Tag: Salesforce

Spotlight on Salesforce’s Acquisition of Tableau | Blog

On June 10, 2019, Salesforce announced an agreement to acquire Tableau, a leading interactive data visualization company, for US$15.7 billion in an all-stock deal. Here’s our take on it.

Strategic Intent behind the Deal

The announcement is a masterful move to aid Salesforce’s hyper growth agenda to become a US$28 billion company in three years’ time. In the past 15 months, Salesforce has accelerated the data pivot through its acquisitions of Mulesoft in March 2018 and now Tableau, for a combined value of $22.2 billion.

Given its ambitious topline growth goals, Salesforce has hedged its bet against a pure cloud play. Tableau, which is not a cloud company, runs most of its products on-premise, with over one-third deployments in the cloud. However, last year, Tableau announced that its products will also be available on hyperscalers’ cloud platforms (AWS, Microsoft Azure, and GCP.) Addressing the ubiquity of data in a modern enterprise and recognizing the transition in software consumption pattern, Salesforce is taking an “anytime, anywhere” analytics approach to cater to enterprise’s hybrid cloud-first mandate.

In addition, Tableau’s strong performance against rivals including IBM Cognos, MicroStrategy, Oracle BI, and QlikView makes a strong case for the acquisition, given Salesforce’s big bet on its Customer 360 initiative and its broader foray into empowering clients with data analytics and visualization capabilities.

Enhancing the Data Analytics and Experience Pivot

Salesforce, a veteran in the CRM space, is repositioning itself as a digital experience (DX) platform, wherein it intends to become a one-stop, end-to-end solution for enterprises’ DX needs. It has been making strategic acquisitions over the years to plug in the gaps in its DX platform portfolio to achieve this goal.

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Because Tableau and Salesforce’s in-house analytics tool, Einstein Analytics, can easily interoperate, the company will be able to sell a well-packaged data analytics offering. Tableau’s niche capabilities in data analytics will not only deliver an improved data management solution but will also help enterprises form data-intensive strategies and optimize the overall stakeholder experience. And, the acquisition gives Salesforce new up- and cross-sell opportunities, as enterprises will be able to purchase CRM and business intelligence (BI) capabilities from a single vendor.

Gaining a Full View of Enterprise Data

Looking at the timeline of Salesforce’s acquisitions, we see a strategic shift from targeting digital marketing and commerce space toward enhancing enterprise data lifecycle management. Since 2018, Salesforce’s top deals have been to expand its coverage in the data and analytics space. Undoubtedly, the move has given Salesforce a shot in the arm when it comes to showcasing its capabilities across the data management value chain. Tableau sits atop of its acquisitions, plugging in multiple outside data sources and offering an easy to use UI for data visualization.

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Indeed, Salesforce’s acquisition of Tableau is a strategic next step after its 2018 acquisition of MuleSoft. While Salesforce leveraged Mulesoft to create a “Salesforce Integration Cloud” that allows different cloud applications to connect via APIs, Tableau can help it gain deeper insights in this data, in turn driving enterprises toward data-driven decision making.

Data Orchestration Meets Cognitive

We give a thumbs up to this deal, particularly for what it means to the market going forward. Why?

The move fits well with Salesforce’s agenda to move into machine learning-driven analytics. Essentially, it will now have a strong BI tool, underpinned by AI, that will democratize enterprise access to next-generation data modeling and analytics capabilities.  A Tableau-integrated Salesforce Einstein Analytics offering should be able to deliver an intelligent, intuitive analytics and data visualization platform that leverages enterprise-wide data to help enterprise customers, employees, and partners with well-curated insights.

Salesforce Acquires MuleSoft Proving APIs Hold the Key to the Digital Enterprise Kingdom | Sherpas in Blue Shirts

In a major statement that reaffirms its vision of becoming the backbone of the modern digital enterprise, Salesforce acquired MuleSoft, a leading application network platform, for a hefty US$6.5 billion. This is the software giant’s largest ever acquisition.

Strategic Intent Behind the Deal

It is evident that MuleSoft will complement Salesforce’s PaaS agenda, per Salesforce’s statement that it will leverage MuleSoft to create the “Salesforce Integration Cloud.” MuleSoft’s AnyPoint Platform, which connects different cloud applications via APIs, is a good fit with Salesforce’s platform offerings.

