Editor’s note: As rumors of a potential Salesforce acquisition continue, we asked several of our favorite software industry advisors and CRM experts to weigh in on the following question.
Q: Which company do you think is most likely to acquire Salesforce.com, and why?
Toby Redshaw, CEO, Kevington Advisors:
“I hope Salesforce ‘acquires’ Microsoft. Yes, I know the commercial transaction would be the other way around; but the dilution of the Redmond-centric, strategically slow aspects of Microsoft’s generally positive culture plus the infusion of Salesforce DNA would make a combination that could leapfrog competitors. In five years it would radically change enterprise IT and, indeed, business effectiveness for those ready and willing to embark on that journey.
That would also be great at IBM; but balance sheet, size, scale and the seasoned smarts of the IBM antibodies would probably cause the new organ to be rejected. This would then light a fire under Oracle which, in turn, would be fuel for accelerated progress across enterprise IT. I posted a little note earlier this year that Benioff would be the leader of a new company called SalesOracleForce.
However, back in Realityland, I think Salesforce and Oracle merge, Benioff and their culture takes over, especially on the product dev side, and everyone else then plays catch-up for years.”
Paul Ressler, principal, Cirrostratus Group:
“I would really like to see Amazon acquire Salesforce. Although Amazon has not said that they want to pursue the enterprise application software business beyond productivity applications, their business model creativity and willingness to invest in risky new technologies would likely shake up the enterprise software world. Who knows what kind of interesting advancements we might see?
A much more likely suitor for Salesforce would be Oracle. In the recently released CRM market share and CRM growth numbers, Oracle’s CRM business grew a minimal 2.6 percent in 2014 and Salesforce grew 28 percent. This would certainly give Oracle a boost in the cloud market and help their CRM business substantially. But I would be disappointed should Oracle acquire Salesforce because I don’t think we would see the same kind of cloud application leadership that we’ve seen from an independent Salesforce.”
Christopher Lochhead, co-founder and partner, Play Bigger Advisors:
“We hope Salesforce.com remains independent. Marc Benioff is a legendary entrepreneur and one of the greatest category designers of all time. As history shows, if they were to be acquired, the likelihood that Salesforce would continue to design and dominate new categories is very low. Microsoft, by way of example, has not pioneered, or dominated a new space for more than a decade.
If Salesforce tapped out, our industry would lose an important Category King and lose who knows how much innovation going forward. Additionally we believe Salesforce’s potential for growth is considerable in their core space, given that they have no real competition and they have many potential growth options if they want to keep creating new categories.
So please, Marc, hold fast and keep innovating.”
Dalia Asterbadi, VP Relationship Management, realSociable
Salesforce has a high PEG (Price Earnings to Growth) Ratio at 22.9, fueled by its opportunity to grow tied to the company’s relative standing to competitors and its transition from SaaS to PaaS. The street focuses on a company’s evolving business model.
Expanding its footprint to enterprise customers makes Salesforce attractive for further service expansion capabilities. Microsoft, Oracle and SAP (PEG Ratios 1.80 – 2.55) don’t fit this model; companies broadening their focus and transforming service areas – IBM, Amazon and LinkedIn – possibly fit.
My vision centers on a disruptor – emergence of a unified platform and service delivery integrating front- and back-office systems. Innovation would expand an offering as opposed to extending a standalone product area. Salesforce needs commerce and cloud connectors to meet that promise.
Based on Amazon’s 35.50 PEG Ratio, it stands to gain most from the acquisition. And the finance principles make sense granted it has a higher ratio than Salesforce, which would keep shareholders reasonably happy and in line with anticipated future growth.
Omid Razavi, independent customer success consultant:
I hope Salesforce will remain independent and transform into a profitable SaaS/PaaS company. For employment in the Bay area, an acquisition would be net negative – especially if the acquirer were Oracle – because of the overlaps.
Microsoft is the most likely and the best fit for these reasons:
- Microsoft has come a long way to become a cloud company with Azure IaaS, online applications and services, while other potential acquirers are struggling.
