“Salesforce-ification” of Tableau

It is June 2016. A “hacktivist” group called DC Leaks published a website that was responsible for publishing leaks of emails belonging to multiple prominent figures in the United States government and military. Cybersecurity research firms determined the site is a front for the Russian cyber-espionage group Fancy Bear. On Jul-18, an indictment was made against 12 Russian GRU military officers; it alleged that DCLeaks is part of a Russian military operation to interfere in the 2016 U.S. presidential election.

Amongst those documents, DCLeaks also unearthed a presentation of a list of Salesforce’s potential acquisition targets. The list included 14 companies, including LinkedIn, which Salesforce tried to buy before Microsoft closed the deal to acquire the professional networking company.

Salesforce listed both Tableau and competitor Qlik as possible targets. Tableau, was given the code name “Tuscany” in the presentation, and had a tough year on the stock market but had not indicated if it was up for sale, at that time.

2016 – Year of disappointment for Mark Benioff

A milestone year for Salesforce in M&A as the company pursued 2 major social networking tech deals and Mark Benioff (Chairman and Co-CEO of Salesforce, then CEO), famous for his attempts at empire-building, saw frustration in two back-to-back M&A situations – LinkedIn and Twitter.

#1 LinkedIn: Microsoft announced it will buy LinkedIn for $26.2bn, at 48% premium to LinkedIn’s market capitalization at that time, to challenge Salesforce for Enterprise CRM 2.0. To put things in perspective, this was the biggest acquisition in the history of Microsoft at the time (the biggest acquisition now could potentially be Activision Blizzard for ~$70bn, which is in the hands of UK regulators). When Microsoft won, Salesforce threw cold water on the acquisition by saying it would violate European antimonopoly laws.

Before they went head-to-head for LinkedIn, the two bidder giants were tight. They even talked about merging their businesses — not once, but twice. In May 2015, CNBC reported that the talks had fallen apart because Salesforce was demanding around $70bn, about $22bn more than the company’s market value at the time.

#2 Twitter: 2016 also kept Salesforce in the headlines for its pursuit of Twitter. Google, Apple and Disney had passed on Twitter; and Salesforce was the last remaining suitor, until Salesforce’s largest shareholder Fidelity Investments refused to sign off on the deal. And given that Fidelity owned 14% of Salesforce at the time, it would have been hard to buy Twitter with the board’s approval. (Wise decision in hindsight, right?).

Nevertheless, Salesforce bought 10 companies, spending at least $5bn in 2016.

Recently in 2022, Benioff expressed his desire of buying Twitter again, ‘if he could’. He also added that he still thinks Twitter “is the greatest, most unrealized, most un-monetized brand” in tech (won’t Elon Musk agree with that!).

2019 – Microsoft and Salesforce saga continues in the battle of Business Intelligence market

As fate would have it, old friends and arch-rivals, Microsoft and Salesforce meet yet again head-to-head in the Business Intelligence market. While Microsoft had Power BI, Salesforce was about to make its entry into the market with the leader product at the time (yes, you guessed it right!) – Tableau.

June-19: Salesforce to buy Tableau for $15.7bn – bringing together the world's #1 CRM with the #1 analytics platform. To put things in perspective, this was the biggest acquisition in the history of Salesforce at the time (the biggest acquisition now is Slack for ~$28bn, paying ~26x NTM revenues, a “match made in heaven”, which has also crumbled!).

This comes at a time when all major tech companies that were courting enterprises were getting their ducks in a row in terms of squaring up to stronger strategies (and products) in the analytics area: Google’s move to buy Looker for $2.6bn, and strengthening of existing player capabilities and market share: Microsoft’s Power BI and AWS’ QuickSight.

In 2013, Salesforce acquired Edgespring, entering into the Analytics Cloud. Over the years, Edgespring became Wave Analytics, and growing to become to what is now Salesforce Einstein Analytics. Einstein provides analytics solutions that can be sliced and diced to explore datasets.

Deal details

Transaction details:

• All stock deal: Tableau was a publicly traded company and this deal involved shares of Tableau (Class A and Class B common stock) getting exchanged for 1.103 shares of Salesforce common stock. The consideration of $15.7bn is the enterprise value of the transaction, based on the average price of Salesforce’s shares as of June 7, 2019. This valuation was a big jump on Tableau’s last market cap: $10.8bn (~45% premium on a publicly listed market value). Had the deal not gone through, Tableau was on the hook for a $552mn of “break-up fee.”

