5 Key Takeaways from Salesforce’s $6.5B Acquisition of MuleSoft
Mergers and acquisitions in the technology space are nothing new. However, Salesforce’s lofty bid for MuleSoft announced March 20 made headlines for reasons beyond the $6.5 billion price point. Briefly, the massive deal signifies a major bet on hybrid integration technology by the largest SaaS company on earth. And that points to something really important.
Here’s what we see as five key takeaways from this deal:
Key Takeaway 1 – Salesforce wants to make money
The underlying story here taps into a dominant market force: Companies are continually dealing with the challenge of integration. The MuleSoft acquisition means that Salesforce is entering the integration fray, because they recognize the explosion of integration challenges and will attempt to capitalize on them.
Key Takeaway 2 – Modern integration does NOT imply cloud-only
Salesforce is a CLOUD (yes, all caps) company. Remember, these are the “no software” guys. And right up until March 20, MuleSoft wanted you to think they were a cloud company, too. Even analysts classified them as a cloud integration provider. But MuleSoft was not born in the cloud. In fact, a lot of their market relevance came from closing on-premise ESB deals before marketing to cloud-based solution selling.
Businesses are gradually deploying cloud-based technologies and services, but the key word here is gradually. Rather than scrapping all on-premise infrastructure in favor of the cloud, most organizations are looking to leverage legacy assets, while extending and modernizing the capabilities of these systems by integrating with cloud-based applications and infrastructure.
Key Takeaway 3 – Stop saying “legacy” is outdated
Here are three quick reasons why legacy doesn’t mean what you think it means:
- Legacy systems represent major investments over time by the enterprise.
- A complete and sudden shift to the cloud is unnecessarily disruptive, expensive, and potentially risky.
- On-premise databases and applications store and manage much of the most important data and transactions, making them invaluable to the business.
From its inception, the term “cloud” has gotten a lot of the buzz. There was a period where most of that buzzing could be considered cloud washing. But today, when discussing modern digital transformation strategies, the cloud really means the cloud. However, when starting to look up, it’s important for digital leaders to not forget what’s under their feet.
So, what’s underfoot?
For years, legacy IT systems were responsible for ensuring operational data exchanges and desired business outcomes. The truth of the matter is, that predominately, they still do. And that is the danger of thinking that legacy means obsolete – on-premise IT stuff remains extraordinarily relevant to the business.
Key Takeaway 4 – What John Travolta and integration have in common
In 1993, John Travolta starred in “Look Who’s Talking Now,” a movie that Roger Ebert surmised with, “So help me God, I am not making this up.” Flash ahead one year, “Pulp Fiction” arrives and JT’s massive comeback becomes a hot story in the entertainment industry. In this analogy, Travolta is the stand-in for integration – specifically with older, legacy systems.
In analyzing the coverage of the Salesforce-MuleSoft deal, one thing we noticed in all this is how much attention legacy integration is getting. Consider a few of these tidbits from journalists and contributors:
Hot Take 1: Forbes
“Yes, the cloud is growing rapidly, but on-premises technology is still by far the predominant IT model — so it’s incumbent on those top cloud vendors to make their products as compatible as possible with those massive estates of on-premises technology.”
Hot Take 2: Wall Street Journal
Salesforce President and COO Keith Block: “Over time all of these organizations’ legacy systems will be moving to the cloud. But it has taken years to build up these systems and I don’t think we can underestimate how much legacy is still out there.”
Hot Take 3: Barron’s
“We believe MuleSoft’s technology would be a good fit for Salesforce and expand its total addressable market—particularly for its force.com platform, enabling faster and more complex application development, and we believe it would also enhance its integration capabilities with legacy systems.”
The terms “legacy” and “on-premises” show up in each of these quotes, and for good reason. Addressing on-premise EDI, MFT, and other data-driven B2B applications and systems is one of the main obstacles businesses face when deciding how and when to modernize IT infrastructure. It’s why businesses that weren’t born in the cloud must embrace (and vendors must deliver) options for hybrid integration and integrate systems that live on-premise and in the cloud to create connectivity and visibility across your enterprise.
Key Takeaway 5 – Hybrid integration makes sense
To circle back to the start of this blog, integration ain’t easy. And hybrid integration, especially the kind that stays cost-effective, efficient, and oriented to enhance the business strategy, is tough.
To put it mildly, forming airtight integrations between cloud and legacy, on-premise systems is a growing challenge. But the market demand for hybrid integration solutions means it is a challenge most businesses are required to face. Ultimately, Salesforce bought MuleSoft because it aims to try to solve this oh-so-difficult challenge. After all, the company spent an ungodly sum of money, recognizing that cloud-only doesn’t work for a lot of organizations.
Bonus Takeaway – Hybrid integration is the future
With true hybrid integration connectivity, the delineation between cloud and on-premise systems is not as clear cut. Marrying these two worlds with a hybrid integration environment modernizes data flows. While the goal may be data monetization, the use cases hybrid integration allows for are quite exciting.
Imagine an enterprise fully capable of complete data aggregation, system unification, and intelligent analysis of data regardless of the source or destination. Ultimately, viable hybrid integration solutions must support comprehensive system and application connectivity, address emerging integration requirements, and enable visibility into important business data flows.
It will be interesting to see whether the Salesforce gambit pays off. But there’s good news for the rest of the business: There are ways your organization can address the need for modern hybrid integration without having to fork over $6.5 billion.