What Would the Acquisition of SalesForce Mean to the Procurement Market? Pierre Mitchell - April 30, 2015 10:15 AM | Categories: Analysis, Breaking News, M&A | Tags: Breaking News, General News An M&A firm is reportedly looking for a “mega vendor” to acquire CRM giant Salesforce.com – a deal valued as high as $50 billion. This is fairly rarefied air and most likely we are talking about providers like Microsoft, IBM, SAP and Oracle, but it could also include someone like Google or even Amazon. We will handicap these vendors in a moment. Although this appears to be a customer relationship management story, it will have an impact on the procurement market. Here’s why: Practitioners who use Salesforce will suddenly find their strategic CRM vendor now under a different roof and should respond quickly (e.g., by examining contract terms and change of control clauses and also understanding any potential impact on pricing, service levels, security, privacy and other potential concerns). And if they are considering buying Salesforce, perhaps this uncertainty can add a little leverage to their negotiations. Will the Sell and Buy Side Meet? Some of the acquiring firms already have procurement solutions and platforms (i.e., a platform-as-a-service or PaaS offering), so this acquisition represents an entirely new platform and ecosystem that will have an effect (good and bad) on how they currently support you. This would not be a bad thing. For example, we’ve been writing about a relatively unknown provider named Apttus that has been quietly tapping the Salesforce platform to great success. We don’t tout Gartner much on the procurement side, even though we like the analysts there personally, but Gartner does put Salesforce head and shoulders above other vendors in the PaaS space. Apttus hasn’t shown up on their radar yet in procurement, but with 0.7% probability, we predict it will eventually call it a “cool vendor” (which they often do after we cover them). For some customers of big acquirers like Microsoft or IBM, this could be a very good thing. I only say “could” because it’s unclear how both firms would absorb an entirely new technology infrastructure and ecosystem when they are so wedded to their own. Both firms could desperately use the lift. More specifically: Microsoft wants to do $20B in cloud revenue by 2018, and this one makes a lot of sense, and Seattle isn’t too far from the Bay Area (there will be a lot of face-to-face time needed!). But Microsoft isn’t a major player in procurement (for now), so this would give it a platform ticket to the show. IBM is the grand dame in the market that is definitely blue, but needs a serious makeover to get blood in the cheeks again. It’s getting a new brain with Watson, but Salesforce could indeed by the heart transplant it needs to focus its services, supply chain expertise, analytics, etc. If IBM could somehow not destroy the innovation in Salesforce, it’d be a killer combination. Heck, it might even breathe some new life into the creative energies of the Emptoris line of business, which like Ariba within SAP, is still primarily looking back around checking the box on feature/function needs versus looking forward around new innovation. Too Many Platforms in Waldorf? SAP is a different story, and I don’t even want to go there. It doesn't have a ton of money to throw at these things, especially after spending almost $10B on T&E vendor Concur, actually another “platform” play in its own right. We love Concur, but we just don’t think that SAP will make its money back on that expensive foray, at least not for a long time. And we just can’t let ourselves think about the complexity of a Salesforce in the face of “Run Simple.” Yes, it could happen. SAP has been buying its ways into the cloud and it needs a platform beyond a database (HANA), but it’s already been weighed down by its smaller acquisitions, and even if it somehow scraped up the moola for this one, I think it’d be a long-term disaster. In short, it would truly become a mutual fund rather than an integrated tech firm. But, who knows, maybe the platform element could indeed bind the other acquisitions together (why does the Lord of the Rings play in my head: “One [platform] ring to rule them all – one [platform] ring to bind them”). Oracle and Others Finally, what about Oracle? Well, it’s sort of like Oracle buying Coupa in terms of common “DNA,” proximity, etc., but Oracle already bought Siebel, and does it really need another massive CRM system? It could probably spend its $50B more wisely elsewhere. Now what about the dark horses? Like Google? Seriously, this one would be awesome. It’d force Google to grow up and focus on B2B instead of just spaceships, secret barges, self-driving cars, wearable devices and anything else that can be turned into a virtual billboard. I’d personally love to see it, but Google would have to “dirty its hands” with actual business process workflow