Salesforce Subscription Business Explained

The subscription revenue cost structure is quite effective. In 2022 on a $29 billion in subscription revenue, the company reported $5.82B in cost of revenue (expenses related to delivering the service and providing support, including the costs of data center capacity), thus generating a $23.2 billion in gross profits, in 2023. Professional services are run at negative gross margins. In short, in 2022, on $2.33 billion in revenue from professional services, Salesforce reported a $208 million gross loss. In short, Salesforce runs professional services at a loss to boost its subscription revenue over time since professional services are used to enhance the use and retention of the software. Related Visual Stories Who Owns Salesforce Marc Benioff, Co-CEO of Salesforce is the main individual shareholder, with 3% of the company's stock. Other major individual shareholders comprise Parker Harris, Co-Founder, and Chief Technology Officer, and Bret Taylor, who is the company's CEO. Major institutional shareholders comprise The Vanguard Group, Fidelity, and BlackRock. Salesforce Business Model Salesforce follows a SaaS business model, offering four main categories of cloud CRM (Customer Relationship Management) services spanning the sales cloud to the marketing cloud. Where subscriptions drive the primary revenue model. However, the company leverages professional assistance to push the adoption of the software and retention of paying subscribers. Indeed, in 2023 Salesforce generated $29 billion from subscriptions and $2.33 billion from professional services. Salesforce Revenue In 2023 Salesforce generated $29 billion from subscriptions and $2.33 in professional services, compared to $24.66 billion in subscriptions in 2022 and $1.83 in professional services. Salesforce Employees Salesforce had 73,000 employees in 2022, compared to 56,000 employees in 2021, and 49,000 employees in 2020. Salesforce Marketing Expenses In 2023, Salesforce spent 43% of its total revenue on marketing and sales expenses, compared to 45% in 2022, and 45% in 2021. Salesforce Cost Structure Professional services are run at negative gross margins. In short, in 2022, on $2.33 billion in revenue from professional services, Salesforce reported a $208 million gross loss. In short, Salesforce runs professional services at a loss to boost its subscription revenue over time since professional services are used to enhance the use and retention of the software. The subscription revenue cost structure is quite effective. In 2022 on a $29 billion in subscription revenue, the company reported $5.82B in cost of revenue (expenses related to delivering the service and providing support, including the costs of data center capacity), thus generating a $23.2 billion in gross profits, in 2023. Salesforce Revenue Per Employee Salesforce generated $208 million in profits in 2023, compared to $1.44 billion in 2021, and over $4 billion in profits in 2020. Salesforce Competitors Salesforce is a cloud-based customer relationship management (CRM) provider, allowing businesses to build meaningful and sustained relationships with their customers. With robust, customizable software that integrates with social media, Gmail, and Microsoft Outlook, the Salesforce CRM platform is rated highly among businesses of all shapes and sizes. Recent data has shown that the company has captured 19.5% of the global CRM market. Salesforce Mission Statement Salesforce's mission is to build bridges between companies and customers. Salesforce does that via a SaaS platform, which is enhanced via professional services offered on top of it. Salesforce Acquisitions Salesforce was founded in 1999 by Marc Benioff, Frank Dominguez, Dave Moellenhoff, and Parker Harris. In a relatively short time, the corporate powerhouse of enterprise software has made numerous acquisitions as part of its broader growth strategy to become a SaaS giant!

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Gennaro Cuofano

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Gennaro Cuofano