• Temporary hiccup: In Jul-19, Tableau shareholders sued to block Salesforce’s acquisition of Tableau, alleging companies didn’t disclose key information. As the transaction unfolded further, three lawsuits were filed alleging that merger documents omitted key information about Tableau’s financials, the underlying data behind how the two sides got to a valuation for Tableau, background about the sale process and that the deal undervalued Tableau’s growth potential. Such lawsuits, are like "merger tax," which are filed after almost every public company merger or acquisition, and in most cases the defending company adds a few sentences to their documents and settles the suit. Marcy Curtis, the Tableau Shareholder who had filed the lawsuit, filed for a voluntary dismissal of the lawsuit in Aug-19.

• Financial Impact (FY20):
• Revenues were expected to increase Salesforce's total revenue by ~$350-400mn yoy, which were just 2% of the total revenue of Salesforce at the time, implying minimum impact of the merger for Salesforce
• Operating margins were expected to decrease Salesforce's consolidated margins by ~75 basis points yoy, which was quite a reasonable impact on the profitability
• Earnings per share was expected to decline by 13%

• All’s well that ends well (for now): The tie-up between Tableau and Salesforce was cleared by Germany’s competition authority on 17 July, 2019. The acquisition was completed during third fiscal quarter of 2019.

Expected synergies:

• Help Salesforce extend its engagement (and data intelligence) for the customers that Salesforce already had — something that LinkedIn would have also helped it to do
• With Tableau and Einstein together, Salesforce could form Customer 360 to deliver the most intelligent and intuitive analytics and visualization platform for every department (sales, service, marketing, commerce and more) and every user at any company
• Tableau had a number of Industry-specific solution accelerators (Finance, HLS, Manufacturing, etc). While Einstein was making inroads into industry-focused templates, with currently being functionally focused (Sales, Service, Marketing, etc)
• Tableau lacked true AI/ML capabilities, like the kind available in Einstein Analytics Plus through its Discovery functionality
• Einstein Analytics was developed to work seamlessly with the Salesforce platform. Tableau was not specifically developed to exist within the Salesforce user experience and required customization to do so
• Tableau lacked the Salesforce action framework found in Einstein Analytics. This was a key differentiator for Einstein Analytics as it allowed users to take “direct action, in the tool” on their findings with Einstein

This acquisition brought about the clash of the titans – Salesforce and Tableau vs. Google Suite and Looker vs. Microsoft’s Power BI, Office, and Azure. Until…

2023 – As Salesforce loses ground, DataFam is in trouble

Earlier this year in February, a group of more than 50 past and current Tableau Software employees gathered at Fremont Brewing near Lake Union in Seattle, to reflect on Tableau’s 19-year journey more than three years after it was acquired by Salesforce for $15.7bn.

#DataFam, as the Tableau workers called themselves, carried a double meaning, describing both a love of data and also camaraderie among family members. What they shared amongst themselves was deep love and comradeship from the 19-year journey at the data visualization technology company. But on this day, there was another resounding consensus amongst them – Tableau has been killed by Salesforce! During late 2022, Salesforce’s fired overall 10% workforce including many long time Tableau employees and senior leaders. After the layoffs, many past and current Tableau employees connected online to offer help and support to those affected. A Tableau Slack workspace grew from 40 people in Jan-22 to nearly 700 by the end of the year.

The question arises – Is Tableau’s unique identity lost inside the customer relationship giant already?

• At the time of the acquisition, Marc Benioff stated that the company plans to treat Seattle (Tableau’s headquarters at the time) as Salesforce’s official second headquarters. However, earlier this year, Salesforce was putting more than 200,000 square feet of Tableau Software office space in the Seattle region up for sublease along with a couple of other Tableau real-estate properties as part of its “cost-cutting moves”
• Most of the Tableau executives listed on its leadership site when the acquisition was announced have left the company, including company’s former CEO, Mark Nelson, who stepped down in Dec-22 after two years

The numbers don’t lie –

• Tableau’s revenue of $516mn in the Oct-22 quarter represented growth of < 8%, compared with four straight quarters of growth ranging from 22% to 38% in 2021.
• According to 6sense, Tableau commanded a market share of ~13% as against ~5.4% for rival product – Power BI by Microsoft, at the time closer to the acquisition. However, according to the most current data, Power BI is now competing neck-to-neck with Tableau as both the companies command ~14% market share respectively. Fascinating to see how Power BI has grown while Tableau has stagnated in the market. But that is majorly because the Microsoft business ecosystem is nearly unstoppable. Think about the foundational apps companies use: Word, Powerpoint, Excel, Outlook. Office 365 is an all-in-one bundle. Remember, it's not just the tool that's important. It's the ecosystem.

