How Salesforce Plans to Expand to Europe

Learn why is opening new data centers in Europe, and how this move could affect the company's top line.

Mar 10, 2014 at 10:00PM

Leading cloud computing company (NYSE:CRM), famous for its cloud-based customer relationship management platform, has seen amazing revenue growth in the past five years, as corporations all over the world shift their IT budgets to the cloud.That being said, the company recently has experienced fierce competition from emerging cloud players, such as Workday and NetSuite. Even traditional tech giants like Microsoft and Google are joining the cloud game.

The challenging competition from well-established and resourceful companies could potentially damage's top-line growth. The company is already using an aggressive pricing strategy to protect its market share, as evidenced by the fact that it reported a net loss of $116.6 million in the most recent quarter, despite seeing revenue of $1.13 billion. In its current struggle, is planning to expand to Europe. How does this company plan to conquer this new market?

Conquering Europe plans to open three new data centers in Europe. In August, the company will open a data center near London. Plus, it will take this expansion further by opening centers in Germany and France by 2015.

Note that in the past few years has performed well in this region. Last year, the company saw a 41% revenue growth in Europe. Also, 18% of its revenue in the fiscal year ending in Jan. 31 come from Europe.

It seems is well aware that government agencies and financial institutions in Europe are in need of a trustable and secure data host, and cloud solutions provider.

Europe is an attractive market for cloud technology
Gartner predicts that from 2013 to 2016, roughly $677 billion will be spent on cloud services worldwide, with Europe, Asia, and Latin America, showing the highest growth rates. According to IDC research, by 2017, the Western European market for cloud software will go up to $29.4 billion.

Even in mature markets, like the UK, there is plenty of room for growth left when it comes to cloud solutions. Computer Weekly forecasts that 32% of organizations in the UK will acquire cloud services from external providers.

In addition, the IT budget in UK might increase by 3.6%, and in Europe, by 3%. Thus it appears like the's new data center in Europe will be settled at an adequate timing.

The European environment is attractive for the cloud. However, tech giants like Microsoft and Google are already settled there. The former has two data centers, in Ireland and Netherlands, while the latter has three, in Finland, Ireland, and Belgium. Both companies have reached Europe in order to provide safer cloud solutions for organizations.

SAP AG (NYSE:SAP), the German multinational software corporation known for its quality customer relations service, can toughen's Europe expansion. The company has experienced consistent growth in the past few years. Its current annual run rate revenue from cloud exceeds $1.06 billion, and aims for a $30 billion revenue by 2017.

Overall, there is strong competition in Europe, to which must take on aggressive measures. Because of the fierce competition, the expansion in Europe might show unpleasing results in the short term. That being said, investors may be more long-term oriented than the average investor, as this company is usually regarded as a growth pick, rather than a value stock.

Final Foolish takeaway
Despite heavy competition, the demand in Europe from government agencies and enterprises seems solid enough for to generate meaningful revenue in the mid run.

Note that has seen positive results in Europe in the past few years. The region has interesting growth potential, as evidenced by the strong demand for cloud solutions, which is supported by the recent economic recovery. Even after accounting for the presence of tech giants like Microsoft and Google, or well-established companies like SAP AG, may have a good chance of succeeding in Europe in the long term. The company has a consistent track of achieving record sales in Europe, and this trend should continue, backed up by the recent installment of new data centers in this region. Therefore, in the long run, should see plenty of benefits from expanding its operations in Europe.

You don't want to miss this
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And everyone from BMW, to Nike, to the U.S. Air Force is already using it every day. Watch The Motley Fool's shocking video presentation today to discover the garage gadget that's putting an end to the Made In China era... and learn the investing strategy we've used to double our money on these 3 stocks. Click here to watch now!

Adrian Campos has no position in any stocks mentioned. The Motley Fool recommends The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers