Say It Ain't So, Salesforce!

I heard some disturbing business news back on April 29, 2015: Bloomberg News reported that Salesforce.com was "in play" again as an acquisition target.

It was not unexpected or even surprising that a company would take a run at Salesforce.com. Given its great success, the only surprise is that it hasn't happened sooner, even though the company, with the exception of its most recent quarter, has lost money quarter after quarter. (In fiscal 2014, it earned $5.4 billion in revenue and lost $263 million. This is not uncommon for a high-growth company.)

There was also no intrigue about who the rumored acquisition partners could be. Whether IBM, Oracle, Microsoft, SAP, or Amazon, any potential acquirer would have to have the market cap to make it happen, and it would be a good idea to have some strategic rationale besides buying a "cool" growth company. [Editor's note: At press time, no deal for the acquisition of Salesforce.com had emerged.]

What was—and is—disturbing is this: the potential impact of limiting a visionary market maker. An acquisition would undoubtedly hurt Salesforce.com's entrepreneurial can-do spirit and culture and compromise the singular cloud-centric vision that has made it so successful.

DRIVING SOFTWARE ECOSYSTEMS

By pushing the concept of software-as-a-service, Salesforce.com has changed the face of software. But the company's impact on the market is much greater than simply proving that enterprise software is viable in the cloud. (In fact, many companies sold "hosted" solutions for years before Salesforce.com entered the market.) Its greatest contribution may very well be the introduction of software ecosystems, where vendors truly work together for the betterment of their customers.

Most enterprise software vendors want to "own" their customers—they lock customers into a proprietary solution that is costly and painful to integrate with third-party applications. Sure, companies with deep pockets can invest in expensive (and time-consuming) custom integrations with third-party applications, but more often than not, these challenges discourage innovation and prevent companies from implementing new solutions that would improve their performance, reduce costs, and enhance the customer experience.

Salesforce.com understood from the start that it couldn't do everything for its customers, so it delivered an open platform that makes it easy to share data between applications. This sounds simple, but it was a game changer for service organizations that were traditionally held hostage by their CRM vendor.

DRIVING INNOVATION

Salesforce.com has been a benevolent giant. It does compete with a growing number of ecosystem partners and offers preferential treatment to companies that do things its way. But this doesn't prevent any vendor willing to meet Salesforce.com's integration standards from participating in its ecosystem. This approach encourages innovation by making it easier for new entrants to sell their products—it gives all ecosystem participants access to a huge and growing number of prospects.

Of course, Salesforce.com gets to see all of these new products, which poses a risk for innovators. But it's a risk that thousands have taken and more will take in the future, so long as the company continues to treat partners fairly. While its CRM solution is the core system, users can now cost-­effectively introduce innovation into their environments, knowing that the path to integration exists and works.

FINAL THOUGHTS

No one is saying that Salesforce.com is a perfect company and does everything right. But it surely is a gutsy one that invests its money in what it believes in—a vision that will end quickly if it is acquired, as the buyer will need to show a profit, which Salesforce.com has struggled to do. It clearly understands that third-party ecosystem partners enhance the value of its CRM solutions and increase its own retention.

Most of its large potential acquirers have synergistic and complementary (as well as competing) products that they'd like Salesforce.com's customers to buy. Unfortunately, any typical acquirer will likely prioritize changes that favor its own product sets—which is contrary to what makes Salesforce.com great.

Donna Fluss (donnafluss@dmgconsult.com) is founder and principal of DMG Consulting, a provider of contact center and analytics research, marketing analysis, and consulting.