So what does the future behold?

Ex-CEO of Tableau, Mark Nelson's departure came during a turbulent period in the Salesforce boardroom, which also saw co-CEO Bret Taylor step down, and the co-founder and chief executive of Slack, Stewart Butterfield, leave the company. The “Salesforce-ification” of Tableau has already come at the cost of the very same "passionate community" of users, that Benioff was courting in 2019.

However, Salesforce still believes there is still more integration to come which will be to the benefit of both Salesforce and Tableau users.

Well, another case study on that, if and when that happens! Thank you for your time. Please post your feedback and comments.

Please find below all the information sources which have been instrumental to the above article, along with some additional reading materials. Gratitude to all the creators –

1.?????https://en.wikipedia.org/wiki/DCLeaks

2.?????https://www.seattletimes.com/business/technology/leaked-document-listed-tableau-among-salesforces-potential-acquisition-targets/

3.?????https://techcrunch.com/2016/10/14/salesforce-officially-walks-away-from-twitter-acquisition-for-real-this-time/

4.?????https://edition.cnn.com/2022/09/23/investing/marc-benioff-salesforce-twitter/index.html

5.?????https://www.reuters.com/breakingviews/salesforce-twitter-together-again-2021-12-01/

6.?????https://www.dhirubhai.net/pulse/microsoft-buys-linkedin-finally-take-salesforcecom-paul-teshima/

7.?????https://www.nytimes.com/2016/11/06/technology/how-linkedin-drove-a-wedge-between-microsoft-and-salesforce.html

8.?????https://stackoverflow.blog/2019/07/16/google-looker-salesforce-tableau-bi-open-source-alternatives/

9.?????https://www.cnbc.com/2019/06/06/google-buys-cloud-company-looker-for-2point6-billion.html

10.??https://www.geekwire.com/2023/tableau-has-been-killed-by-salesforce-past-and-current-tableau-employees-gather-at-irish-wake/

11.??https://www.geekwire.com/2023/salesforce-aims-to-sublease-more-than-200k-square-feet-of-tableau-office-space-in-seattle-area/

12.??https://techcrunch.com/2019/06/10/salesforce-is-buying-data-visualization-company-tableau-for-15-7b-in-all-stock-deal/

13.??https://www.theinformation.com/articles/how-slacks-marriage-to-salesforce-crumbled

14.??Mergermarkets

15.??https://atrium.ai/resources/first-impressions-of-what-salesforces-acquisition-of-tableau-means-for-the-future-of-business-intelligence/

16.??https://www.geekwire.com/2019/shareholders-sue-block-salesforces-acquisition-tableau-alleging-companies-didnt-disclose-key-information/

17.??https://6sense.com/tech/business-intelligence-bi/tableausoftware-vs-microsoftpowerbi

18.??https://getthematic.com/insights/power-bi-vs-tableau/

19.??https://www.nigelfrank.com/insights/everything-you-ever-wanted-to-know-about-microsoft-power-bi

20.??https://www.ijsr.net/archive/v10i11/SR211121185807.pdf

21.??https://www.dhirubhai.net/pulse/who-winning-losing-power-bi-vs-tableau-qlik-deckler-microsoft-mvp-/

22.??https://www.wsj.com/articles/salesforce-won-t-pursue-bid-for-twitter-1476468050

23.??https://techmonitor.ai/technology/software/tableau-future-salesforce-marc-benioff

24.??https://techcrunch.com/2016/12/23/salesforce-asserted-itself-in-2016/

25.??https://www.pacermonitor.com/public/case/29040704/Curtis_v_Tableau_Software,_Inc_et_al

26.??https://www.bizjournals.com/seattle/news/2019/07/15/shareholder-lawsuit-salesforce-tableau-acquisition.html

27.??https://www.salesforceben.com/2019-update-how-wave-evolved-into-einstein-analytics/#:~:text=In%202013%20Salesforce%20acquired%20a,is%20now%20Salesforce%20Einstein%20Analytics.