automation, something it has shied away from to date. But the prospects are fascinating. Consider how in one business model, it could make the apps a loss leader and basically create new ad space to wrap around the previously barren landscape of an enterprise app where people are quietly trying to do their jobs. What a shift! But it’s unlikely. Still it makes sense – if there will be buyer-supplier interactions, there must be supplier ads to present to buyers, right? Of course this raises huge questions (e.g., encouraging maverick spending), but it fundamentally makes solution sense. How about Amazon? Probably not. It’s pricey. Jeff Bezos is type A and would no doubt love to have it (and he’s all about growth), but shareholders would probably revolt and perhaps prefer a dividend rather than a new foray. Still, it would be extremely cool to think about the Amazon supply chain capabilities pointed at a B2B commerce channel beyond Internet Retailing and its “new” foray into B2B with Amazon Business. Regardless of what tech giant ends up acquiring Salesforce (if it happens at all), every practitioner and provider should, at a minimum, have a playbook for what to do based on the outcome. And on the vendor side, specifically, it should also spur solution providers to think about latching their wagons to the star that is Salesforce ecosystem, namely the Force.com platform. Apttus has some first mover advantages, but there are few barriers to entry here, and to an arms dealer like Salesforce, the more the merrier, just as Ariba recognized with a Force.com CLM application years ago. What do you think? Who do you feel will acquire Salesforce and what will be its impact? Voices (3) Jason Busch: 30.04.2015 at 11:35 am I second the notion that MSFT makes the most sense. Some additional thoughts: – Would provide an aggressive platform from which to launch a next generation set of Microsoft business application beyond sales enablement/CRM alone (procurement, supply chain, financials, HR, etc.) – Force.com could conceivably become the next “operating system” for applications and business following on MSFT’s decades old success with its original OS and productivity suite – The acquisition would take MSFT “up-market” for the first time in enterprise applications (while also further SMB penetration) instead of focusing on small and middle market financials/ERP alone – Less likely to be probed by DOJ/Justice compared to other potential candidates (source: Enterprise Irregulars) – Balance sheet is twice as large/strong as IBM (and cash/short term investments over 2X as strong) — approaching $100B Oracle is the one who should do the deal … it could prove the ultimate flank on SAP’s hodgepodge of SaaS and platform deals. But it’s likely too rich from a valuation standpoint. Reply Pierre Mitchell: 30.04.2015 at 11:04 am Thomas, I totally agree with your points – I think they would probably be the best suitor. They have the money and they’re not going to get to $20B organically. The NIH will be the biggest thing. Satya Nadella is trying to change that I think. He graduated from Chicago GSB same year as me (man do I feel inadequate!) and should be academically trained to ignore sunk costs and look forward to EV creation. I forgot about SalesForce having equity in Apttus. I hope that doesn’t color their support for other ISVs using Force. SharePoint integrations is a great point. Apttus should buy or emulate Cordis Solutions. Use SharePoint as KM and ‘system of process’ (i.e., link the chevrons on your n-step PPT slides and actually link them to the various systems you run behind the scenes – don’t laugh – I’ve seen it!) Reply Thomas Kase: 30.04.2015 at 10:47 am Pierre, I like it – I personally think MSFT makes the most sense. * As you point out, synergies with Office 365 which clearly has a strong sell-side play in all organizations * Salesforce is active in all verticals and all sizes – so is MSFT – but the other potential contenders are Enterprise class only * Salesforce1 could be a great platform to move towards – Azure probably has deep APIs already * Apttus’ HQ is next door to MSFT – and Salesforce practically owns Apttus, or at least has a solid chunk of equity * MSFT Dynamics (which is knocking on and displacing SAP ERP accounts) and is also SMB as well as (smaller) Enterprise would do well with cutting edge CRM * Sharepoint + Salesforce = happy couple. Salesforce fairly recently (Dec ’14) launched a connection tool to Sharepoint and is doing Microsoft OneDrive next (maybe done already). Will MSFT accept not-invented-here technology? They need to, their lack of real security, still crazy DLL after all these years, and in general weak scalability compared to other architectures could do with a Force-full shot in the arm. Embracing Salesforce1 would be a win in so many ways. Thomas Reply Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of follow-up comments by email. Notify me of new posts by email.