Salesforce’s $6.5B acquisition of MuleSoft: What it means for the cloud ecosystem

Salesforce’s acquisition of MuleSoft is a landmark moment in the world of enterprise SaaS applications. For starters, it’s big news because of the size of MuleSoft and it’s not too often a company this size gets acquired. Beyond that, the purchase price of $6.5 billion is the most Salesforce has ever paid for an acquisition. Their acquisition of ExactTarget comes closest at $2.5 billion, but that’s still far shot from this price tag. What makes this an expensive buy for Salesforce is that they’ve paid 16 times MuleSoft’s projected revenue for the year 2018. So, what’s it about MuleSoft that made Salesforce pay a premium for it? Let’s discuss.

MuleSoft: The vital facts

MuleSoft, founded in 2006, is a data integration platform that connects applications and their data across any cloud — public or private. MuleSoft’s tryst with Salesforce began in 2013 when the latter became an investor in MuleSoft’s series E round of funding. Since then, Salesforce funded MuleSoft two more times with the last round valuing MuleSoft at $1.4 billion. In March 2017, MuleSoft had a successful IPO with stable stock performance since then. Its 1,200 customers, most of whom are enterprise organizations, is proof that MuleSoft is at a pivotal point in the enterprise market.

MuleSoft and the competition

The flagship product of MuleSoft is its Anypoint platform which enables integration between SaaS applications, microservices, and APIs. MuleSoft’s competition ranges from API-focused vendors like Apigee, which was acquired by Google for $625 million in 2016, to data-integration platforms like Informatica and Dell Boomi.

When asked about the key use cases of MuleSoft, Shree Mandadi, ex-technical director at MuleSoft and currently a product head at AutoRABIT, says that “MuleSoft provides a 360-degree view of the customer by federating data from Salesforce and ERP systems. It handles inventory lookups from SAP, and can manage delivery tracking information from various sources.”

There are three key components of MuleSoft’s Anypoint platform. First, there’s Mule ESB, which acts as a central point of integration between applications. Then, there’s CloudHub iPaaS which is a completely cloud-based version of the Anypoint platform. Finally, there’s the API management component, which helps secure and operate APIs at scale. With over 120 connectors, MuleSoft is pervasive in its coverage of the enterprise application landscape.

MuleSoft’s core customer base is made up of organizations that are making a transition to the cloud and need a robust way to manage all the disparate sources of data across their organization. MuleSoft looks to provide a more powerful solution than developers writing point-to-point code to integrate applications in customized ways. It wants to be the unified layer that handles all integrations in a consistent manner and at large scale. With the number of cloud applications and cloud vendors available today, the task at hand is immense and is only going to be more demanding as organizations become increasingly reliant on the cloud.

Why integrate enterprise data?

salesforce MuleSoft
In today’s connected world, data is what powers modern cloud-native applications. The amount of data available to an organization and its ability to glean insight from its data is what separates any company from its competition. That said, here are some of the key benefits of data integration:

Improve collaboration: In a large enterprise, there are many SaaS applications being used. Sales teams use Salesforce CRM, marketing may use Marketo, IT may use ServiceNow, and HR may use Workday. These teams rely on each other to perform their roles effectively. Since their workflows are integrated, it only makes sense that the applications they use should likewise be integrated. This is where MuleSoft enters and makes collaboration possible across teams.

Modernize applications: In large organizations, there are legacy applications operating alongside modern ones. Companies may be too heavily committed to their legacy apps and are unable to fully let go of them. However, by using an integration tool like MuleSoft they can integrate their legacy apps with modern ones, and in a sense, teach an old dog new tricks.

Make data more valuable: You can enhance the data in any application by enriching it using a data enrichment tool like Lusha, or by integrating it with data from neighboring applications. MuleSoft takes the integration approach and makes data more valuable.

360-degree view of customer: The ultimate goal of all data integration and digital transformation is to gain a complete view of the customer. This helps to deliver a superior user experience and is the way of the future for enterprise applications.

What’s in it for Salesforce?

Salesforce seems unstoppable given the pace it’s been growing at in recent years. Not satisfied with being the first enterprise cloud computing company to reach $1 billion in revenue, it also became the first to reach $10 billion yearly revenue in 2017. Its new goal is to reach $20 billion by 2024, and the only way it can get there is by diversifying its business beyond CRM.

Commenting on Salesforce’s efforts to diversify, Vishnu Datla, CEO of AutoRABIT, says, “All large clients have ERPs powering their businesses. While Salesforce provides a robust CRM, it cannot be in a silo. Clients want to integrate their backoffice applications to CRM, and MuleSoft is the best way to do this.”

Having conquered the CRM throne Salesforce has set its sight on the entire cloud ecosystem with complementary cloud offerings for functions like marketing, support, finance, analytics, and now data integration. Its objective in all this is to be the most extensive cloud platform and the most compelling option for organizations that want to move to the cloud.

MuleSoft is key to this ambition of Salesforce as it can bring together the various products of Salesforce and make the transition to the Salesforce cloud seamless for customers. Data integration happens at every point of the Salesforce platform, and a robust integration platform like MuleSoft is just what Salesforce needs to position itself as the leader in cloud technologies. Not only this, MuleSoft’s 1,200 customers are a prime target for Salesforce, and they’ll hope to win bigger deals from this existing customer base. So, though MuleSoft’s current revenue numbers aren’t very impressive from Salesforce’s perspective, it’s the full range of opportunities that Salesforce is really interested in over the long run.

What does this mean for competitors?

The Salesforce-MuleSoft deal will have a huge bearing on the competitors of both Salesforce and MuleSoft. For one, it would bump up the price of potential future acquisitions, which his bad news for Salesforce competitors like Oracle and Microsoft, but good news for MuleSoft’s competitors. It’s also a sign of even more consolidation to come as big players look to take the shortcut and acquire a mature product than build one from scratch in-house. Shree of AutoRABIT believes that “among MuleSoft competitors, Adeptia, WSO2, and Jitterbit are prime acquisition targets.”

Commenting on the ecosystem, Siva Devaki, CEO of Mansa Systems, says that MuleSoft competitors like Informatica, Jitterbit, Boomi “may see a decline in their Salesforce integration business. However, ISVs focusing on data integration and Salesforce may see even more opportunities for consulting.”

Salesforce-MuleSoft: Biggest cloud deal of 2018?

I recently wrote about the top 10 cloud computing acquisitions of 2017 and Cisco’s acquisition of AppDynamics topped the list at $3.7 billion. However, this deal is almost twice as big and is likely to take the No. 1 spot on my list of top acquisitions in 2018. With just the first quarter down and three still to go, anything is possible. Let’s wait and watch.

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