The Good Envelope Party

Cloud Computing Giant Hints eCommerce Introduction, Acquires Demandware for $2.8 Billion

cloud-computing-giant-hints-ecommerce-introduction

Salesforce, one of the biggest names in cloud computing, recently completed a $2.8 billion deal with Demandware, an enterprise-focused-eCommerce solutions provider. With the said acquisition, Salesforce is now offering $75 per share for all outstanding shares.

The announcement was made public on June 1, 2016 and the actual $2.8 billion acquisition deal was reportedly completed in July 11, this year.

In July 11, Demandware’s COO (Chief Commerce Officer), confirmed the final agreement of the acquisition deal in the company’s blog by stating:

“What a tremendous day this is for Demandware, our customers and our partners. Today Salesforce completed its acquisition of Demandware and we are officially part of the #1 CRM Company and Customer Success Platform. “

In the previous years before the acquisition, eCommerce has been one of the lacking industry in the Salesforce’s platform of customer engagement products.

Now, Demandware has become a Salesforce company and will be more widely known as Salesforce Commerce Cloud product. Salesforce interest in the eCommerce industry is not without a substantial precedent. This was made clear to the public when Alex Dayon, Salesforce CPO (Chief Product Officer) mentioned the said interest about an eCommerce gap, in June 1, the same day the announcement of the deal was made: “The only blank spot we had in CRM was commerce. And we think the market is now ready for disruption. The future of commerce is really through solutions like Demandware.”

Salesforce’s company president, Keith Block, reiterated the same interest by explaining that the four pillars of a CRM (customer relationship management) platform includes ecommerce, along with sales, service, and marketing.

The decision to acquire Demandware has also been influenced by many of Salesforce customers who are eagerly urging the company to integrate a world class digital commerce platform in its CRM system. Now that Demandware is a Salesforce company, existing platforms and systems under Salesforce can now be synched and synergized in many possible ways. Salesforce is already looking into this to form new ways on how to best integrate Demandware with its existing family of clouds.

It is interesting to note that this is not Salesforce’s first acquisition deal. The cloud computing giant is no stranger to acquisition deals. In fact, according to reports and press releases, Salesforce has more than 30 acquisitions to count, dating back from 2006 up to the present.

Among its most recent acquisition deals in 2016 are:

  • MetaMind – a startup company for deep learning using the AI (Artificial Intelligence) technology.
  • PredictionIO – also a startup company studying on deep learning with an open source platform that also uses the AI technology.

With a host of multiple technologies in its system, Salesforce has become bigger. With Demandware, Salesforce has now joined the eCommerce industry. This means that the eCommerce competition has now become steeper for the top players in the industry.

How important is this deal for Salesforce?

Moving forward, it is evident that Salesforce, along with its many existing family of clouds, will be able to make an upsell for additional services related to eCommerce. This potentially grows the funnel in which Salesforce can make a larger profit. With Demandware in the cloud, Salesforce can now forward proposals with higher priced bundles or packages from its existing plans. This newer pricing would include ecommerce services and would certainly benefit existing customers that have ecommerce businesses.

There’s also an additional group of customers that Salesforce can target – existing customers that are still running the Demandware platform. These existing customers include some of the biggest names in different industries such as L’Oreal and Marks & Spencers. Thus, Salesforce existing services such as analytics, marketing, and IT solutions will also be offered to Demandware’s existing customers. This unique proposition will also allow Salesforce to boost profit revenue and thus use Demandware’s platform to synergize with the existing service in Salesforce.

Salesforce opportunities with this acquisition deal are actually endless. In fact, this also means that Salesforce is now in direct competition with some of the biggest names in the eCommerce industry such as Shopify, and Magento (which is also one of Salesforce services in the past) along with the biggest marketplaces today – Amazon and Ebay. Interestingly, Amazon and ebay is not only an eCommerce platform but is also widely known for their services in payment transactions – Amazon Payments and eBay with Paypal.

It is interesting to note that Demandware’s customer base is mainly focus on B2C retailers or business to consumers. The customer base also includes big brand names, but usually these merchants have an annual revenues reaching to $50M to $100M. Catering to B2C retailers is not the only service Demandware currently operates on. It also has capabilities in:

  • OMS – Order Management Service
  • POS – Point Of Sale
  • Personalization

With this, it would be expected for Salesforce to continue servicing B2C retailers given Demandware’s big market share in the said category, along with its current capabilities in the said category. Accordingly, by 2020, spending on digital commerce would reach $8.5 billion, projected from an annual growth of 14%.

Joining forces together, Salesforce and Demandware as a single unit has become a bigger platform with a more competitive technological capability. With its current customer base combined together, it is not farfetched to imply that Salesforce could possibly be a heavy-hitter in the very near future when it comes to the retail industry, or to eCommerce as a whole.

The new technology roadmap with this acquisition deal will only mean one thing – innovation and collaboration. The eCommerce industry can expect bigger changes in the following months as Salesforce will possibly soon make another announcement regarding the plan on how to maximize Demandware’s capabilities with its current cloud platform. The end result would be to benefit the customer by adding more services in the current platform, integrating more third-party applications that are already currently handled by Salesforce, and Salesforce promise to deliver a more comprehensive and personalized consumer experience.

These possibilities are all hinted by Demandware’s CEO Tom Ebling, in a blog post, explaining that the two companies share the same goal with their “customer first” mentality.