Salesforce Takes Aim at Microsoft with $15.7 Billion Tableau Acquisition

Salesforce is betting big on demand for data visualization tools by agreeing to acquire Tableau, regarded as the leading independent provider of self-service business intelligence (BI) software.

The all-stock deal, announced today, is valued at $15.7 billion, representing a 13x premium over Tableau’s most recent annual revenue of $1.4 billion and a 42% increase in valuation over its Friday closing price of $125 per share.

The deal is by far the largest in Salesforce history, dwarfing last year’s biggest acquisition of MuleSoft for $6.5 billion. It reflects anticipated continued growth for self-service BI. Just last week. Google said it has agreed to acquire Looker for $2.6 billion in cash. Looker offers a BI platform that will become part of Google Cloud. And today, Microsoft, whose PowerBI is popular among Office 365 users, said it is adding advanced AI capabilities to its platform.

Apparently, Salesforce investors weren’t impressed with the premium the company is paying for Tableau, which aims to make up ground on its existing BI offering, Wave Analytics. Salesforce shares closed down 5% Monday, though Tableau shareholders enjoyed a 34% jump. Nevertheless, Tableau will fill a major gap in Salesforce’s Customer 360 multicloud sales and marketing initiative, along with its CRM and Einstein machine learning platform. The addition of Tableau, according to Salesforce, will play an important role in the company’s strategy to provide digital-transformation capabilities by enabling intelligent decision-making.

Salesforce’s Marc Benioff

“Tableau and Einstein bring together two pivotal platforms that every customer needs to understand their world,” said Salesforce founder and co-CEO Marc Benioff.

By acquiring Tableau, Salesforce is also taking aim at Microsoft, whose PowerBI has emerged as the leading cross-platform. Relations between the two companies have chilled in recent years, after Salesforce spurned a potential deal by Microsoft in acquiring it. Microsoft responded by doubling down on its Dynamics business. In 2016, Microsoft reportedly outbid Salesforce for its $26 billion acquisition of LinkedIn.

Benioff tacitly acknowledged that the company will gain a greater presence in Seattle, during a call with Wall Street analysts Monday morning.

“Tableau will make both Customer 360 and Einstein stronger than ever and enable us to reach a much broader set of customers and users. alongside of expand our presence in the Seattle area where Tableau is based,” Benioff said. “Seattle will become our second headquarters. It;s going to be our ‘HQ2,’ if  you will.”

Salesforce already has 1,000 employees of in Seattle, the backyard of Amazon and Microsoft, among others.

Since Microsoft launched PowerBI, it has become an unwelcome obstacle for Tableau.

“This provides a wider onramp to Salesforce analytics,” said Tony Baer, principal analyst with dbInsight. “Before this, Salesforce was more dominant in CRM, while Microsoft has the wider onramp with Power BI. This levels the playing field.”

Orion Global Solutions’ Yacov Wrocherinsky

Yacov Wrocherinsky, president and CEO of Orion Global Solutions, a Salesforce consulting partner, agreed.

“I suppose they realized they were missing a strategic component in their platforms, so they added this to their war chest,” said Wrocherinsky.

A key contributor to PowerBI’s success is Microsoft’s pricing model, which is available to Office 365 customers for $10 per month, per user, along with an inexpensive premium offering that costs significantly less than competitive solutions.

SPR Consulting has fulfilled significant demand to migrate customers from Tableau to PowerBI, said Ray Johnson, the company’s chief data scientist. Johnson said Salesforce will need to come up with …

… a similar type of bundling arrangement.

“For our clients that have Tableau and are thinking of migrating to Power BI from a cost perspective, if Salesforce does some sort of bundling work for existing Salesforce customers, it could get interesting,” Johnson said.

Tableau partners will have to become more accustomed to earning their fees from consulting revenues, rather than any margins they may now receive, Wrocherinsky predicts.

“Whoever has a business model around Tableau, product and professional services, partners will have a little challenge adapting to no margin, some professional services, no margin on software.”

Benioff has reportedly had interest in Tableau for some time, apparenty looking for a stronger platform than Wave Analytics, an offering that presents key performance indicators.

“It was really never a strong platform on the BI side,” Wrocherinsky said. “It’s more like a data analytics tool versus a BI platform. And as a platform, you can do so many really cool things without physically merging or integrating things because you can touch many data points.”

Short term, the deal will have little impact, Wrocherinsky said. It isn’t expected to close until October, pending shareholder and regulatory approvals.

“It will be a good six to 12 months after that before it has an impact,” he said, though adding that it’s good news for partners. “Visualization is going to be the next key battleground, where everyone is going to have to come up with fancier visualizations, give more insights that are more dynamic and drill down into the details easier.”