Salesforce announced today their intent to acquire Demandware for $2.8 billion – its largest acquisition to date. This move adds a commerce to its CRM portfolio. It’s an acquisition long due, with the question of why it took Salesforce so long to fill their gaping hole in CRM functionality – commerce functionality that its formidable competitors such as Oracle and SAP already have.
Demandware offers an enterprise cloud commerce suite (digital commerce, order management, point-of-sale, store operations), and together, in conjunction with other Salesforce clouds – marketing, sales, service, communities, analytics and IoT – allows companies to support the end-to-end customer journey which include scenarios like asking a product question during an online purchasing process, or purchase a purchase a product or service during an online customer service interaction.
The positives of this acquisitions are:
- It’s a software category with a bright future. The market for B2C commerce suite technology is mature, yet it is growing, and set to exceed more than $2.1 billion in the US alone by 2019. This acquisition allows Salesforce to tap into a growing market, and coupled with their IoT cloud, allows them to also explore personal, high touch retail experiences
Demandware is a commerce leader. In Forrester’s Wave evaluation of commerce platforms, four vendors dominated – Demandware, hybris (SAP), IBM and Oracle Commerce, with only Demandware in reach of Salesforce. Forrester stated that “these vendors all pack a heavy punch, with extensive, mature capabilities that, frankly, go beyond the needs of many of their clients”.
Demandware improves Salesforce’s reach. Demandware creates a new product offering for Salesforce, and allows them to create “ another billion-dollar cloud,” as Marc Benioff, Salesforce’s CEO and founder aptly stated. It also gives Salesforce a new group of customers – existing Demandware customers – to target with Salesforce’s existing portfolio.
- Companies can now purchase the full CRM portfolio from a single vendor. This move increases Salesforce’s strategic role within companies who rely on technology vendors to help shape their vision and offerings for differentiated customer experiences.
The potential negatives are:
- Acquisitions of this size are risky. It takes time and effort to digest large acquisitions, and align product roadmaps, company processes, organizational structures and culture. Salesforce has become an acquisition monster, with over 20 acquisitions since 2010, yet their track record for success is varied.
- The acquisition increases creates more heterogeneity in Salesforce’s code base. This adds another dimension of complexity to manage.
- The acquisition is expensive. Salesforce is paying over ten times Demandware’s revenue in the past year — much more than typical.
Yet, net, net from a CRM perspective, this acquisition is a good thing. Salesforce, with their technology, can now fully support the customer lifecycle of winning, serving and retaining customers.