Post-Corona Customer Relationships: The Outlook For CRM System Providers

In an economy weakened by the coronavirus, investing time and resources into maintaining high-conversion relationships with existing and potential customers is essential for most businesses. A key asset in doing so successfully are Customer Relationship Management (CRM) systems. 

Consequently, many CRM vendors - such as industry leader Salesforce, as well as Salesforce alternatives - have seen demand spike, even as the global economic climate brought significant challenges to the businesses themselves. 

This poses questions concerning the future development of the CRM software market, and of the stocks of large CRM providers from Salesforce and SAP to Oracle and HubSpot. The following is a synthesis of existing market projections, recent stock behavior, and future potential. 

The Market Outlook for CRM Systems

According to DirJournal, CRM systems were the fastest growing software market in 2019, with steep expansion curves projected for the following years. 

COVID-19 has reshaped the playing field. Businesses in dire straits now face choices whether to stay with big-ticket tools, and in which ways to maintain customer relationships. 

Several recent research reports released during the first two quarters of 2020 assess the current state of the CRM SaaS market. Though their projections differ to some extent, the consensus is that the market is still poised to expand significantly over the next five to seven years.  

A recent study by 360 Research Reports projects a CAGR of 4.1% for the global CRM software market. Compared to the figures presented by other studies, this is a conservative estimate. 

In contrast, an analysis by Reportlinker published in April sees the market expand with a CAGR of 14.2%, driven by growing demand for data analytics and aggregation functionalities, mergers, and AI technology. 

A new research report by Technavio equally sets CAGR at 14%, and projects an expansion of $33.15 billion by 2023. The majority of growth (53%) is attributed to investments by North American businesses and intra-industry mergers. 

Salesforce

With a market share of 20%, Salesforce (CRM) is far ahead of the competition. Even the cumulative market shares of the giant’s closest rivals (18% counting SAP, ORCL, MSFT, and ADBE) don’t exceed it. 

Founded in 1999, Salesforce has already weathered several periods of harsh economic climate, from the dot-com crash and 9/11 to the bursting of the housing bubble in 2008 and the consequent recession. The company went public in 2004. 

When the corona crisis hit the stock markets in March, Salesforce’s stock went down with them. Its recovery since has been steady. What’s more, following its recently reported quarterly sales of 4.87 billion, representing 30.2% growth, some projections see the company’s stock soar over the next 12 months. 

Another factor for that bright outlook is that Salesforce has profited hugely from investments during the crisis - particularly in Zoom Video Communications (ZM).

SAP

SAP AG (SAP) is another central player in the CRM market, in fierce competition with Oracle to catch up on market leader Salesforce. 

Like Salesforce, SAP experienced harsh losses when the virus hit, crashing from its $139.70 high in late February to $92.50 in late March. It, too, has since recovered, with stocks hitting an all-time high of $147.56 in early July. 

However, the outlook for SAP is not as positive as for some competitors. An analysis of Wall Street brokers’ expectations sets the price target at an average of $124.55 over the next 12 months - 18.5% below its early July price level - with a high of $137.78 and a low of $111.11.

Oracle: Siebel and NetSuite

Oracle (ORCL) has acquired CRM system providers such as Siebel and, more recently, NetSuite. Such SaaS systems now form a considerable part of the company’s spectrum. 

Like its competitors in the CRM market, Oracle’s stock value dropped in March - but its recovery is much slower, and it has not regained its pre-pandemic value. 

Some projections are cautiously optimistic, particularly as the company recently won Zoom as a client for its cloud services. 

Other analyses are bleaker, pointing to Oracle’s near-zero revenue growth over the past decade, liquidity issues rooting back to stock repurchases, and increased competition in the IaaS and SaaS markets. 

HubSpot

HubSpot (HUBS) stock, finally, bounced back from the March crash faster than any of the others, and exceeded previous highs. Most analysts see the company well-positioned for profitable growth, and set to outperform the market. 

This is underlined by the company’s recent quarterly report, which reported revenue of $198.97 million, exceeding analysts’ consensus estimate of $191.24 million. Year-to-quarter, these results represented a growth of 31%, largely driven by subscription revenues, with more than 5,000 customers onboarded

The Bottom Line

While the CRM market as a whole is set to grow, the performances of individual major players in the industry vary significantly. Some, such as HubSpot and Salesforce, are set to perform well over the coming months, others, in particular Oracle, are floundering. 

Overall, the CRM market provides considerable investment opportunities, but necessitates research into the financial health, assents, and outlook of the individual companies.