Microsoft CEO Satya Nadella pumps his fist.
PHOTO: Bhupinder Nayyar

Microsoft took advantage of the Adobe Summit in March to get in front of 17,000 marketers and tout its partnership with Adobe. Particularly, Microsoft and Adobe pushed an extension of the Open Data Initiative (ODI) partnership with SAP and their investment in Account-Based Experiences (ABX) with LinkedIn.

Was it a sign of things to come? Is Microsoft setting the stage for an acquisition of Adobe in a move to surge ahead of Salesforce in customer- and content-driven experiences? Microsoft needs a sound customer experience game. Adobe could benefit from a CRM play. A potential acquisition served as a good chunk of the scuttlebutt among attendees of the Summit who roamed the hallways at the Venetian Hotel in Las Vegas.

Will these resurfaced rumors of acquisition, which date at least back to 2010, actually lead to one of the biggest acquisitions of all-time, putting Microsoft-Adobe in the $100 billion club? Or is the constant pairing of old college buddies Satya Nadella of Microsoft and Shantanu Narayen of Adobe on stage at tech conferences just a sign of a continuing partnership and nothing more? 

“For Microsoft, acquiring Adobe adds new product capabilities and platform ‘heft,’” said Bruce Cleveland, founding partner at Wildcat Venture Partners. “If the future of ecommerce and marketing is primarily driven via machine learning/digital applications, then an acquisition of Adobe could play a significant role in Microsoft’s long-term strategy to be the largest provider of enterprise and technological solutions. Microsoft does not yet have a significant marketing platform — especially one that is cloud-based — to market.” 

Related Article: Will Open Data Initiative From Adobe, Microsoft, SAP Break Down Silos?

Down to Brass Tacks, Money

Although the martech implications of a Microsoft-Adobe merger are significant, you’d have to talk money first. As of April 5, the market cap for Microsoft is $919.36 billion, and the market cap for Adobe is $130.21 billion. That’s a big bite for Microsoft and easily its largest acquisition, surpassing its $26.2 billion grab of LinkedIn.

What's the overall enterprise technology landscape look like in these waters? Cleveland places Microsoft and Adobe in a list of “traditional providers” among SAP ($141.80 billion), Oracle ($184.55 billion) and IBM (127.10 billion). Outside of that, you have “digital providers,” according to Cleveland. They include: Google ($844.52 billion), Amazon ($900.53 billion) and Salesforce ($122.52 billion).

Microsoft will compete in the future against the digital providers: Google, Amazon and Salesforce, whom Cleveland calls the companies “fueling one of the largest technology transitions ever: digital transformation. Look at the market cap comparisons.” Further, he added, a Microsoft acquisition of Adobe may force the hand of Google or Amazon to acquire Salesforce, whether Salesforce wants this or not. A Microsoft acquisition “does make strategic sense on ‘paper,’” Cleveland said. “It may not make sense in execution.”

Weaving Data Into Marketing, Commerce

Beyond the financials, what would this mean for marketers and potential tech capabilities? Scott Webb, president at Adobe partner Avionos, told CMSWire when asked if a Microsoft-Adobe acquisition would make sense that it would be a direct reflection of where customers are going; looking to have more capability to draw customers into marketing and commerce. “We already see this with the relationship between Dynamics CRM and the Adobe marketing suite," Webb said. "And we also see the reverse of being able to drive activation in those sales processes, using what you know about the customers from your marketing activities to kind of have that virtuous circle.” 

Related Article: Salesforce, Adobe, Oracle Among Data Management Platform Wave Leaders

What Should I Do With My Martech Stack?

But is it a scary proposition these days to run with one mega martech vendor? After all, those using IBM marketing software are left wondering what's next. IBM, which just this year was named a leader in digital experience software by Gartner, last week sold off its marketing software to an investment firm. This is a "stunning" move and proof of the pitfalls of investing with a big tech vendor, according to Tony Byrne, CEO and founder of Real Story Group. "Microsoft, Google, Salesforce and even Adobe in early days have all killed web CMS platforms, sometimes abruptly," Byrne wrote.

The prospects of one company owning all of a customer’s data could be a “scary” one for marketing leaders, according to Mellissah Smith, founder and managing director of Marketing Eye. With acquisition rumors swirling around marketing circles, this also creates a high pressure environment for CIOs, CTOs and CMOs who are currently making big decisions on what their martech investment will look like going forward, Smith said. “Scalability of products and solutions is the biggest single advantage of a super-merge,” she said. “However it is the technology and ability to stay ahead of the curve and not just follow it which will see a true winner in the war on the marketing dollar.” 

LinkedIn’s acquisition by Microsoft showed that Microsoft is ready to reinvent itself, said Smith, who added “the connectivity of both organizations is showing a fairly harmonious union.” Users of Microsoft and LinkedIn were given tools that have never existed before “in a way that gives a competitive advantage” and adding Adobe’s creative arm “will help Microsoft get closer to closing the circle.”

Marketers’ Pressure to ‘Produce Creatively’

Back to a potential Microsoft-Adobe marriage. The big pressure on marketers and brands now is to produce creatively, according to Darin Archer, CMO of Elastic Path. “We’ve evolved from the word processor as our primary application and now need to touch up photos, create compelling presentations, produce videos and record podcasts,” Archer said. “For Generation Z, the so called ‘digital natives,’ their toolset requires more paint brushes and fewer keyboards. Microsoft clearly gets this as it’s evolved its positioning and even its toolset with recognition of these expanded activities on the Surface tablet.”

Microsoft “gets” these knowledge workers at scale globally, like Adobe does, Archer said. “And I’d argue it’s time the world gets easier access to Adobe products via the channel and marketing prowess of Microsoft,” he said. “When you look at the revenue of Adobe, the vast majority is in this area that Microsoft would simply amplify. I also believe Microsoft has to get back into the business tools area and really put some life into the category beyond Office. I love what they’re doing with Azure, but think they’ve had a lot of misses with other ‘office tools’ and larger applications like the Dynamics portfolio.”

Related Article: Microsoft, Adobe Partner to Boost Analytics, Cloud Hosting

Microsoft’s Creative Opportunities, Challenges

Customers and partners in the Microsoft and Adobe ecosystem would benefit from a unification of the Office and Acrobat franchises with the "file format battle" coming to an end, according to Ryan Duguid, chief evangelist at Nintex. “In that arena,” he said, “Adobe also would bring major investments in understanding unstructured content through their Sensei platform."

In addition, Adobe would bring much needed capabilities to the Dynamics franchise, layering in sophisticated tools for customer engagement through their acquisitions over the years of Day Software, Omniture, and most recently, Marketo, Duguid added.

Microsoft would also have the opportunity to win over the creative community via Adobe’s Creative Cloud suite, those who "live and breathe Photoshop on their Macs each day," Duguid said. Delivering the Creative Cloud alongside Office would give Microsoft the ability to merge the largest productivity platform with the largest creative platform."

However, Duguid does see Microsoft having trouble winning over the creative and marketing audiences. “These are people that have long eschewed Microsoft as a brand, and technology provider, seeing them as a necessary evil rather than a core part of their workflow," he said. "That issue is exacerbated by the fact that there has never really been a clear owner of these audiences within the company."

Microsoft would have to lean heavily on Adobe to navigate this new world, Duguid said, putting the Creative Cloud front and center as a core franchise in the business, alongside Azure, Office, Windows, Xbox and the Server and Tools businesses.