Salesforce is the market leader in the customer relationship management (CRM) software industry, but it still lags behind most of its competitors in one major area: overseas sales.
Market-research firm Cowen Group pointed out in a note published on Thursday that Salesforce generates a substantially lower percentage of revenue from international regions compared to other software makers.
As seen in the chart below, Salesforce gets only 32% of its revenue from outside the US, lagging behind SAP, Oracle, and Microsoft, which all generate over half of their sales from overseas.
- Cowen & Co.
A lot of this may have to do with international companies still being reluctant to store their data in the cloud. Salesforce, unlike other competitors, offers only cloud-based software.
There are also concerns around storing data outside their countries. To solve those issues, Salesforce has made significant investments in the European region, building its first EU-based data center in the UK in 2014. It’s also opened new data centers in France and Germany over the past couple of years, while announcing a new partnership deal to use Amazon Web Service’s infrastructure for parts of its European services.
These efforts are finally starting to bear fruit. According to Salesforce’s most recent earnings, it saw 33% growth in the European and Middle East regions and 27% growth in the Asia-Pacific region – both the highest growth rate in six quarters. Cowen believes that this is a sign of better things to come.
Cowen wrote in the note:
“We wouldn’t be surprised to see international (especially EMEA) to continue to grow at an outsized pace for the foreseeable future, noting that CRM has recently indicated that it is starting to gain greater attention from C-level executives in many regions throughout Europe.”
This isn’t the first time Wall Street firms cautioned against Salesforce’s weak overseas sales growth. Research firm Stifel wrote in a note late last year that Salesforce’s reliance on the American region is “the one chink in the company’s armor,” while warning that it could lose its market-leading position “by ignoring overseas markets.”