Salesforce has squeezed in one more acquisition for 2015.
Shortly before Christmas, the San Francisco-based company disclosed in a regulatory filing that it had signed a definite agreement to acquire SteelBrick, a Software-as-a-Service provider also based in San Francisco.
SteelBrick provides apps in the Configure, Price, Quote space as well as for subscription billing. These apps are built on Salesforce.com's development platform, the App Cloud.
Salesforce.com is paying $360 million for the company in a stock-and-cash transaction with the deal expected to close after April 30, 2016, according to the filing.
The fact that SteelBrick is native to Salesforce.com — and for that matter, the fact that Salesforce Ventures has invested in SteelBrick in previous VC rounds — is likely just a side benefit to this deal, from Salesforce.com's perspective.
CPQ’s Importance to Sales
The main lure, rather, is the CPQ software category itself, which is a rapidly growing component of the sales cycle.
CPQ, often called quote-to-cash for shorthand, incorporates a range of seemingly one-off B2B sales activities such as purchase specifications, bidding, pricing and contracting, into one end-to-end process for the sales rep.
The process starts, as the name suggests, with a prospective lead asking for a quote. From there, the customer and sales rep reach an acceptable price, with the CPQ application applying optimal product and price configurations and related discounts. Relevant up-sell and cross-sell opportunities are part of the mix as well.
It is a process that has become increasingly important — even essential — to the B2B sales cycle, which is why, no doubt, Salesforce wants the best-of-breed functionality embedded in its own offering.
A Shifting and Competitive Landscape
CPQ has been undergoing a shift in recent years as it has gained prominence, which may be why Salesforce has not made an acquisition before this point — and why, as we shall see in a moment, it has been hedging its bets with investments in other providers.
The field has traditionally dominated by the large ERP vendors such as SAP hybris, which boasts it has the largest CPQ customer base and ecosystem. Oracle is another major provider via its acquisition of BigMachines in 2013.
There are other players as well, namely the B2B companies that offer a range of functionality, giving them added appeal over the straight up CPQ functionality (the best-of-breed versus suite is one debate that will never die). Forrester Research touched upon this and related issues in its The Forrester Wave: B2B Commerce Suites, Q2 2015 report, which published this summer.
In a blog post discussing the report, Forrester analyst Peter Sheldon noted that B2B e-commerce transactions in the US have grown 40 percent from $559 billion in 2013 to reach an estimated $780 billion by the end of 2015.
In addition, the majority, or 74 percent of B2B buyers, is now researching products online, while 30 percent make at least one-half of their purchases online. "Manufacturers, distributors and wholesalers alike are investing heavily in next generation enterprise B2B commerce technology to ensure they are delivering world-class online buying experiences that are able to scale for anticipated growth," he wrote.
According to Forrester, Insite Software, Intershop, hybris and Oracle Commerce play head-to-head in this space and CloudCraze, Magento (eBay Enterprise) and NetSuite offer competitive options.
CloudCraze, Sheldon also pointed out "is a native Salesforce application, and as such appeals to B2B firms standardizing their cloud infrastructure and applications on Salesforce.com."
Now's The Time
That latter point explains why, perhaps, Salesforce.com had decided it is time to establish its own branded presence in the market after tracking its progress and investing in the startups in this space.
Besides investing in SteelBrick, Salesforce Ventures has been an active supporter of SteelBrick's main competitor, San Mateo, Calif.-based Apttus, which has built its own version of CPQ software on the Salesforce1 platform.
Once the acquisition of SteelBrick closes, its fully integrated Quote-to-Cash applications will be available directly from within Salesforce, writes SteelBrick CEO Godard Abel in a blog post announcing the deal.
Godard Abel is also the founder and ex-CEO of BigMachines, which Oracle acquired for $400 million plus in 2013 to establish a deeper presence in CPQ.