Q: Should Google acquire Salesforce?
Maybe. It would move the needle.
A key question for the Cloud infrastructure leaders (Amazon, MSFT, and Google) is how deep do they want to go on the application layer.
The PaaS layer is huge and has become a bit of an oligopoly of a Big 3.
The application layer though is even larger, depending on how you define it. Or at least, just as large or close. Here are Gartner’s estimates of each segment:
But, the SaaS/application layer is much more diverse than just 3 main vendors. It’s very hard to even get 5% market share across the entire application / SaaS layer. But Salesforce, at ~$20b in ARR growing 20%+, has that.
So to keep the engine going, the leaders have to be asking themselves if they can leverage the SaaS / application layer to win overall in Cloud.
There are just too many applications and products for 1 alone to make a dent. For example, Google put a lot of work into Google Hire, its recruiting SaaS product. But then shut it down. Too much work for just 1 little part of SaaS.
Who is #1 in the SaaS layer of Cloud? Salesforce. By far.
If you buy Salesforce, you get several benefits:
- Scale. A ~$20b run-rate is enough to make a difference here. Maybe, the only place an acquisition can move the needle really. And at 20%-30%+ growth, this will compound over the coming years to a $100b+ run rate.
- Diversity in Applications. Salesforce is really 4+ clouds that are all at scale (sales, marketing, commerce and platform). So you also get a wider footprint across SaaS. There’s no other place to acquire / get this all at once.
- Mature, Proven Applications. The Cloud wars are brutally competitive, but the Salesforce core engine is very mature and working, and growing 20%-30%+ a year. This means that as long as they don’t wreck the company, there should be at least 7–10 really good years here ahead, and maybe 20+. That’s really all you can ask of an acquisition.
- Accelerated Enterprise Credibility. Look at the JEDI contract. Everyone in Cloud is now dueling in the enterprise. If you also own Salesforce, and you are #3 (Google), you get instant additional cred and footprint with the Fortune 500 and Cloud 2000. They all are already using and trusting Salesforce, after all.
So it makes a lot of sense.
Having said all that, are the synergies real? Do corporate customers really care that their application vendor and a PaaS/infrastructure vendor are the same company?
Maybe not today. The synergies would take work.
But if you are Google/Amazon/Microsoft in an epic duel in Cloud, if you buy Salesforce, you instantly get scale across the #1 or #2 layer in the Cloud.
I’d take that bet.
A bit more here: How to Build a $100 Billion SaaS Company | SaaStr