Thoughts On Mulesoft Joining The Salesforce Ohana
Unless you were living under a rock in the land of SaaS, yesterday’s news about Mulesoft joining Salesforce for an enterprise value of roughly $6.5B was huge for the industry. The deal is the largest by a long shot in the ecosystem as laid out by Tomasz in his post this AM. As he also lays out, Salesforce is acquiring the business for an astounding 21x enterprise value to trailing twelve months revenue – nearly 2x the next closest comp. We’ve written a lot here on the Bowery Capital blog about the Rise Of The Digital Marketing Suite and how Salesforce thinks about conquering many of the “system of record” categories selling into sales, marketing, and customer success IT buyers. As the dust settles, we had a number of thoughts on the Mulesoft acquisition by Salesforce that we thought were worth sharing.
1. The Play Is User Experience Across Digital. The play here is likely that Mulesoft – as the provider of the API layer between disparate systems – will continue to help brands with systems integration, interoperability, and reliability to ultimately power better user experiences across digital. As more and more brick and mortar businesses move from transaction oriented organizations to customer oriented organizations this interoperability becomes important. When you marry the API layer with the CRM, it provides Salesforce with an opportunity to become embedded much lower in the stack and provide end to end capabilities. This is a brilliant strategy within Mulesoft joining Salesforce.
2. Expect More M&A From CRM Here. Salesforce rarely, if ever, buys one company in a particular product cloud. Alongside building products internally, M&A has been their core strategy since 2009-2010. They want to get into the marketing cloud? They buy Exact Target and others. They want to get into the commerce cloud? They buy Demandware and others. Build out the sales cloud more? Buy Steelbrick and others. Mulesoft is an amazing company but there are still many areas they are lacking (i.e. mobile). We would not be surprised if there was much more M&A here around this space from CRM and others.
3. What Happens With Informatica? One of the more nuanced things here is going to be how Salesforce plays with the other integration as a service companies. For those that don’t remember, they actually were a part of the Informatica buyout in 2015 and own a piece of the company still. It seemed for a while like Salesforce was still treating Informatica, MuleSoft, TIBCO, Zapier, and the other cloud data integration solutions equally. Now with Mulesoft joining Salesforce, what happens?
4. Post Acquisition Integration Will Be The Big Key. Salesforce historically takes their time to integrate companies into the broader landscape of products. For instance with the marketing cloud, you had acquired companies staying virtually standalone with minimal cross-selling or up-selling for as much as two years post acquisition. Sellers selling ExactTarget different from BuddyMedia different from Krux different from everything else. It was a big giant mess for some time. Most interesting about this will be how quickly Salesforce can integrate Mulesoft within their existing product clouds.
All in, this is a bellwether for 2018 and Mulesoft joining Salesforce is likely the start of a long string of M&A in the category this year.
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