Salesforce blows over $500m bulking up

salesforce

I remember there was a song that was pretty popular a few years ago called “If I had a Million Dollars,” by the Bare Naked Ladies. That song seems childish and silly compared to the spending spree that Salesforce.com has been on over the past several months.

The two main acquisitions by Salesforce that give me pause are its puzzling $250m+ acquisition of hobbyist Ruby platform Heroku that no one was actually paying to use in production. Now, Benioff and Co. are shelling out $276m or so to acquire Radian6, a social media monitoring and analytics company.

What the #$%& is going on here?

Salesforce.com has spent more than half a BILLION dollars on a) platform tools that no one really cares about and b) a “cool” set of tools that really doesn’t add anything major to its core offerings (where, I should point out – Salesforce.com makes all of its money).

I think Radian6 does some cool stuff, really I do. But this multiple is ridiculous – and dangerous for the industry. It was bad enough hearing everyone freak out about Color getting a trillion dollars in funding (OK, maybe I’m off by a hair or two here) – but this type of overspending makes those shouting “BUBBLE!” seem like wise sages right now.

Salesforce paid a ridiculous multiple for a company probably struggling to grow profitably in a space that has not matured into a “must have” portion of the app stack for small and mid-sized businesses and may not for several years. While it is great to get insightful data from social channels, what companies have proven to have the right actionable processes in place to leverage this data in any valuable way?

Agin, social media monitoring is a useful tool – BUT – Radian6 was already tightly integrated into Salesforce.com. AND – I imagine that only about 15% TOPS of Salesforce.com’s user base really gives a damn about the kind of social media intelligence that Radian6 provides. Remember, Salesforce’s bread and butter is still the SMB and midmarket – areas where “brand monitoring” are not as critical as in, say, the Global 2000 (where Salesforce.com pretends to be a big player).

So, to recap, Salesforce.com has spent upwards of $500m+ to bulk up a platform that does not serve its core user base, and for a social media monitoring tool that its core user base has no desire or need to use.

Wow.

Just imagine, if Salesforce.com spent that money making its core CRM product actually easier to use, contain a less “Siebel in a browser” look and more of a modern web app feel, more reliable and less vulnerable to universal outages, etc. Imagine if they kept their actual core user base happy and actually still built CRM tools?

I guess we’ll never know…

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Martin Schneider is Director of Product Marketing at SugarCRM. In his role, Martin handles competitive intelligence, marketing positioning and analyst relations. Prior to joining SugarCRM, Martin held the position of senior analyst with technology industry research firm the 451 Group, headquartered in NYC. Martin covered the CRM landscape for the 451, analysing and consulting on such topics as Software-as-a-Service, business intelligence and open source applications. Martin also covered the CRM space as news editor with CRM Magazine in New York.