two Tech M&As and what I learned from them

Recently, cloud computing has become one of the focus areas for mergers and acquisitions. Of course, Virtualization and cloud computing have transformed some of the very fundamentals of operating a business by changing how servers, storage, networking, databases, software, intelligence, and analytics are delivered, used, and managed.

As the Cloud has become so key to business operations, the interest in companies that have a cloud story has grown. It’s also becoming clear that companies are looking to powerfully impact business decisions. These trends have, in turn, ramped up M & A activity among companies with offerings in those spaces.

I am particularly intrigued by two big-name mergers, which I’ll discuss below in my capacity as an observer. Here’s what I learned from each.

IBM RedHat

One of the most significant of M&A deals in 2018 was IBM’s USD 34 billion purchase of the open-source software vendor RedHat. While IBM acquired RedHat’s Ceph and Gluster storage systems, these technologies were not the center of the acquisition; cloud computing was.

Today, RedHat is known for supporting and distributing RedHat Linux, as well as other technologies popularly used in data centers. As IBM tries to reduce its dependence on legacy systems, it’s looking closely at RedHat’s hybrid cloud revenue stream to boost its growth. Post this acquisition, the enterprise software maker will become a part of IBM’s Hybrid Cloud division, and CEO Jim Whitehurst will join IBM’s senior management reporting to CEO Ginni Rometty. Of course, adding RedHat to its product mix can help IBM generate revenue from professional services, strength of Red Hat.

Cloud happens to be one of IBM’s four strategic drivers of growth. IBM claims that most firms are only 20% done shifting to the cloud, leaving an enormous unaddressed market out there. The remaining 80% may be where the real business value is unlocked. IBM believes that currently, the move is proving difficult for enterprises as they face challenges in migrating applications between providers that are part of the proprietary cloud market. This is where the combined story may prove a game-changer.

Within the technology industry, we witness that enterprise IT buyers increasingly favor using the hybrid cloud consumption model, marrying the existing on-premise assets with public cloud resources. This suggests that there are synergies there to be exploited by IBM, not just an easy entry into the Cloud space.

Given the disruptive nature of the Cloud, to my mind at least, this acquisition may be the most significant IBM has ever done.

Time will tell whether IBM has been able to secure the future with this acquisition but it has undoubtedly put IBM in a better position to tap into various sub-trends going on within the cloud landscape.

Salesforce and Tableau M&A

If IBM - Red Hat was about where the data resides, this is a story that focuses on the data itself. Tableau has pioneered self-service analytics. Their intuitive analytics platform empowers people of any skill level to effectively leverage data. Salesforce Inc. decided in early June to buy Tableau Software for $15.3 Bn, marking it the most sizeable acquisition for Salesforce. The stated goal is that Salesforce plans to offer more and better data-driven insights to its customers.

Salesforce has over 86,000 customers worldwide, including tech giants such as Netflix Inc and Verizon Communications Inc. Salesforce has unbeatable capabilities across areas such as sales, service, and marketing. You would be hard-pressed to find an Enterprise sales pro today who hasn’t worked on SFDC. Salesforce has, of late, moved away from the traditional CRM to more intelligent insights that help companies understand their customers better. They leverage AI for analytics, application integration, and more. This is where the Tableau acquisition seems to fit it. The acquisition is said to accelerate Salesforce’s roadmap for their Customers 360 initiative, which helps companies gain a more holistic picture of their customers and their analytics initiative.

Of course, Tableau believes Salesforce has an incredible reach of customers and that all of them need better analytics to understand their business, customers, and see growth potential.

According to Liz Herbert, vice president, and principal analyst at Forrester Research, Salesforce customers who don't yet use Tableau are likely to benefit the most from this acquisition. She adds that in working with companies that use Salesforce, she noticed a majority of them need better insights from the platform, but would not have wanted to use a third-party platform such as Tableau for fear of adding unnecessary risk to the mix. But, as Tableau becomes part of Salesforce, that concern might evaporate for enterprises.

SFDC and Tableau customers interested in cloud deployment will want to hear that Tableau’s multi-cloud strategy will stay alive. To my mind, it likely will, given that Salesforce is also partnered with Google and AWS. Of course, Salesforce could make more accommodations for hybrid cloud deployment.

On the downside, customers of Tableau alone might have something to worry about; especially those who run Tableau analytics on top of SAP, or Oracle. Some experts think it is unlikely that the Salesforce will invest in maintaining Tableau’s platform for direct competitors. Let’s see how that pans out.

My two cents:

●     In the case of Salesforce, the company clearly realized it would need more than a CRM to become a trusted advisor to boardroom decision-making. Which means, data analytics is mightier than we suppose it to be.

●     Salesforce might be hinting at improving the security of its application by tying up with Tableau since analytics is critical to detecting and preventing intrusion and fraud.

●     IBM’s acquisition makes it evident that the cloud is increasingly expanding and there are no show any signs of it slowing down yet. In fact, if IBM’s 20% down, 80% to go logic is sound then we’re set for a massive expansion.

●     Digital transformation of enterprises is at an inflection point as enterprises enter the next chapter of their cloud strategy, and IBM wants to monetize this trend with capabilities from RedHat.

I’m not a technology expert, just a guy who has been selling to VP Engineerings’ and CTOs in technology companies for a few years. From that vantage point, it’s fairly clear that the landscape of the industry is changing. The separation between enterprise applications and the technology that supports it is becoming less clear. In that scenario, I expect more such big-name M&As in the days to come.

#M&A #VP Engineering #CTO #IBM #RedHat #Salesforce #Tableau #SFDC #IBM RedHat #Jim Whitehurst #Ginni Rometty #Digital transformation #Liz Herbert