What effect will Salesforce acquisitions have on the company’s future?

By January 17, 2017News

After buying 10 companies in 2016, analysts are watching for Salesforce’s next step — whether it be more acquisitions or more integration.  SQDM shares an article published by TechTarget, taking a look at different possibilities for Salesforce and for the technologies it has acquired.

Few software companies did more than Salesforce in 2016.

After watching Salesforce spend more than $5 billion on acquisitions last year, analysts are starting to put the pieces together regarding Salesforce’s grand plans.

One analyst believes that by integrating Salesforce acquisitions with its existing products, Salesforce is hoping to become a software platform that its customers rarely have to leave.

“I believe they are sneakily building a strong collaboration platform,” said Alan Lepofsky, vice president and principal analyst at Cupertino, Calif.-based Constellation Research Inc. “We don’t necessarily think Salesforce versus Office 365 or GSuite, but I think you might think that way in 2017. They want people inside of Salesforce as much as possible.”

Salesforce’s string of purchases seems to support that sentiment, as acquisitions of document management software Quip and the evolving SalesforceIQ have helped round out the company’s offerings.

But with more than $5 billion in acquisitions in one year, the question of how well Salesforce’s acquisitions will integrate with its existing applications is still being answered.

“You look at the far end of the spectrum and you see how Frankenstein the Oracle platform is after 20 years of acquisitions,” Lepofsky said. “To get penetration throughout larger swaths of a company, [Salesforce] had to grow and enter other markets. They are doing really well at building out a layer that expands everything.”

Salesforce’s most recent purchase of Twin Prime, which helps mobile applications perform better, is the latest example of a Salesforce purchase that spans across its products.

Several Salesforce products have already been integrated, including SteelBrick’s transformation to Salesforce CPQ, messaging application HeyWire becoming Salesforce LiveMessage, and Quip’s integration into the Salesforce platform.

In 2016, most of the Salesforce acquisitions were tied to AI, eventually helping to build Einstein, Salesforce’s AI offering. While Einstein is Salesforce’s largest rollout since Wave, it’s too early to see the benefits for customers, although Einstein is expected to be more beneficial for enterprise companies.

“Einstein is not designed for everybody,” Lepofsky said. “You need a lot of data to drive those insights. You have to have tens of thousands of customer records and support coming in. You won’t drive insight on small amounts of data.”

Whether Salesforce acquisitions continue into 2017 will go a long way in detailing whether Salesforce is satisfied with its portfolio of products or if it still sees gaps to fill.

“How they will continue their innovation and achieve their vision will most likely be through a continuation of analyzing build versus buy decisions, as well as the level of integration success,” said Karl Becker, president of The Carruthers Group, an Arvada, Colo.-based marketing and sales programs consultancy.  “If the tech market continues to be attractive for acquisition opportunities, then we should expect to see ongoing strategic acquisitions from Salesforce.”

Speaking to financial analysts, in August during an earnings call Salesforce CEO Marc Benioff attributed 2016’s buying spree to changing market conditions and “some incredible opportunities” to purchase “one-of-a-kind companies with unique technologies.” Benioff also described Salesforce Einstein as an example of “combining organic innovation with some amazing acquisitions.”

One area that could benefit from more Salesforce product development is real-time communication. While the addition of Salesforce LiveMessage integrating with Service Cloud helps address this gap, Lepofsky believes there is more to be done with customer communication.

“Customer support is an area they are a little weak in,” Lepofsky said. “I’d like to see Salesforce up its game there — not sure if it will be by build or by partnering, but real-time communication is missing from their portfolio.”

Lepofsky also believes that further innovation is possible with Salesforce’s existing products.

“There’s tons of potential, they own so much of the customer experience. To bring all that data together about an account or a customer and use Einstein to find patterns — that’s what I’m not seeing yet,” Lepofsky said.

There’s no denying that this past year was a turning point for Salesforce, moving from primarily a sales and marketing software company to a company with more wide-ranging goals. Whether Salesforce will focus on building out a platform encompassing the entire customer journey or continue acquiring companies to achieve the same goal should play out in 2017.

“I believe Salesforce will continue evolving from a marketing and sales platform to a customer lifecycle ecosystem focused on delivering the most relevant and timely experiences,” Becker said.  “Salesforce will continue to compete through innovation and futurist vision.”

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