Salesforce acquires MuleSoft — A Defensive Move

The News

On March 20, 2018 Salesforce announced the signature of a definitive agreement to acquire Mulesoft for a whopping 6.5 billion USD — whopping because the 2017 Mulesoft revenues have been at just $296.5 Million, albeit with a $1 billion target for 2021.

The Bigger Picture

As I have stated repeatedly before, most recently here, the enterprise software market is engaged in something that can be called a platform war. There are a few big players and some emergent players in the enterprise software market, and then we have a number of companies that come from the infrastructure side of the house.

  • It is hard for enterprise level companies to scale down to become more attractive to SMBs. Salesforce addresses this e.g. with Salesforce Essentials. Mulesoft can play a role here, too.
  • While Salesforce is profitable, it is not that profitable with an EPS of $0.26 according to the FY 2017 annual report. With a relatively high price point this is a risk factor. Salesforce battles this by staying a thought leader, delivering best-of-breed applications, and now strengthening its integration ability.
  • The many acquisitions need integration, so do seamlessly connected processes that digitally transforming companies require and demand. Here Mulesoft comes into the picture.
  • Last but not least, Salesforce is challenged getting at sufficient data to feed advanced machine learning models. Here Mulesoft will again play a role

My PoV and Analysis

This acquisition is a defensive move — a strong one, but still a defensive one. It fortifies the position while enabling Salesforce to address some of its challenges that I laid out above.

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