When Google parent company Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) recently announced the purchase of data applications and analytics outfit Looker, the deal made sense. Google is trying to play catch-up with its cloud software and development platform.
But a wrinkle just got added to that story. As it turns out, Google Cloud isn't the only one racing to catch up to Amazon.com's Amazon Web Services and the Microsoft Azure cloud software ecosystems. A few days after Google's move, salesforce.com (NYSE:CRM) announced its own acquisition with a more far-reaching goal -- and suddenly Google's purchase looks far too conservative if it wanted to really make some waves.
Google takes the offensive
Big-data visualization is a fast-growing segment of the digital economy. According to a report from Mordor Research, the data visualization market is expected to grow close to 10% a year through 2023, when it is expected to reach an annual value of nearly $8 billion.
Thus, purchasing privately held data-visualization platform Looker for $2.6 billion in cash seemed like money well spent. In addition to getting a leading big-data insights company, Google could get help in expanding other capabilities of its cloud ecosystem. Google Cloud CEO Thomas Kurian had this to say in a press release:
Google Cloud is being used by many of the leading organizations in the world for analytics and decision-making. The combination of Google Cloud and Looker will enable customers to harness data in new ways to drive their digital transformation. We remain committed to our multi-cloud strategy and will retain and expand Looker's capabilities to analyze data across Clouds.
Looker is relatively small but expanding fast. Founded in 2012, the data software provider competes with heavyweights like Tableau Software (NYSE:DATA), Amazon QuickSight, and Microsoft Power BI. Google's takeover therefore looked like a sound yet prudent way to edge in on competitors.
Salesforce launches a massive counterstrike
However, the deal for Looker, announced Thursday, got lost in the headlines after Salesforce on Monday announced its own big-data acquisition. Always on the hunt for complementary services to add to its primary customer relationship and marketing clouds, Salesforce is an especially active player in the world of mergers and acquisitions. In the spring of 2018, it announced its biggest-ever purchase, MuleSoft, for $6.5 billion. A new business segment called data integration cloud was subsequently created.
The deal announced Monday handily beats the MuleSoft buy. Salesforce decided to go after one of the data visualization leaders in Tableau, announcing an all-stock takeover valued at $15.7 billion. Each share of Tableau will be exchanged for 1.103 shares of Salesforce, making former Tableau owners part of the Salesforce family once the transaction closes, which is expected to happen before the end of October.
The acquisition will slightly dilute ownership for existing Salesforce owners, but the cloud-based software suite has its eye on much more than just data visualization.
Salesforce co-CEO Keith Block said: "Salesforce's incredible success has always been based on anticipating the needs of our customers and providing them the solutions they need to grow their businesses. Data is the foundation of every digital transformation, and the addition of Tableau will accelerate our ability to deliver customer success by enabling a truly unified and powerful view across all of a customer's data."
Where Google played it safe, Salesforce was looking for maximum publicity and business impact -- a specialty of co-CEO and founder Marc Benioff. Plus, Tableau and the other acquisitions it has made are about digital transformation. Benioff and friends aren't looking at just the data visualization market. They are looking at something bigger: helping enterprises transform legacy operations into businesses equipped for the digital age. Salesforce cited a study from tech researcher IDC that expects worldwide spending on digital transformation to reach $1.8 trillion by 2022.
Perhaps Google Cloud considered buying Tableau as well, but ultimately chose the discount path with Looker -- leaving the spend-happy deal-making to Benioff & Co. Whatever happened behind closed doors, it's Salesforce that is tying up the bigger big-data cloud acquisition, giving it another powerful tool to capitalize on digital transformation. Tableau has managed north of 20% sales growth for years and looks to maintain that pace for the indefinite future.
It could be a wild ride on the way there, but Salesforce said in early March that it was on track to reach $26 billion in annual revenue in just a few years, which would make it one of the largest and most powerful software enterprises on the planet.