I see the possible sale of Salesforce, which has been widely reported in the business and trade press, as a clear sign that enterprise customers are moving away from single applications, especially in the cloud.
At one time, enterprise customers signaled that they wanted their data center business applications software to be part of a suite. They wanted to reap the benefits from integrated information that could be delivered quickly, while avoiding the time, expense, and aggravation of trying to integrate disparate software systems.
This strategy has served them well, and so we see the trend taking place once again -- this time with cloud-based business applications. Vendors have heard this message, loud and clear. They're in a race to move suites of business applications to the cloud and vying for the opportunity to control and "own" the business applications market in the cloud.
This scenario is especially true in the CRM space where Salesforce has been a powerful contender. Historically, CRM has been a single software application, one that tracks customer relations. Salesforce became a dominant player in the first-generation cloud market by being early, executing well, and making easy-to-use software working directly with the business unit.
Having had a good experience with this approach, enterprises are seeking to put more applications in the cloud -- and they want everything to work together. Nowhere is this more important than in dealing directly with their customers. There is an increased focus to provide a great customer relationship and deliver an omnichannel experience. Numerous studies have shown that a loyal, happy customer base delivers long-term profits; Apple is one great example that comes to mind.
Delivering an integrated experience goes beyond delivering the single application like CRM. It takes multiple applications, including ERP, e-commerce, CRM, and contact center, working together to accomplish this. Integrating disparate vendors with APIs and middleware is challenging, complex, and stressful. Those who trivialize what is involved and think the cloud makes such integration easy are mistaken.
Single application vendors like Salesforce already are facing the integration headwind, as the challenges and costs of integrating multiple products from different vendors increase. A vendor possessing and providing support for products designed to work together in a suite and pre-integrated in the cloud has a distinct advantage over companies that don't have such offerings. Salesforce is a smart company; it knows that the days for a single application company are over, and that this is the time to exit. The business landscape is clearly in transition.
So what company would want to buy Salesforce? The acquirer would instantly add $5 billion of cloud business applications revenue and an excellent sales team. The downsides would be the staggering acquisition cost (Salesforce's current market cap is almost $50 billion) and the challenges involved in retaining the sales organization. An acquisition is not a financial play, rather a strategic one; it will take years to cover the costs. As industry consultant Phil Edholm pointed out when we chatted about this the other night, this is part of the battle for supremacy among cloud-based business application providers. In that context, the costs are more understandable if they help determine the pecking order of the business applications software suppliers.
SAP, Oracle, and Microsoft are the most-mentioned possibilities. Here's what I think about them as potential buyers.
So far, SAP has ruled itself out. Having purchased Hybris for its e-commerce platform, it is already able to integrate CRM and contact center. This gives SAP the capability of delivering an omnichannel experience and pre-integrated software suites designed to work together.
Microsoft is the leader in office productivity tools and has a comprehensive cloud strategy, so I think it is questionable whether the Salesforce sales personnel would stay if acquired.
That seems to leave Oracle as the logical choice. It can afford the acquisition, supplies the underlying database used by Salesforce, and has the potential to retain the sales organization. Most importantly, Oracle has the goal of being the leading company to deliver business applications software in a Cloud 2.0 world. That's my call. What about yours? Share in the comments below.
