Salesforce's surprise $15.7 billion acquisition of Tableau is a shot at Microsoft and SAP (CRM, DATA)

Marc Benioff

On Monday, Salesforce announced it would acquire data analytics company Tableau for $15.7 billion, the company's largest deal since its acquisition of MuleSoft last year.
The news comes less than a week after Google announced that it would acquire data analytics startup Looker. The back-to-back deals underscore that the future of analytics is in the cloud.
Analysts say that Salesforce's Tableau acquisition is also a shot at Microsoft, which has a competing data analytics product, and at SAP's acquisition of Qualtrics.
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The big cloud vendors are locked in an arms race to bulk up their analytics tools, and Salesforce's surprise $15.7 billion purchase of Tableau is an indication of how heated the contest has become, according to industry observers.

Salesforce announced the deal on Monday, and said it would expand its operations into Tableau's hometown of Seattle to build a second headquarters.

With this acquisition, analysts say Salesforce instantly becomes a major player in the so-called Business Intelligence market. Meanwhile, the other cloud vendors like Amazon, Microsoft, and Google have been working to improve their own analytics offerings. Just last week, Google announced it would acquire Looker, also an analytics company, for $2.6 billion.

"It's reflective of a world where data and analytics are becoming increasingly important. The cloud vendors ignore that at their own peril," said Joseph Antelmi, an analyst at industry research firm Gartner.

For Salesforce, which paid $6.5 billion last year to acquire MuleSoft, the Tableau deal is a logical next step. MuleSoft's technology allows Salesforce's platform to suck in more data from various sources and Tableau will help Salesforce users make sense of it.

"It's putting data into the hands of users," Rebecca Wettemann, vice president at Nucleus Research, told Business Insider. "It's not just analytics. It's that sort of visualization that Tableau is really strong in. I think it's an overall part of Salesforce's messaging since they started investing in Einstein. It gives them a broader and deeper analytics sense."

Tableau can enhance two of Salesforce's existing analytics products Customer 360 Platform and Einstein Analytics. What's more, many of Salesforce's customers are already using Tableau, which should make integration easier.

Salesforce said it expects Tableau to add $350 million to $400 million to its fiscal 2020 revenue.

Tableau's roster of marquee customers, including Netflix and Verizon, are "certainly not going to hurt," noted Brian Pirri, a principal at New England Investment & Retirement Group, told Business Insider.

Competing against Google and Microsoft

The rapid fire succession of analytics deals by Salesforce and Google highlight an increasing competition between the two tech giants.

But it's not just Google that Salesforce needs to look out for. Steve Koenig, managing director at Wedbush securities, calls this acquisition "a shot across Microsoft's bow."

Microsoft had been rising up to the challenge to face off Salesforce, considered the market leader in customer relationship software, while legacy vendors like SAP and Oracle have not kept up in terms of cloud software.

Now, Salesforce is acquiring Tableau, which works on both cloud and on-premise data centers, to compete with Microsoft's own analytics product Power BI and make sure it stays at the top.

"Basically the dynamic is they're trying to defend their market leadership in CRM," Koenig told Business Insider. "Now they're trying to fight back. They're highly competitive in a fairly important area for Microsoft."

Competing against SAP

Allen Bonde, an analyst at Forrester, compares this to when SAP announced it would acquire Qualtrics for $8 billion. The Tableau deal was likely in the works for a long time, and if anything, may be a response to SAP.

"You could see that this is both Salesforce saying, 'We see your deal, SAP,' and up it with Tableau," Bonde told Business Insider. "It's more recognized company and larger and widely adopted...If I'm a Salesforce customer, certainly that means there's more toys in the toy box."

Maribel Lopez, founder and principal analyst of Lopez Research, says that before, companies were focused on moving their applications to the cloud and connecting their data to that application. Now, it's all about analytics, which companies need to make sense of that data.

It's a win for Tableau as well, Lopez says. She says it can be difficult for a public company to keep growing exponentially each quarter.

"You have to ask yourself it the growth would have slowed," Lopez said. "I think now is a very strategic time for Tableau to exit because they can exit, they can get a decent premium...This is a time when analytics is becoming the most interesting of plays for a lot of organizations."

Lopez expects other companies take a similar path as Salesforce and Google as well.

"I think you'll see other companies go deep in analytics from an acquisition standpoint," Lopez said. "There's still Oracle. There's still AWS. There will be other companies looking at, what else should I be putting into my portfolio?"

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