dcsimg

Salesforce Makes Its Biggest Bet on APIs and Data Integration

SHARE
Share it on Twitter  
Share it on Facebook  
Share it on Google+
Share it on Linked in  
Email  

Salesforce.com’s definitive agreement to acquire MuleSoft for approximately $6.5 billion represents the company’s biggest acquisition yet and a calculated move to consolidate it’s position as the leading enterprise software company in the Cloud. The move also illustrates that the real power in the market is quickly shifting to those vendors that can facilitate the most cost-effective flow of data across applications in an increasingly connected and complex world.

It has become a cliché in the tech world to say that “it’s all about the data”. And, as the volume of data soars as a result of social networks, online networks and advent of the Internet of Things (IoT), the demand to capitalize on this data to better serve customers and gain a competitive advantage is also escalating.

Yet, the greatest challenge facing businesses and other institutions today continues to be leveraging data to perform daily functions and achieve corporate objectives. Various market research studies suggest that only 1-10% of corporate data is being effectively utilized to satisfy today’s business needs.

Capturing data is no longer the issue. The Cloud has made it relatively easy and economical to collect and store data from nearly anywhere. The real problem is moving the rapidly increasing volume of data around the organization and integrating it from various sources so it can properly inform corporate decision-making processes and power a widening array of business processes.

While almost every organization is trying to undergo a digital transformation so it can better engage with its customers and end-users, most are still trying to properly tap the data at its disposal to achieve these objectives.

This problem has been growing for a long time. Before the idea of ‘Big Data’ became popularized, nearly every organization was grappling with the challenges of data integration. Highly customized applications sitting on disparate computer systems gave rise to a wide array of data integration tools vendors and systems integration firms promising to tie together data warehouses with business intelligence (BI) solutions.  

After decades of making multimillion dollar investments in these efforts, many organizations were more than willing to try a new generation of Cloud-based, Software-as-a-Service (SaaS) vendors promising to overcome the data integration problem. Yet, Cloud/SaaS companies have been equally frustrated dealing with these data integration issues.

Back in 2011, THINKstrategies teamed up with Mulesoft to conduct an industry survey about this problem and found that nearly 90% of the respondents said that data integration was critical to their SaaS sales efforts. Mulesoft’s most recent survey of IT decision-makers (ITDMs) found an equal percentage “believe that integration challenges are slowing or hindering digital transformation within their organizations.”

Given these issues, it’s no surprise that the data integration market is expected to jump from $440 million in 2017 to $12.24 billion in 2022, a compound annual growth rate (CAGR) of 13.7%.

Salesforce.com has been able to circumvent this issue and grow tremendously by building a platform and partner ecosystem around a new generation of application programming interfaces (APIs) that make it easier for enterprise applications to interoperate. However, even Salesforce has seen its growth efforts stymied by the data integration issues facing its customers and partners. And, now that Salesforce is attempting to sustain its growth by expanding its leadership position into specific vertical markets and the IoT, solving the data integration problem is even more imperative.

Salesforce is not the first Cloud company to acquire a data integration vendor. A decade ago, Workday acquired Cape Clear. The legacy players have also gobbled up data integration companies to strengthen their positions in the Cloud. For instance, IBM acquired Cast Iron and Dell bought Boomi.

However, the scale of Salesforce’s acquisition of Mulesoft surpasses all of the past company purchases. The $6.5 billion price tag not only represents a 36% premium over MuleSoft's closing share price on March 19, 2018, it also represents nearly a 22x multiple of Mulesoft’s 2017 revenues. And, even Mulesoft admitted in its most recent fiscal yearend report that it didn’t expect to reach $1 billion in revenue until 2021.

Obviously, Salesforce expects its acquisition to accelerate this growth projection and produce far greater financial returns by embedding Mulesoft’s API/data integration capabilities into Salesforce’s platform and making it available to its partners to solve their customers’ escalating data integration needs.

Salesforce’s other data integration partners, such as Informatica, Jitterbit, Scribe Software and SnapLogic, are not going to be happy about this acquisition. But, this isn’t the first time Salesforce has acquired a company from its partner ecosystem, and in this case a previous Salesforce Ventures portfolio company, to enhance its corporate capabilities. While this could alienate some of its data integration partners, Salesforce is betting that it is worth the tradeoff in the long-run.

Submit a Comment

Loading Comments...

NewsletterDATAMATION DAILY NEWSLETTER

SUBSCRIBE TO OUR IT MANAGEMENT NEWSLETTER