The Salesforce business model transformed the landscape of customer relationship management with its groundbreaking cloud-based solutions.
Salesforce equips businesses of all sizes with the tools to optimize their sales, marketing, and customer service operations.
While the Salesforce business model is conventional now, it was revolutionary when it was first introduced. Most firms at the time were using server-based software rather than the cloud.
In this article, I’ll run through the main principles of the Salesforce business model.
Table of Contents
How Does Salesforce’s Business Work
Salesforce is a cloud-based software company that provides a comprehensive suite of CRM solutions to businesses worldwide.
The company’s core offering is its Salesforce CRM platform, which enables organizations to manage customer interactions, sales processes, marketing campaigns, and customer service activities in a unified, cloud-based environment.
The Salesforce Ecosystem
Over the years, Salesforce has become an ecosystem that allows third-party complementary apps to integrate into the system. As such, Salesforce is now the orchestrator of a vast network of partners.
Here are examples of relevant companies or products within the Salesforce ecosystem.
1. Consulting Partners
These companies help with Salesforce strategy, implementation, and customisation.
- Accenture: Provides large-scale Salesforce implementations and industry-specific solutions.
- Deloitte: Offers end-to-end Salesforce consulting, focusing on customer experience and CRM optimisation.
2. System Integration Partners
These partners focus on integrating Salesforce with other platforms and systems.
- Mulesoft: Acquired by Salesforce, Mulesoft specialises in API-led integration to connect Salesforce with various systems.
- Boomi: Offers integration platforms that link Salesforce to on-premise or cloud applications for data synchronisation.
3. AppExchange Partners
These companies develop apps extending Salesforce’s capabilities through its AppExchange marketplace (they are the complements).
- Conga: Specialises in document generation, contract lifecycle management, and reporting apps built for Salesforce.
- Vlocity: Provides industry-specific apps for sectors like telecommunications and insurance, now integrated into Salesforce.
4. Managed Service Providers
These companies offer continuous support and optimisation for Salesforce implementations.
- Capgemini: Provides managed services, ensuring Salesforce instances are secure, updated, and optimised.
- Infosys: Delivers long-term support and custom development for Salesforce implementations, especially for large enterprises.
5. ISV (Independent Software Vendor) Partners
These are independent software vendors building solutions that enhance Salesforce’s native features.
- Tableau: A Salesforce company offering advanced analytics and visualisation tools integrated with Salesforce data.
- DocuSign: Provides e-signature and contract management solutions that integrate seamlessly with Salesforce workflows.
6. Training & Certification Providers
These companies help users and developers become proficient with Salesforce tools.
- Trailhead Academy: Salesforce’s own learning platform offering free and paid courses to upskill users.
- Simplilearn: Provides training and certification programs for Salesforce administrators and developers.
7. Marketing Automation Providers
These partners focus on automating marketing efforts within Salesforce.
- Pardot: A Salesforce product for B2B marketing automation, helping sales teams with lead management and customer journeys.
- HubSpot: Offers marketing automation tools that can integrate with Salesforce, enhancing inbound marketing and CRM data.
8. Data & Analytics Partners
These companies enhance Salesforce’s data management and reporting capabilities.
- Snowflake: Partners with Salesforce to enable scalable data warehousing and analytics within the CRM.
- Einstein Analytics: Salesforce’s own AI-powered analytics tool that helps businesses make data-driven decisions.
The Salesforce Business Model Patterns
Salesforce’s business model is subscription-based, with customers paying a recurring fee to access and utilize the company’s software solutions.
Salesforce offers a platform-as-a-service business model pattern. It has a core offer (the Salesforce core functions) and additional value through integrations and apps.
Key Facts About Salesforce
Salesforce
Marc Benioff, Parker Harris, Dave Moellenhoff, and Frank Dominguez
March 1999
1999
Marc Benioff
San Francisco, California, USA
79,390 (2023)
CRM
$34.86 Billion (2023)
$0.208 Billion
$289.58 billion
Useful Links for Salesforce
A Brief History of Salesforce
Salesforce was founded in 1999 by Marc Benioff, Parker Harris, Dave Moellenhoff, and Frank Dominguez.
The company was born to revolutionize the traditional enterprise software industry by delivering CRM solutions through a cloud-based model.
In 2004, Salesforce went public on the New York Stock Exchange, raising $110 million in its initial public offering (IPO).
