Why Salesforce Acquired Mulesoft
Cloud specialist Salesforce is tackling the largest takeover in its company's history: The goal is the US software provider Mulesoft. Salesforce officials announced on March 20 that the purchase price will be around $ 6.5 billion in cash. This corresponds to a premium of 36 percent on the market value of the previous day. Antitrust authorities and shareholders have yet to approve the deal. The management of Mulesoft has already approved the takeover.
"Salesforce and Mulesoft will enable customers to link all information in their companies, across all public and private cloud infrastructures and data sources," said Salesforce CEO Marc Benioff. This will significantly increase the speed of innovation in companies. Mulesoft chairman and CEO Greg Schott is on the same page. Linking the two solution worlds could accelerate the digital transformation of customers because they are now able to connect and use data from a wide variety of devices and applications.
Integration Platform as a Service (IPaaS)
Mulesoft started in San Francisco in 2006 under the name Mulesource with an integration solution that was supposed to combine software-as-a-service (SaaS) applications with classic on-premise software. Over the years, the company developed its solution into an Integration Platform as a Service (IPasS). The linchpin is an API hub with more than 13,000 interfaces. With the help of these application programming interfaces, a wide variety of data sources and applications should be linked. There is also a development environment that developers can use to add APIs or build their own interfaces. For interface providers, Mulesoft offers a platform on which they can offer their APIs. In addition, various tools are available on the platform that are intended to help partners, for example, to automatically generate documentation of their interfaces.
With "Mule", Mulesoft also offers a package of Enterprise Service Bus (ESB) and integration framework. The platform is Java-based, but according to the provider it can connect a wide variety of platforms such as .NET or web services. Another important core component of the integration solution is "Anypoint Studio". This is a development environment with the help of which so-called "Mule Flows" can be designed, tested and operated. Various security functions are also integrated in order to secure access and transactions between the applications connected via Mule. The "Mule Management Console" gives users an overview of their entire Mule repository or cluster.
The Mulesoft platform is to be integrated into the Salesforce Integration Cloud and further developed there, according to the official announcement of the deal. It is not yet known to what extent the almost 1200 employees and management will remain on board. The deal is expected to close by the end of July this year.
Shooting star on the stock exchange
Mulesoft has grown rapidly in recent years, thanks in part to several rounds of financing by venture capitalists. Salesforce also joined the donors in 2013. SAP Ventures, the venture capital arm of the German Salesforce competitor, had previously invested money in Mulesoft. The software startup was valued at around three billion dollars at the time. The IPO followed in March 2017. The Mulesoft paper made a furious start on the parquet. The stock shot up 50 percent on day one. With an issue price of $ 17 and 13 million shares, the software company raised $ 221 million.
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Whether the acquisition will be a success also depends on how sensitively Salesforce reacts to the concerns of Mulesoft customers. According to its own information, Mulesoft supplies around 1200 user companies worldwide with its integration solutions, including well-known names such as Barclays, Coca Cola and Unilever. Larger companies also rely on Mulesoft. According to Mulesoft, the number of customers with contracts with an annual volume of more than one million dollars rose to 45 in 2017. A year earlier there were 30 companies.
How independent does the Mulesoft platform remain?
According to experts, Mulesoft was able to score in the past primarily with its independence - an important aspect in negotiations with customers, especially for an integration provider. It remains to be seen to what extent this independence will be maintained, or how much Mulesoft will be integrated into the Salesforce cosmos. Competitors in the business with integration solutions around the cloud are, for example, Dell Boomi, Informatica and SnapLogic.
Salesforce itself is working flat out to continue expanding its cloud platform. It has long been about more than just customer relationship management (CRM) solutions that the cloud specialist started with at the turn of the millennium. In recent years, Salesforce had already made several big deals: in 2013, for example, ExactTarget, a specialist in digital marketing automation, was taken over for 2.5 billion dollars, followed in 2016 by a provider of eCommerce systems with Demandware (2.8 billion dollars) Quip ($ 582 million) a variety of productivity and collaboration tools, and Krux ($ 700 million) is another marketing automation provider. In addition, Salesforce is looking for partnerships with other large cloud providers such as IBM and Google - among other things, to functionally expand its own platform, for example in terms of artificial intelligence (AI) (IBM) and to expand the basis for its cloud infrastructure (Google).
Now Mulesoft is also becoming part of the Salesforce cosmos. The company recently reported figures for its 2017 fiscal year. Revenue was $ 296.5 million, up 58 percent over the previous year. The lion's share of the company's revenue came from subscription and support revenues of $ 238 million. Most of the rest is due to Professional Services. The bottom line, however, is that the company is still in the red. The loss was nearly $ 80 million, down from a loss of nearly $ 50 million in fiscal 2016.
Salesforce targets $ 20 billion in annual sales
Salesforce has also reported losses for many years, but is now in the black. In the fiscal year 2017/18, which ended at the end of January, the bottom line was an increase of almost 127.5 million dollars (previous year: plus 179.6 million dollars). The cloud specialist was able to increase sales by a quarter to almost 10.5 billion dollars year-on-year. However, the ambitions go much further, as Chief Operating Officer (COO) and Vice Chairman Keith Block recently indicated. In the current fiscal year, revenues are expected to add up to $ 12.5 billion, and in the medium term, the software provider plans to exceed the $ 20 billion mark.
In order to achieve these goals, Salesforce wants to place itself in a key position in its customers' digitization projects. According to Block, the most important contact persons are the company bosses themselves. The driver of the digital change must be the CEO, he made clear. "Ignoring technology means ignoring the future." According to Block, there is no such thing as a progressive and forward-thinking CEO who doesn't think about technology.
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