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Jun 11

Salesforce is paying top dollar for growth — and not just in the cloud

When Salesforce was first seeking public attention almost two decades ago, it created a mascot that consisted of the word “software” in bold letters on a prohibition sign — surrounded by a red circle with a line through it.

SaaSy, as Salesforce named the mascot, represented the evolution from traditional software to the cloud and helped distinguish Salesforce from older companies like Oracle. That’s where co-founder and co-CEO Marc Benioff got his start selling software that businesses installed and ran in their own data centers.

But in the past 15 months, Salesforce has made two huge acquisitions, totaling $21.8 billion, that complicate its no software message. On Monday, the company announced the biggest deal in its 20-year history, agreeing to purchase data visualization company Tableau Software for $15.3 billion.

Tableau is not a cloud company. Its products run primarily in on-premises data centers, with over one-third of deployments in the cloud, CEO Adam Selipsky said on the call with analysts after the deal was announced. Similarly, in March 2018, Salesforce spent $6.5 billion on MuleSoft, whose software connects data that’s stored in all sorts of places, regardless of whether it’s running in the company’s data centers or if it’s hosted elsewhere.

It all speaks to Benioff’s big challenge. Now that Salesforce is generating over $13 billion a year in revenue, with expectations to top $16 billion in fiscal 2020 and reach up to $28 billion three years later, the company has to seek growth beyond pure cloud plays. MuleSoft and Tableau are both high-growth businesses with many customers that also use Salesforce, and because Salesforce executives spend so much time surveying the company’s client base, they know which other technologies get rave reviews.

On Monday’s call, Benioff called Tableau a “jewel in our industry” and said “our customers are looking to do a lot more in this area” in terms of integrating the software across Salesforce’s products.

“There really was no argument that said, ‘If you want to do analytics in a meaningful way, the only way you can do it is in the cloud,'” said Mike Capone, CEO of Qlik, a Tableau rival that was acquired by private equity firm Thoma Bravo in 2016. “I think Salesforce made a big admission to that today.”

SaaSy still makes the occasional appearance for Salesforce on the exhibition floor at conferences and on Twitter.

But there’s a clear recognition at Salesforce that data is the valuable asset, and data lives all over the place. MuleSoft works with companies that for a variety of reasons don’t have all their data in the cloud. They could be in highly regulated industries like finance or health care or they may be large enterprises that are slowly migrating over.

Tableau was founded in 2003, three years before Amazon introduced its cloud infrastructure offering. Even before that, the founders were working on data visualization at Stanford. Last year, Tableau introduced a new set of subscription offerings, recognizing the transition in how software is being consumed, and announced that the products would be available on premises or in clouds run by Amazon, Google or Microsoft.

Salesforce, the cloud evangelist, is showing a willingness to accept hybrid companies that have access to critical business data.

“Getting the data, integrating the data and analyzing the data is what’s going to win the war,” said Ted Smith, a partner at tech investment bank Union Square Advisors in San Francisco. Salesforce is saying, “If I have to reach down and take assets that today are not exclusively in the cloud in order to win that part of the critical war, on balance I’ll do that,” he said.

Benioff said on Monday’s call that the company’s strategy related to organic and inorganic growth hasn’t changed.

“To be honest with you, we’re excited to go to get a deal done when we can get a deal done,” he told analysts.

Permanent link to this article: http://homebiz2bizreview.net/internet-marketing/salesforce-is-paying-top-dollar-for-growth-and-not-just-in-the-cloud/

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