Salesforce billion dollar deal with Tableau – Who will gain and who will lose?
Posted on June 25, 2019

Salesforce has long remained the stellar no.1 in CRM and a leading company in cloud computing. It has witnessed 26% of year on year revenue growth earning USD 13.3 billion in FY 2019. On the other hand, Tableau earned USD 0.9 billion of revenue in FY 2019, a stunning 41% of year on year growth making it one of the fastest growing company to disrupt the world of business intelligence. It is not uncommon for companies in the IT sector to opt for rapid M&A’s given the industry’s volatility and pace. But then comes Salesforce Inc.’s long held focus in CRM and cloud computing, its ticker symbol ‘CRM’ being representative of the fact. The sudden announcement made by Salesforce on 10thJune to acquire Tableau in an all-stock deal worth a whopping USD 15.7 billion marks a turning point for Salesforcefrom its core CRM function towards different segment of a much wider IT industry and hints at its potentially larger diversification strategies for the future.

The acquisition is expected to be completed by October 2020, which is the third quarter for Salesforce. Post the acquisition, Tableau is set to operate as a separate brand of Salesforce whereby the USD 15.6 billion (net of cash) deal will result in Tableau’s Class A and Class B common stock being exchanged for 1.103 shares of Salesforce. According to an estimate made by Trefis, once the acquisition is completed, the company will have synergy gain of 0.5% in fiscal year of 2020. Post that, synergy gain of 2.1% and 2.3% is expected in FY 2021 and FY 2022 respectively. 

According to Liz Herbert, vice president and principal analyst at Forrester Research, Salesforce customers who don’t yet use Tableau have the most to gain from the acquisition. She commented that a lot of clients whom she has come in contact with had felt the need for simple, user-friendly tools that enabled them to use complex platforms in an optimum way. In-spite of the need, most of them stepped back not wanting to approach a third party like Tableau as it would mean additional risk and introducing a small vendor in their company. Salesforce and Tableau working together will surely cast aside such issues for concerned parties. Given the fact that Salesforce intends to allow Tableau on continuing its operations independently from Seattle headquarters, joint customers of both companies might not experience much of a change post takeover. According to Forrester Research, the whole deal was Salesforce’s bid to win over Tableaus’ on-premise customers and the ones who prefer and use Tableau over Oracle or SAP. 

From the industry’s perspective, the deal might result in some independent analytics vendors being driven out of the market. The benefits of economies gained by companies like Salesforce after such integration allows them to provide business intelligence services in a very competitive price which independent analytics vendors may not afford to. Considering the competitors landscape, analysts remark that the acquisition instantly makes Salesforce a major player in Business Intelligence market while the other cloud vendors like Amazon, Microsoft and Google have been working to improve their analytical offerings. However, just a week before Salesforce announcement, Google had also announced to acquire Looker, an analytics company for USD 2.6 billion while Microsoft already has a competitive analytics product and SAP recently acquired Qualtrics, all reflecting at the future of analytics to be on the cloud.

In light of all things, it can be concluded that data and analytics are being increasingly important and Salesforce acquisition though is a complex strategy can be a straight upward track towards organizational growth.  While analysts are being contentious on whether Salesforce should have considered alternative players in BI like ThoughtSpot instead of Tableau, a lot of effort is required from Salesforce end to reap the maximum synergy out of the surprising deal. A well turned out deal would mean Salesforce making huge profits from the large and fast growing market of big data and business analytics which is forecasted to reach USD 260 billion in 2022 with a CAGR of 11.9% according to IDC.

Palpasa Shrestha, Senior Research Analyst at A2Z Insights

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