Salesforce announced today that it had finalized its acquisition of MuleSoft a company specializing in software integration. The companies announced their intent back in March raising eyebrows when the price of the merger, $6.5 billion, was announced.
The cost of the acquisition is roughly two thirds of Salesforce’s current annual revenues and is exclusive of other mergers that the company has engaged in whose prices ranged from millions to billions. The announcement caused a fair amount of wonder and consternation in some quarters because of its cost and because MuleSoft was seen as, forgive this please, a one-trick pony.
Fair enough, but one can also say that the price reflects value pricing for the technology and not simply a more familiar cost-plus-some-profit-margin, for a very good reason. Companies buy other companies as a short circuit for conducting costly and time-consuming research and development and that’s where the value pricing comes in. Buying a company drastically shortens time to market.
Salesforce is one of the companies in the vanguard of the cloud computing revolution which, in a few years, will leave us with a global information utility that looks superficially like electricity or telecommunications but will be so much more. We’re already seeing the outlines taking shape as multiple vendors continue to deploy scores of datacenters around the world to handle the load.
This should be seen as a break with our information technology past when we relied on a corporate datacenter or a small regional cloud infrastructure. It is the commoditization of information and the crowning achievement of the post-World War II evolution of the information industry.
So back to MuleSoft. In a heterogeneous world with multiple competing and sometimes cooperating information utilities the need for integration is assumed. No matter how any vendor tries to convince the world that it should just run every app it makes, there will always be a need for integration. Moreover, our patience with the integration process will continue to decline. Salesforce has now built up an Integration Cloud for that contingency and it looks like MuleSoft is an important part of it.
As for cost, there was an article in the business press recently comparing management styles that focus on cost vs. those focusing on opportunity. I don’t know where it is but the important part is that those who focus on opportunity do better in the real world than the others. So in my mind the question for all parties both inside and outside of Salesforce isn’t the cost of the acquisition but how it will be used. We’ll have to wait for results but Salesforce’s track record is pretty good in this regard.