In addition to strengthening Salesforce’s PaaS portfolio, the acquisition will enable the combined entity to:

  • Enhance its value proposition: Drive a more compelling digital transformation story across enterprises around personalized customer experiences, a single platform for a 360˚ enterprise view, and an enhanced industry-specific suite of solutions
  • Derive synergies from focus on the API economy: Aid enterprises’ need for faster time-to-value by enabling ease of data access across cloud and legacy systems, as well as enhance revenue by cross-selling / bundling across MuleSoft’s 1,200+ customers

Gain a stronger competitive foothold: Salesforce has been competing with Oracle and Microsoft in the CRM space. With players such as ServiceNow and Workday pivoting towards platform services, this deal enhances Salesforce’s platform play.

Crunching the Numbers

Salesforce CEO Marc Benioff has been chasing hyper-growth, with ambitions to nearly double the company’s current revenue to US$20 billion by 2022. While Salesforce’s growth has been relatively muted growth recently (~25%), he application network platform business grew by an impressive 37 percent YoY in Salesforce’s Q418. This presents a strong opportunity for Salesforce to enhance its PaaS portfolio, beyond the headway it’s been making in infusing AI and IoT capabilities across its platform to deliver a more personalized experience for customers.

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Naturally, the next smart move for Salesforce would be building or acquiring a strong API integration engine that helps it access and connect data across enterprises, regardless of its location. Evaluating its acquisition chronology, it was time for Salesforce to start owning the integration experience as well, while also trying to stitch together an integration cloud and potential iPaaS offering. The acquisition of MuleSoft gives it just that, with the added advantage of ensuring a faster time to market and a broader customer base. Additionally, MuleSoft was growing at a fast clip, clocking revenue of US$297 million for FY2017, 58% YoY growth, with guidance of US$405-415 for FY2018 (with an aim to reach US1 billion in revenue by 2021).

The growth story notwithstanding, Salesforce is paying a premium for MuleSoft, with an enterprise value to sales multiple over 20x, which is a reasonably high compared to typical deals in the segment. Salesforce is not alone to tap into the API ecosystem. Google acquired Apigee in 2016 for US$625 million, while Red Hat acquired 3Scale in 2016.

You Can’t Just Patch-fix in the Digital Era

This interest in tapping into the API and integration economy is not accidental. Enterprises have realized that they cannot move the needle meaningfully when it comes to digital transformation if they don’t get their technology estate in order. As we’ve opined before, creating the next breakthroughs in digital requires collapsing the stack to eliminate friction across the value chain. Digital needs to be enabled through convergence of emerging technology themes to drive efficiencies across back-office and core mid-office business processes and enhance competitive advantage by impacting market-facing front-office processes. To do this, it is not enough to invest in a solitary mobile app for customers or an internal gamification initiative, it requires efficient plumbing (e.g. DW/BI, creating data lakes, etc.) as a precursor to meaningful digital transformation. Our recent enterprise research also indicates that front office digitalization or Digital for Growth (DfG) is just the tip of the proverbial iceberg (less than a fourth of the spend), while a significant share is focused on the nuts and bolts (Digital for Efficiency / DfE and Digital enablement).

SFDC-DfG blog

A Word of Caution for Ecosystem Stakeholders

Although there is a general optimism around the business value of the acquisition, the stakeholders need to be wary of some of the potential roadblocks that will emerge:

  • Enterprises: With Salesforce aiming to be their digital transformation partner, the threat of lock-in becomes stronger and their bargaining power dynamics change
  • Competitors: The deal allows Salesforce to look beyond the CRM landscape and aid the digital transformation push, increasing competition with Microsoft, Oracle, ServiceNow, etc. MuleSoft’s peers, such as Sensedia and WSO2,will also be looking to compete with the might of the merged entity and evaluate their strategic growth options
  • Salesforce-MuleSoft: Managing enterprise lock-in concerns, anti-incumbency, and talent integration will be crucial to unlocking significant value through this ambitious deal. Also, integration in the modern enterprise, while a fundamental success requirement, is often riddled with tricky organizational inertia, data silos, fragmented systems, and change resistance

The Way Forward

The size and intent of the deal has certainly piqued the market’s interest. With the aggressive stance Salesforce is taking to expand its PaaS portfolio while playing the customer experience card, it wouldn’t be surprising if we see it forging more acquisitions and/or partnerships, including other companies in the API economy. Enterprises will need to keenly evaluate this landscape to choose the right partner in their digital transformation journey.

What is your take on the Salesforce-MuleSoft deal? We would love to hear from you at [email protected] and [email protected].

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