- Microsoft CEO Satya Nadella is a visionary leader and his relationship with Marc Benioff is unique.
- Microsoft and Salesforce are both excellent at developing partner ecosystems and nurturing vibrant developer communities that they will need to compete with Amazon AWS.
- Microsoft has more cash than the other rumored acquirers combined.
Oracle and SAP are both struggling with their SaaS acquisitions. IBM and HP are not true application software companies. Lastly, Google and Apple are busy competing in other markets.
Chris Kocher, founder and managing director, Grey Heron:
- SAP: possible until their CEO, Bill McDermott dissed SF.com as overvalued.
- Oracle: could accelerate lagging cloud efforts – but imagine Benioff working for Ellison again.
- Microsoft: broke off talks with $20 billion valuation differences but would have been an integration mess with overlapping platforms, tools and apps.
- Apple: prefers smaller acquisitions but it could help shore up enterprise initiatives.
- Google: in need of diversifying ad revenues. Salesforce would bring a breadth of accounts, platforms and applications in short order.
- Amazon: AWS could benefit from higher margin, value-add applications and tools to up their game in the enterprise.
And the winner is …
No one. Salesforce is an extremely strong company on its own. Momentum, vibrant culture, next-generation cloud offerings, broad partner ecosystem and no legacy baggage lead to high valuation, pricing it beyond existing buyers’ appetite.
Marc, unless they start throwing $100 billion your way, stay independent.”
Jeffrey M. Kaplan, managing director, THINKstrategies:
“I don’t expect Salesforce.com to be acquired soon because the company’s valuation is too high, and the risks of losing many employees and customers are too great. However, one or more of the companies that have been identified as potential acquirers may be willing to absorb the costs and take these risks in order to acquire Salesforce.com’s customer base, platform capabilities and staff even if it means disrupting its operations and possibly derailing its momentum.”
Dalia Asterbadi, a pioneer in in technology-driven marketing communications and sales analytics, is CEO and founder of realSociable, a company focused on social insight for deeper engagement with customers. Engineer, inspirational speaker and author, her latest book is titled “The 21 Immutable Plays of Prospecting: The Truth Behind a Winning Culture and Bridging the Gap between Sales and Marketing.”
Jeffrey Kaplan is the managing director of THINKstrategies, founder of the Cloud Computing Showplace and host of the Connected Cloud Summit focused on the IoT market on September 18 in Boston, MA. He can be reached at firstname.lastname@example.org.
Chris Kocher is a founder and managing director of Grey Heron, a high-tech business strategy consulting and advisory firm. In addition to managing pioneering products at HP and a business unit at Symantec, he has advised over 100 high-tech companies. He specializes in increasing revenues and growing company valuations by helping management teams identify new business opportunities and developing strategies to accelerate adoption in evolving markets like IoT, big data, cloud and mobile. Contact him at email@example.com.
Omid Razavi is a cloud sales and customer success leader and currently advisor to software and technology companies to grow and/or transform their sales, services and operations for the cloud. Dr. Razavi has over 20 years of leadership experience in managing sales and services at various companies in Silicon Valley. He may be reached at LinkedIn and Twitter.
Toby Redshaw is CEO of Kevington Advisors and a leading authority on leveraging modern IT for competitive advantage. He has 30 years’ experience leading technology efforts in change-intensive environments from both business and CIO perspectives at FedEx, Motorola, American Express and Aviva as well as several startups. He has served on several boards, both private and public. Toby is chairman emeritus of the Kellogg Innovation Network and was chairman of the RosettaNet Council in Telecomm. Contact him at Toby@kevingtonadvisors.com.
Paul Ressler is a consultant specializing in service delivery for SaaS, cloud computing and managed services. As the principal of The Cirrostratus Group, Paul helps his clients improve customer satisfaction, raise service margins, introduce profitable new services, and transition to the SaaS business model.