Salesforce Key milestones and dates:
- 1999: Salesforce is founded in San Francisco, California
- 2000: The company launches its first CRM product, Salesforce Automation
- 2003: Salesforce introduces its innovative AppExchange platform, allowing third-party developers to create and sell apps that integrate with Salesforce
- 2004: Salesforce goes public on the New York Stock Exchange (NYSE: CRM)
- 2005: The company expands its offerings with the launch of Salesforce Sandbox, a testing environment for customizations and integrations
- 2007: Salesforce reaches $500 million in annual revenue
- 2013: The company acquires ExactTarget, a leading marketing automation platform, for $2.5 billion
- 2016: Salesforce introduces its artificial intelligence platform, Einstein, to provide predictive insights and recommendations
- 2018: The company achieves $10 billion in annual revenue
- 2020: Salesforce acquires Slack Technologies, a popular workplace collaboration platform, for $27.7 billion
Who owns Salesforce?
As of August 2023, Salesforce is a publicly traded company listed on the New York Stock Exchange under the ticker symbol “CRM.”
The company’s ownership is distributed among its shareholders, which include institutional investors, mutual funds, and individual retail investors.
According to the most recent proxy statement, Salesforce’s largest shareholders are institutional investors such as The Vanguard Group, FMR LLC (Fidelity Investments), and BlackRock Inc.
Marc Benioff, the company’s co-founder and chairman, still holds a significant stake in Salesforce but does not possess a majority ownership.
Salesforce Mission statement
“We believe the business of business is to improve the state of the world.”
How Does Salesforce Work?
One key aspect of Salesforce’s business model is its subscription business model. Customers pay a recurring fee, typically monthly or annual, to access and utilize the company’s software solutions.
This model provides Salesforce with a predictable and stable revenue stream, as customers continue to pay for the service as long as they find value.
The Salesforce business model also heavily relies on its ecosystem of partners and developers.
The company’s AppExchange platform allows third-party developers to create and sell applications that integrate seamlessly with the Salesforce CRM platform.
This ecosystem enables Salesforce to offer a wide range of industry-specific and custom solutions, catering to the unique needs of different businesses and verticals.
Furthermore, Salesforce invests heavily in research and development, regularly introducing new features, products, and services to its portfolio.
The Revenue Model of Salesforce
Here is a table summarising Salesforce’s revenue and profit over the last five years:
| Fiscal Year End | Revenue (USD Billion) | Net Profit (USD Billion) |
|---|---|---|
| 2024 | 34.86 | 1.43 |
| 2023 | 31.35 | 0.21 |
| 2022 | 26.49 | 1.44 |
| 2021 | 21.25 | 4.38 |
| 2020 | 17.10 | 0.13 |
Salesforce Revenue Breakdown by Category (2024):
- Subscription and Support: $31.9 billion
- Professional Services and Other: $2.96 billion
The Salesforce revenue model produces the following streams:
- Subscription revenue: Salesforce’s primary source of revenue comes from the recurring subscription fees paid by customers to access and use the company’s cloud-based CRM solutions.
- Professional services: Salesforce generates revenue by offering implementation, customization, and training services to help customers adopt and utilize the company’s software solutions.
- AppExchange: The company earns a percentage of the revenue generated by third-party applications sold through its AppExchange platform, which serves as a marketplace for Salesforce-integrated apps.
- Vertical-specific solutions: Salesforce offers industry-specific CRM solutions, such as Financial Services Cloud and Health Cloud, which provide additional revenue streams catering to the unique needs of different sectors.
- Cross-selling and upselling: As customers grow and their needs evolve, Salesforce generates additional revenue by cross-selling and upselling complementary products and services to its existing customer base.
Key Features of the Salesforce Business Model
The Salesforce business model operates in the enterprise software, specifically focusing on Customer Relationship Management (CRM) solutions.
Key Features of the Salesforce Business Model:
- Cloud-based CRM solutions for businesses of all sizes
- Subscription-based revenue model with recurring revenue streams
- Extensive ecosystem of partners and developers through the AppExchange platform
- Continuous innovation and investment in research and development
The Salesforce Business Model Canvas
Salesforce Customer Segments
The Salesforce business model is designed to meet various industries’ needs and sizes’ needs.
Salesforce Value Propositions
The Salesforce business model has a specific set of value propositions aimed at helping to manage and grow businesses.
Saleforce Channels
The Salesforce model leverages various business model channels to reach and serve customers. The company employs a combination of direct and indirect channels to market its services.
Salesforce Customer Relationships
The Salesforce business model through its subscription model builds long-lasting relationships with its customers and the broader developer community that provide apps.
Sales force Key Activities
The Salesforce business model activities are primarily based on the platform as a service model.
Salesforce Key Resources
The Salesforce model critical resources are primarily technology based.
Salesforce Key Partners
The partnerships enable the company to expand its reach, enhance its offerings, and create additional value for its customers. Salesforce’s key partners include:
Salesforce Revenue Streams
The primary revenue source is its subscription-based CRM offerings, complemented by additional services and solutions. Salesforce’s main business model revenue streams include:
Salesforce Cost Structure
The Salesforce model costs are focused on maintaining and growing its operations.
