An object lesson in the Salesforce acquisition of MuleSoft
On March 20 Salesforce announced it had agreed to buy MuleSoft, a maker of API data integration software, for $6.5 Billion. The announcement was met with skepticism in some quarters, with analysts believing that in offering a 32-percent premium over the MuleSoft share price Salesforce overpaid for the deal, especially considering Salesforce was the only bidder for MuleSoft.
Putting aside the mixed Wall Street reaction to the deal, the bigger picture is the story this acquisition tells us about digital transformation and legacy systems. IDC is forecasting worldwide spending on digital transformation technologies will reach $1.3 trillion this year. But some argue businesses still don’t know what it means—are these investments truly transformational or are they delivering only incremental improvements? A prime reason this question persists is because on-premise, legacy data systems stand in the way of truly agile, innovative and disruptive business transformation.
Businesses are embracing cloud computing relentlessly and with fewer reservations. However, since cloud computing represents only a fraction of the total enterprise-IT landscape, Salesforce and other major cloud providers have to accentuate their capabilities in the hybrid cloud world and do everything they can to extend their offerings into the three cloud layers—Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). One thing this means for cloud providers is they desperately need a way to gracefully connect on-premise legacy systems to cloud offerings. This is where MuleSoft fits into the Salesforce strategy. MuleSoft has grown rapidly by helping large companies like Coca-Cola and McDonald’s Corporation connect applications, data sources and devices on internal servers or public cloud providers.
Paying down your technical debt
Legacy systems, also known as technical debt, have always been a major challenge in organizations looking to move forward in digital transformation. In this realm of aging systems and forgotten workarounds, attempts to shift these data center software systems to the cloud face enormous technical and financial hurdles. SaaS solutions provide a measure of relief in specific application areas. Clearly, Salesforce CRM is one such solution. However, when it comes to data integration across multiple networks there are no neatly packaged SaaS solutions.
Legacy data warehouses and business intelligence tools can’t cope with data coming in from multiples sources and in multiple formats. These systems are inflexible, usually relying on pre-defined data schemas and rigid processes for extracting, loading and transforming data on its way into the warehouse. Improvements in legacy data warehouse technologies have not kept pace with the exponential increase in the volume and variety of available data over the past 10 years.
Integration cloud strategy
With its MuleSoft acquisition Salesforce is positioning itself to more elegantly surface the various data sources and integrate them with the apps and devices across the enterprise. For Salesforce this is another step in delivering on its “Integration Cloud” vision. Salesforce is growing quickly from its original CRM base into marketing automation and other horizontal enterprise applications. It has also made a strong push into AI, commerce and collaboration. The API integration tools and capabilities of MuleSoft is the centerpiece of a data-centric, 360-degree view of the customer and the basis for personalized one-to-one engagement.
Strategically, MuleSoft is a great fit for Salesforce and not just because it’s destined to play a central role in connecting legacy systems and data to the Salesforce integration cloud. Given its current trajectory, and as long as MuleSoft can continue to operate as a semi-independent line of business, expectations are MuleSoft will reach $1 billion in total revenue and will be profitable by 2021. If this holds even close to true, questions about the cost and value of the transaction will have been muted.
What are your organization’s struggles in integrating legacy systems to the new cloud-based future of digital transformation? Send me your experiences and questions.