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About That Salesforce Acquisition

This article is more than 8 years old.

Speculation continues about the supposed Salesforce acquisition. To recap, earlier this week Bloomberg reported that Salesforce has been approached with an acquisition offer that was serious enough for the company to work with financial advisors to consider the option. It was 450-or-so-word article that sent the CRM industry into a tailspin.

It's been widely assumed that the mystery buyer comes from a short list consisting of Oracle, Microsoft, IBM or possibly SAP. More recently, Pivotal Research Group has suggested that Google could be angling for Salesforce, according to Business Insider, which points to Google's testing of new data management platform to help advertisers target ads more effectively as a reason. It writes:

Pivotal says both products fall in the marketing technology segment because they all use a marketer’s actual data on customers and prospects. Bunches of that data resides in Salesforce’s marketing software. Marketers love this data. And Google wants its users to get access to it.

In another article, Bloomberg reports that SAP denied the possibility. So has Oracle more or less, for that matter. Here is how Bloomberg reports that development:

Safra Catz, co-CEO of Salesforce rival Oracle Corp., said this week that an acquisition of Salesforce by a competitor would be good for Oracle. 'It'll cause a lot of disruption in that market,' she said and declined to comment on whether Oracle was interested in the company.

Now the furor over the report is dying down a bit and cooler heads are starting to prevail about this rumor. Denis Pombriant, principal at Beagle Research, writes in a post (which, in a masterful bit of artistic expression has been illustrated by the back ends of a row of donkeys) that:

Bloomberg thought that the company was retaining bankers and all of a sudden we all just knew it could mean only one thing. But there are lots of reasons that a public company would do something like this and dealing with a potential takeover attempt is only one of them.

Pombriant's conclusion -- and read his post to see how he arrives at this conclusion -- is that Salesforce is planning to take minority position in Sage via some form of preferred stock issued by Sage.

He writes:

The purchase would give Sage some incentive (and cash) to continue porting its accounting products to the Salesforce1 Platform and it would give Salesforce greater access to some very specialized markets in construction and real estate for openers.

So is this the real story? Who knows, as Pombriant pretty much concludes. But it meshes with the history of the CRM industry.

For that reason alone, the news that Salesforce might be on the table for an acquisition should not have been surprising, Michael Maoz, VP Distinguished Analyst at Gartner , told me after the Bloomberg article came out. "It's nothing that hasn’t been discussed or rumored from months and in fact years."

"Any intelligent buyer of software has always asked himself that question – 'will my vendor be acquired one day?'" Maoz estimates that 95% of CRM companies that have formed over the years have gone on to either be acquired or have otherwise failed "and that is probably a conservative estimate."

The industry will continue to consolidate because that is how it has largely fueled the innovation that has taken place, Maoz says. "CRM has been a place of M&A but it has also been a place of discovery of new technologies," such as mobile, such as social, such as integration with Google and Facebook (a la Salesforce) etc etc. Some vendors build out these features themselves but snapping them up in a purchase is much easier.

All of which is to say that probably some acquisition is in the works, but whether it is of Salesforce or by Salesforce is unclear.

Maybe it is the latter, as Pombriant speculates, but there's this to consider too: yes, CRM has been a place of discovery, but it has also been a place of consolidation. A report published last year by Gartner, Market Share Analysis: Customer Relationship Management Software, Worldwide, found that Salesforce was the worldwide leader in CRM software, with 16.1% market share. The company solidified its position having grown 30.3% from 2012, outdistancing SAP's 12.7% growth, Microsoft's 22.8% and IBM's 22% yearly growth.

If any of these companies want to claim the top perch in the CRM market, then Salesforce needs to be acquired. Perhaps the real question is, is gaining a majority share of the CRM market worth it? At last count by Gartner, the market is sized at $20.4 billion.

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