Yeah, you read that right. In a deal that eclipses its acquisition of Mulesoft last year, Salesforce has announced it will spend $15.3 billion on data visualisation business Tableau. That’s more than two and a half times what it paid for Mulesoft. The news comes just days after Google revealed it would pay $2.6B for Looker, a big data business.
While analysts said the move was not unexpected, they cautioned customers both on product overlap and on the impact of Tableau’s loss of independence.
And the deal is consistent with its track record of writing very large checks once it decided it needs to grab territory in a strategic market, as its $2.5B purchase of ExactTarget demonstrated in 2013 when it’s rolled the dice on marketing technology.
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In each case, each of these three deals was the largest for the company at the time, and each subsequent deal has been multiples of the past record purchase.
Where the Mulesoft deal was designed to help overcome integration problems – both on customer premises and within the Salesforce ecosystem, the Tableau deal is part of an initiative the company calls Customer360 which is designed to give its corporate base the most complete picture of the data they hold on customers.
Salesforce, like other tier-one companies, is betting that with privacy demands and calls for regulation on the rise, the data which companies themselves have about their customers – called first-party data – will become more critical as third-party data like cookies falls out of favour.
Forrester Research meanwhile says the deal has been expected.
According to tom Liz Herbert, VP, and Principal Analyst, Forrester, “The move is not a big surprise, as rumours of massive acquisitions have been swirling and as Salesforce has clearly stated its vision to be a more integrated, insights-driven solution portfolio.”
Herbert said Salesforce customers already use Tableau due to its simplicity and strong appeal with line of business managers, which are two traits it shares with Salesforce. “What does it mean for customers? Longer term, this has great potential for Salesforce to create more cross-cloud data visualisation aligned to its Customer360 strategy. In the shorter term, however, the status quo is likely to remain as Tableau customers are still only partially in the cloud and as this introduces another platform into the mix.”
Meanwhile her colleague Boris Evelson, VP and Principal Analyst, Forrester noted that the business intelligence (BI) market is a very mature market with most of the features and capabilities increasingly commoditised.
“With discommoded features and price pressures (in large enterprise deals Microsoft charges under $4.00 per user per month) it’s increasingly difficult for independent BI vendors to remain profitable,” he suggested.
He also said Tableau and Salesforce have both complementary and overlapping capabilities. “Salesforce only runs in the Salesforce cloud, Tableau runs on most public clouds (AWS, Azure) and also runs on premise. Salesforce mostly goes after customer facing (sales, marketing, customer service) analytics, Tableau goes after all BI use case (front and back office).”
However he also called out overlap between Salesforce’s Einstein Discovery (one of the products in the Einstein Analytics family, that is largely based on a recent BeyondCore acquisition) and the Tableau offering.
“It’s also a general purpose BI platform that can connect to any data source be used to build any BI application. Visualisations, OLAP, NLP and many other features of these two products are overlapping, so it’ll be interesting to see how SF reconciles and integrates them or keep them separate.”
He said long term it wouldn’t make sense to keep supporting and enhancing two sets of code for these capabilities, and he considers integration “inevitable.”
“And hence the risk – Tableau as an independent company had the luxury of focusing on nothing but BI and analytics. Now Tableau faces with the challenge of integrating 3rd party code, getting its developers pulled into other Salesforce projects. Keeping Tableau laser- focused on its core product will be the key to the successful merger.”
Gartner meanwhile said the deal represented something of a ‘back to the future’ scenario. According to Rita Sallam, VP Distinguished Analyst, Gartner, “Modern analytics and BI market mainstreams and large enterprises are now deploying these platform enterprise-wide.”
Sallam said cloud megavendors are buying and consolidating leading modern analytics and BI vendors to complement their cloud data management and application stacks and to drive data and compute-intensive analytics use cases to their respective clouds. “Salesforce and Google are responding, in part to Microsoft’s success with natively developed Power BI. Amazon AWS may respond in kind as QuickSight, AWS’s analytics and BI platform have achieved limited market traction to date.”
She said the current market moves are similar to the consolidation which happened in 2007/2008 in the traditional BI market. AT the time Oracle, SAP, and IBM bought traditional BI market leaders Hyperion, BusinessObjects, and Cognos, respectively, adding them to their respective applications and technology stacks.
“This consolidation also kicked off a new round of innovation which led to the current rise of vendors like Tableau and Qlik. The current consolidation will continue to drive a new round of innovation around Augmented Analytics with new startups emerging daily, she said.
Sallam also highlighted the different thinking behind the Salesforce and Google acquisitions.
“The Google acquisition of Looker fills a gap in the Google analytics stack and is complementary with a well-articulated rationale and set of synergies. Although CIOs will watch the combined roadmap closely for evidence that Google will continue to support and invest in Looker’s multi-cloud optimizations as promised.”
However, she said the rationale and strategic synergies of Salesforce acquisition of Tableau are less clear at this time. “Salesforce said it will announce specific product integration plans after the deal closes, but there is duplication in the Salesforce Einstein Analytics and Tableau product stack. This can cause customer confusion if the two platforms remain separate and potentially painful product rationalization if combined.”
Finally, she noted that acquisitions give both vendors an on-premises play, which she described as a recognition that most large enterprises require a hybrid cloud on-premises approach.
In a statement announcing the deal Marc Benioff, Chairman and co-CEO, Salesforce said, “Tableau helps people see and understand data, and Salesforce helps people engage and understand customers. It’s truly the best of both worlds for our customers–bringing together two critical platforms that every customer needs to understand their world.”
The statement also made clear how this deal, like Mulesoft before it is designed to speed transformation. “Salesforce will play an even greater role in driving digital transformation, enabling companies around the world to tap into data across their entire business and surface deeper insights to make smarter decisions, drive intelligent, connected customer experiences and accelerate innovation.”
Salesforce argues that businesses need to put customers and data are at the heart their transformation efforts. And the fact that IDC projects worldwide spending on digital transformation technologies and services will reach $1.8 trillion in 2022 explains why the purchase price looks so steep on first impressions.