Is the CRM world about to change?

Are These Two CRM News Items Connected?

The first news item is Microsoft's goal of getting to $20 billion in cloud revenue by 2018.  That would imply that Microsoft will triple its' cloud revenue in the next three years.  In 2014 Microsoft had cloud revenue of $5.5 billion.  Based on Microsoft's latest quarterly earnings report, they are on track to have cloud revenues of $6.3 billion in 2015.  So, how are they going to get to $20 billion in three years with the current rate of growth?

The second news item is that Salesforce has hired financial advisors to help it because they were approached by a potential acquirer.  It is unlikely that Salesforce would hire the financial advisors if they were not truly approached to be acquired.  What is not known though is who approached them.

Who Are The Potential Suitors?

There are only a handful of companies who could potentially acquire a Salesforce company as they are currently worth $47 billion.  Those suitors most likely would be Oracle, Microsoft, SAP, Google, and IBM.

I am going to eliminate Google and IBM from this mix.  Google is, essentially, an advertising company and so I think it is a long shot that they would want to get into the CRM business.  IBM would have to get heavy financing to make this deal happen as they only have $8.8 billion in cash on hand.

SAP would also have to take on heavy debt if they wanted to acquire Salesforce.  SAP only has $5 billion of cash on hand and would have to finance the rest of the acquisition.

This leaves Microsoft and Oracle as contenders in this acquisition.  Microsoft has $95.4 billion in cash on hand and Oracle has $13.7 billion in cash on hand and another $30 billion in marketable securities.

What Happens To Microsoft Dynamics CRM If Salesforce Is Bought?

There are three possible scenarios that could play out if Microsoft would acquire Salesforce.  The first scenario is that nothing drastic happens.  Salesforce would be branded as a Microsoft product and both the Dynamics CRM product and Salesforce product would continue to coexist in the marketplace.  This is not unforeseeable as Microsoft has GP and NAV accounting products and has not combined them yet.  In fact, in the short run, this is the most likely scenario.

Another possible scenario is that Microsoft phases out Salesforce and integrates its' good components into the Dynamics CRM product.  If this were to happen, it would have to happen over a long period of time because this would be no trivial task.

And the final possible scenario would be that Dynamics CRM would be slowly wound down and the Salesforce product would take over.  Again, it would take time for this to happen if this scenario were to play out.  And, Microsoft would most likely create some sort of transition plan for its' existing Dynamics CRM customers if this were to happen.

I want to leave you with these thoughts and questions:  Is Microsoft the mystery potential acquirer?  Does Microsoft need this acquisition to hit its' target cloud revenue goals?  Is this simply a rumour or strategy on the part of the potential buyer to tie up potentially large pipeline deals for Salesforce because the potential acquisition makes their buyers hesitate?

What are your thoughts?  How would this acquisition impact you?

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