Salesforce.com's Fund Raising Points to 2010 as Year of SaaS Acquisition

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Think former home run hitter Mark McGwire's admission that he (gasp!) used steroids is the non-surprise of the year? For followers of the technology market, I'd put Salesforce.com's move to raise up to $500 million in debt in the same non-surprise category. It certainly looks like Salesforce wants to go shopping, likely for other software-as-a-service offerings that either compete with or complement its own.


ZDNet's Larry Dignan offers a list of likely Salesforce acquisition candidates, including SaaS CRM competitor RightNow, human capital management software provider Kronos and Jive, whose collaboration software would seem to mesh well with Salesforce's recent introduction of Chatter. Salesforce already made an unannounced acquisition of social software provider GroupSwim, as Jeffrey Kaplan points out on Seeking Alpha.


In fact, the Salesforce/GroupSwim deal was one of three SaaS acquisitions in the first week of 2010, writes Kaplan. Storage giant EMC also bought Archer Technologies, a privately-held provider of governance, risk and compliance software with both on-premise and SaaS solutions. And private equity firm Bedford Funding purchased Peopleclick, a provider of SaaS workforce management solutions.


Kaplan predicts "a busy year of M&A transactions to come" (non-surprise!) as "various [SaaS] companies attempt to pull together end-to-end portfolios that can better position themselves as strategic sources in the eyes of IT and business decision-makers within customer organizations."


He also mentions Salesforce's predilection for "acquiring companies while they are young, relatively inexpensive and can easily be merged into Salesforce.com's ongoing operations and corporate culture," which would effectively knock out many if not most of its rumored acquisition targets. But young companies may not be the best option for Salesforce if, as Dignan speculates, it is looking for players with established enterprise relationships to help sell its products directly to C-suite executives rather than to mid-level execs.


I assume Salesforce would favor companies that build applications on its Force.com platform. So maybe sales compensation software provider Xactly is on its list? There's lots of the usual hyperbole in this 2007 press release announcing Markinekt Professional Resources' deployment of Xactly Incent for AppExchange, but it also highlights synergies between Salesforce and Xactly. Said a Markinekt executive:

Sales compensation management is a key part of our business because it's what drives sales, which directly affects profitability. The integration with Salesforce lets us tie together all the management numbers we need to see -- with Xactly Incent as the central repository for sales-related data, linked back to each salesperson.

I can't help but think we'll also see more on-premise software providers buying SaaS companies in 2010. As Saugatuck Technology CEO Bill McNee told me last summer, traditional software providers have the money to make acquisitions and may decide to buy SaaS specialists for their expertise instead of building SaaS capabilities in-house. It seems even more likely now, with giants like IBM and Microsoft making some pretty big SaaS plays.