Salesforce business model

What Is Salesforce, What Does It Do, And What Is The Salesforce Business Model?

Zurab Samushia
Aug 15, 2021

You might have heard of Salesforce Company even if you’re not in the IT area. Maybe, it is because you’re one of 150,000 clients that use Salesforce’s software? The names of the clients include so many! To name a few biggest: PayPal, Morgan Stanley, AT&T, Bentley, AXA, Aldo, Activision, Adidas, Algonquin, AWS, American Express, American Red Cross, Amtrak, Asana, Aston Martin, Barclays, Caesars casinos, Canon, Cargill, Columbia, Dunkin, DuPont, Dynacast, EA Games, Ecco, Ellen (Ellen DeGeneres Show), Hitachi, Hershey’s, Japan Airlines, KLM, Kimberly-Clark, Lilly, Macy’s, Maersk, Marriott, McKinley, Michael Hill, Michelin, NBC, NYX, New York Post, PWC, Puma, Pandora, Pernod Ricard, Philips, P&G, Quicksilver, Reitman’s, Samsonite, Shazam, Spotify, Sysco, Toyota, Unilever, Virgin, Vodafone, and Western Union. Also, various non-commercial organizations, city councils, and even governments of countries use the products of Salesforce.

The customer sales force structure consists of clients that sell in the B2B, B2C, and B2B2C models.

What is Salesforce and what products does it sell

Salesforce is a SaaS-making company. SaaS stands for the “Software As A Service”. SaaS is a cloud-based solution, which is accessible from various devices only by login and password, where data are located either on dedicated servers either in clouds. A customer does not actually buy software and does not install it on the computer or a smartphone – instead, they buy a license to use the software for some predefined time. When the license expires, the company no longer has access to the software.

The pros of SaaS are that it does not require installation of “fat clients” on user devices and the data/processes/information are accessible from any tabletop computer or hand-carried device on the planet only by login and password, workable even with the thin Internet. The working process can be picked up on another device where it was left off in the previous device. These pros attract young and modern users with an open mind and ever-changing business structures and goals.

The SaaS disadvantage is that a user only buys a time of usage of software, not actually having it in their own possession and usage. They can use it neither on a computer/phone/tablet for any time they need, nor they can distribute it through as many user accounts in their company as they need, nor they can deeply adjust the system according to their unique demands, should any. Also, there is an issue of data safety during online transfer when stored not on physically controlled servers of the company. There is also an issue of Internet connectivity, as we all know the Internet is still not great around the globe (at least, not before Starlink is installed in every home on the planet). Some other related issues arise as well. This makes Salesforce’s solution to be not the only one on the market, although its CRM solution is currently used by around 20% of all CRM users on the planet. Due to its cons, SaaS, including the software offered by Salesforce, is not chosen by most old-school people and company runners. However, as you can clearly see from the numbers we’re providing below, such people steadily get into oblivion. Also, it is simply so that not every company needs a CRM or any other software that is offered by this or any other company.

How does Salesforce make money

It took about 4 years, from 2001 to 2005, to double the company’s revenue from around $100 million to $200 million. Another doubling took 2 years and then, only 1! In 2009, the company already had $1 billion in revenue. It jumped over 2 billion in 2013, again doubling in 2014, and getting to 8 billion in 3 years only, in 2017! In 2020, it had over 16 billion revenues and it is assumed for the 2022 fiscal year that the revenue value would grow to 26 billion. If that growth rate is kept, in 2025, Salesforce will step over $50 billion and in 2028, it will step over $100 billion!

What in the hell makes Salesforce so successful? To put it concisely, it is the Salesforce business model.

Salesforce business model

As of today, Salesforce offers a number of types of software: for large and small businesses, CRM, for sales, service, marketing, e-commerce, analytics, integration, platforms, engagement, enablement, employment, experience, and success planning – all for various industries.

There are three pricing approaches in the Salesforce strategy as of today, across all its SaaS offers (all Salesforce products are SaaS products).

  1. Based on the number of users. Usually, USD per user per month. That also varies on what functionality is required. For Sales, Service Cloud, and CRM products, four options are offered, ranging from $25 to $300 per user per month. The billing is annual, as well as in most other products.
  2. Usage-based billing. It is about how much you’ll use a product, making certain actions. For instance, in the Marketing Cloud, where you can send mass emails during your marketing campaigns, the unit of measurement is the message volume.
  3. Pay depending on the volumes of your sales. This is relevant for an E-commerce product called the Commerce Cloud. The more revenue of sales you generate through the system, the more you pay – usually, a percentage of sales but can be another amount (that’ll depend on your sales volumes).

Salesforce basically gains money through annual subscriptions of its clients, steadily gaining more clients and sometimes, reconsidering its pricing policy. These two main streams generate the biggest money influx to the Salesforce company, which is today headquartered in its own tower (Salesforce Tower in San Francisco), accommodating around 60,000 employees.

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