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Morningstar | Veeva's Wide Moat Stays Strong Despite Increased Competition in Life Sciences Cloud Services

Veeva Systems was the first mover in providing customer relationship management services specifically designed for pharmaceutical companies, and we believe its niche position, top-tier software, and operation-critical services will allow it to enjoy long-term economic profits on par with a wide-moat firm. Veeva’s minimal client churn, substantial market share, and growing appeal outside the life sciences space bolster our view of the firm as a market leader.Veeva currently has two main categories of business: Veeva Commercial Cloud, its vertically integrated CRM products, and Veeva Vault, its horizontally integrated content and data manager. The Commercial Cloud products can manage all forms of interaction between a biotech company and its customers. This product portfolio is built through a partnership with Salesforce on the Salesforce1 platform. We estimate Veeva has increased its biotech CRM market share to at least 70%. Furthermore, by operating in the life sciences vertical, Veeva has developed software specifically tailored to these firms, thereby reducing its customer acquisition costs and increasing cross-sales, with over two thirds of revenue growth in fiscal 2018 coming from existing customers. We expect Veeva Nitro, a newly announced cloud-based data warehouse offering dependent on the Veeva CRM platform, to strengthen this segment with AI-driven data analytics capabilities.The Vault platform offers a unified, customizable cloud product and benefits from substantial switching costs. This has been a boon to Veeva, as increased need for regulation and quality control, especially in healthcare, warrant more sophisticated content management solutions. We believe Vault has the potential to attract additional customers outside life sciences, such as chemicals and consumer packaged goods, and drive solid growth over the next few years. We expect Veeva’s level of innovation, capacity to identify underserved industries, entrenched position, and ability to increase its total addressable market through new product launches to endure.