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Salesforce (CRM) to Host Core Products in Australia with AWS

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CRM platform provider salesforce.com, Inc. (CRM - Free Report) and Amazon.com, Inc. (AMZN - Free Report) took forward their strategic alliance, per which, Salesforce will use Amazon Web Services (AWS) to expand its customer base in Australia.

Salesforce will now use AWS across all of its core products, namely, Sales Cloud, Service Cloud, App Cloud, Community Cloud and Analytics Cloud for its customers in Australia.. The move appears to be a part of Salesforce’s broader infrastructure expansion plan that offers customers better ways of managing their data. The AWS Sydney Region will be available to Salesforce’s customers in the second half of 2017.

The deal will help Salesforce to successfully expand its international infrastructure.

The Win Deal

This is a big win for Salesforce, as it will join the long list of AWS users that boasts names like Netflix, Expedia and Adobe Systems. It must be noted that Salesforce’s flagship CRM offering competes with Microsoft’s (MSFT - Free Report) Dynamics CRM. Microsoft ranks second in the IaaS segment, so Amazon (the market leader) is the best company Salesforce could have gone to.

With this move, it appears that Salesforce is planning to shift from data centers to cloud. According to the General Manager of Salesforce Asia Pacific, Mark Innes, "In our last quarter, APAC was the fastest-growing region for Salesforce, and we're excited to expand our infrastructure footprint to support our rapidly growing customer base in Australia”.

"By leveraging the AWS Cloud, we will be able to deliver the secure, reliable and trusted services of our Intelligent Customer Success Platform locally," he added.

Mutual Benefits

We believe that the partnership will be mutually beneficial for both the companies going forward. It will ensure tighter integration between Amazon and Salesforce clouds, which will help customers in leveraging the security and reliability of the AWS Cloud.

Cloud Opportunities

According to International Data Corporation estimates, public IT cloud services spending will increase at a four-year compound annual growth rate (CAGR) (2013-2017) of 23.5%.

Naturally, the overall growth expectation of the public cloud computing services market is quite bullish. According to Gartner, the worldwide public cloud services market is expected to grow 18% year over year to $246.8 billion in 2017. Further, the figure will increase to $383.3 billion by 2020.

Infrastructure-as-a-Service (IaaS) is being projected as the highest growth service, driven by improvement in PaaS and massive adoption of artificial intelligence (AI), analytics and the Internet of Things (IoT). IaaS is projected to grow from $25.29 billion in 2016 to $71.55 billion in 2020.

Salesforce, with its solid portfolio and growing partnerships, is well-positioned to lead the market.

Share Price

The stock has outperformed the Zacks categorized Computer-Software industry in the year-to-date period. Salesforce returned 21.1% during the said period compared with the industry’s gain of 10.8%.

Last Words

Headquartered in San Francisco, salesforce.com is the leading provider of on-demand Customer Relationship Management software, which enables organizations to better manage critical operations, such as sales force automation, customer service and support, marketing automation, document management, analytics and custom application development.

We consider the rapid adoption of Salesforce1 Customer Platform to be a positive. Overall, the company’s diverse cloud offerings and considerable spending on digital marketing remain catalysts. Moreover, strategic acquisitions and the resultant synergies are expected to benefit in the long run.

Keeping in mind the increasing customer adoption and satisfactory performances, market research firm Gartner acknowledged Salesforce as the leading social CRM solution provider. We believe that the rapid adoption of Salesforce’s platforms indicates solid growth opportunities in the ever-growing cloud computing segment.

Although the company is growing reasonably in the cloud market, growth prospects have been rationalized to a considerable extent due to intensifying competition from International Business Machines (IBM - Free Report) , Oracle Corp. and SAP SE. Also, currency fluctuations and stepped-up investments in international expansion and data centers could impact near-term results.

Salesforce currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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