As always with high-profile liquidity events, there has been a lot of discussion around Salesforce’s $2.5B acquisition of ExactTarget (ET) this week. The deal comes on the heels of several other notable $100M+ acquisitions over the last few months: Cisco / JouleX for $107M, Yahoo! / Tumblr for $1.1B, Trulia / MarketLeader for $333M, Baidu / PPS.tv for $370M, and Intel / Mashery for ~$180M (not to mention Facebook’s and LinkedIn’s purchases of Parse and Pulse, respectively, in the $80-100M range).
For Salesforce, ExactTarget is the latest in a series of purchases designed to bolster dominance in the sales and marketing automation spaces. That much is spelled out in the Company’s recent press release: “The acquisition gives salesforce.com industry leading solutions across every major pillar of CRM, creating a unique customer platform that enables companies to transform how they connect to their customers throughout every part of the customer lifecycle.” The premium paid for the business wasn’t insanely high, so it must have not been to difficult to convince ExactTarget management of Salesforce’s vision and synergy proposition (Salesforce paid $33.75 per share, a 50% premium over the previous day’s closing price of $22.10, but lower than many May Wall Street price targets in the $36-39 range). With 40%+ YoY growth in subscription services focused on email marketing, ET appears to be a healthy at-scale business that will nicely complement Salesforce’s strengths without too much cannibalization.
A consistent clip of acquisitions over the past few years speaks to Salesforce’s concerted effort to serve as the “starting point” and central platform for companies as they seek to scale their businesses. They clearly want a broad presence across enterprise SaaS solutions, including social marketing (Buddy Media, Radian6), collaboration (GoInstant, Stypi, Thinkfuse, Manymoon, Dimdim, Activa Live, Groupswim), customer service (Assistly, Informavores, InStranet), HR (ChoicePass, Rypple), data management (EntropySoft, MinedAnalytics), and of course, the core CRM sector (Etacts, Jigsaw). Probably their most telling overtures have been in the development platform / service space (ModelMetrics, Heroku, SiteMasher, Sendia).
It’s no secret: Salesforce wants to be a platform business, one that can’t be out-innovated or replaced. They aim to serve as the foundation and the glue of a company’s various moving parts rather than any one solution. And CEO Marc Benioff hasn’t been quiet around his belief that marketing execs will “step up and own that infrastructure.” He’s reiterated his commitment to the marketing cloud layer by quoting the now ubiquitous statistic: “The CMO is expected to spend more on technology than the CIO by 2017.” At Bowery, we couldn’t agree more that the purview of the CMO is expanding rapidly as the traditional IT department is redefined.
The ExactTarget acquisition and Salesforce’s strategy, however, raise a larger and more far-reaching question: Are “platform” businesses really the future of enterprise software? The SaaS landscape is increasingly fragmented and the use of dozens of overlapping solutions within one company is already the norm for startups and growth businesses. Companies like Salesforce, Oracle and SAP, in contrast, often cater to the larger enterprise that seeks to simplify vendor relationships. Will that always be the natural course of thinking as businesses grow? Will large enterprises always trend towards one or a few base-layer systems for CRM, ERP and the like? In years to come, a multi-focus platform vendor like Salesforce be a better option than the mix of smaller, more specialized tools that younger counterparts are embracing?
I’d sooner say that the era of the platform is waning. No company’s needs are exactly the same even within specific horizontals (see, as an indicator, the ballooning vertical SaaS market). A one-size-fits all software package, especially in areas as broad as sales and marketing automation, is a virtual impossibility. Fragmented SaaS markets, in contrast, mean an opportunity for maximum customization (think “mix and match”). Already, departments and individuals within companies are selecting their own work tools (e.g. DropBox, personal iPhones, HipChat, Trello), disrupting the traditional “top-down standard” model. And corporate decision-makers should note the benefits: working with many smaller vendors means lower switching costs, a faster innovation-disruption cycle in the overall market, and maybe even happier employees. As described in a recent Adage article, Salesforce’s own entrepreneur-executive and digital native Michael Lazerow seems to have his own doubts around platform solutions, dismissing “plans to create one big technology stack,” even within Sales force. “I just went through this with Buddy Media,” he said. Even ExactTarget, say most insiders, is going to maintain significant autonomy.
The future of enterprise software will see even the largest of enterprises embracing a multitude of independent SaaS solutions. As data parsing, sharing, and management capabilities improve, emerging solutions won’t be as beholden to the integration protocols and APIs of market leaders. The legacy software giant will have to be that much more nimble and take a more devolved approach to absorbing acquisitions. Companies won’t be afraid to work with younger vendors as they mix and match their own intercommunicating patchwork of tools. While ExactTarget won’t be the last big SaaS acquisition of its type, as far as enterprise software as concerned, the platform as we once knew it has already begun to die.
