In August 2019, Salesforce completed its blockbuster acquisition of Tableau for $15.7B. Those that knew anything about Tableau knew they were an extremely successful company by any reasonable measure. They launched an IPO in 2013 raising $250M after raising more than $45M in venture capital investments since their inception.
Clearly, they were creating value and doing well. So why did they need to exit to Salesforce? I’ll get to that in a minute.
As we know, the world is changing and technology is changing even faster. Analytics is changing right alongside these broader shifts, but the problem is, it’s hard to see it happening. We hear about new technology one day and then suddenly it’s the new standard the next, but progress in analytics will happen in pockets at first and then spread.
Consider cloud technology. At first, it was a way to offload data storage. It progressed to software-as-a-service, platform-as-a-service, and eventually infrastructure as a service. Cloud technologies are continuing to change with what is called microservices — small, modular programs called from a cloud library designed to perform specific functions on-demand and cost-efficiently.
When mobile phones hit the consumer market, it didn’t change our habits much overnight. The technology advanced slowly. Cameras were added, the phones got smaller, and soon, colored screens became the norm. Then we started seeing apps built for mobile phones. While we thought apps were revolutionary, mobile phones have kept advancing. Now, you can use one device to make payments, unlock and turn on your car, rock your baby’s crib, start your dinner, and talk to your pet, all from a remote location.
Today, we are in the middle of a fundamental change for the business intelligence and analytics industry. One of the clearest signals of an industry shift are acquisitions. We have seen Business Objects acquire Crystal Reports and then SAP acquire Business Objects, for example. Most recently, in 2019, we have seen Google acquire Looker, Logi Analytics acquire Zoomdata, Qlik acquire Attunity, Sisense acquire Periscope Data, and Salesforce acquires Tableau Software.
There is definitely a reason behind these acquisitions and that brings us back to Tableau. Tableau looked at the future and saw the changes coming. They knew their days were numbered. The way I see it, Tableau reached a point where they had two choices.
The first choice would have been for Tableau to reinvent itself in order to align with the big changes in analytics technology that is already underway. However, reinvention is difficult and there are risks that come with reinvention, including costs and delays, the potential to misinterpret or mis-time the market, and organizational dysfunction — all of which can lead to losing customers.
The second option, which the leadership team wisely chose, was to cash out while the Tableau business was still healthy and profitable.
I have seen reinvention work, but it’s difficult. Apple has successfully reinvented itself a couple of times over from computer to computing; from mobile to services. Facebook has been reinventing itself through its own acquisitions of Instagram, WhatsApp, Oculus VR, and over 80 other companies.
Alternatively, I’ve seen companies blow through millions of dollars and several years trying to unsuccessfully reinvent themselves. Others become so territorial that at some point, they will be left behind. For example, SAP appears to be selecting the path of defending their revenue and customers rather than focus on reinventing for the future. This choice is predominately on display within their partner network. They rarely integrate with an analytic partner because they say they have their own analytics solution, even if the partner’s analytic software is better. Now that they have established this strong defense, they have no other choice than to continue protecting their territory. Reinvention for them would likely be unsuccessful. At some point, they will be better off taking the money and cashing out.
If you manage a business in the midst of a technological or industry shift, you’ll eventually be faced with a similar decision. If you choose the reinvention path, prepare yourself to do more than just modernize your technology, you need to be able to serve the market in a new way. If Apple would have reinvented itself strictly to take advantage of new processors, they would have failed. Their new message was that now your mobile phone is your new computer and the iPhone surged to 80% of their profit. Over time, they needed to reinvent again. This time their reinvention message was that they would provide a digital transformation of your personal life and consequently they launched products to support that vision such as the Apple Watch, the Apple TV, and Apple CarPlay. One wonders what could possibly be next?
So, if you see a wave of acquisitions in the market, you can be assured that big changes are coming. Change is gradual, or evolutionary, but over time it becomes revolutionary. Look for the signs and know what you will do when you see them.