exploit what I believe will be the new paradigm in the enterprise-software business: crossover apps that blend the best of traditional LOB apps that businesses already know and trust, plus the new purpose-built industry apps that are essential in the new world of digital business.
What SAP and Oracle must do
But the opportunity described above for SAP and Oracle will materialize if and only if those two companies aggressively and unconditionally accelerate their development of these new crossover apps across ERP, HCM and CRM.
So some advice for SAP and Oracle: don’t ease into it, don’t “pace yourself to the market,” don’t say that your sales teams aren’t up to speed to take on new products.
Or, if you do choose to fall back on any of those excuses, then be prepared to see Salesforce continue to dominate the highly strategic and booming market for industry-specific solutions juiced up with advanced LOB capabilities.
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Disclosure: at the time of this writing, Oracle, SAP and Salesforce were all clients of Cloud Wars Media.
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