A Salesforce to be reckoned with goes on a Canadian buying spree
Over a Reuben sandwich one afternoon last October, Daniel Debow realized he had found a powerful ally who shared his vision for the future of the business world.
The co-founder of Toronto-based software firm Rypple Inc. was seated in the 2nd Avenue Deli in New York City across from Marc Benioff, the chief executive of cloudbased business software giant Salesforce.
com Inc., where the two were discussing their shared vision of the shifting nature of software in the era of the social web.
Two months later, Mr. Debow and cofounder David Stein agreed to sell their three-year old-startup to Salesforce for an undisclosed sum, rumoured to be more than US$65-million. In an era where social communications tools such as Facebook and Twitter have become central pillars of North American culture, many companies are looking for ways in which their employees can use technology — and the social networking norms they use in their personal lives — to help change the way their businesses operate.
For Salesforce.com, which built its reputation — and a nearly US$19-billion market capitalization — on a bet that companies would be willing to change the way they buy software and store sensitive customer data in the cloud, the future of business software is social, and the road to the social enterprise runs through Canada.
Social media is maybe the most impactful transformation
Since June 2010, Salesforce has spent nearly half a billion dollars acquiring a quartet of Canadian companies to bolster its social enterprise offerings as part of its strategy to help companies create “social enterprises” through re-imagined business software designed to change the way companies interact with their partners, customers and employees.
“Businesses are going to become social enterprises, and that’s going to need an entirely new class of business software that helps them run, that helps them with a new operating model that is more attuned to the social world that we live in today,” said Mr. Debow, who continues to run Rypple for Salesforce in Toronto.
Salesforce.com’s Canadian shopping spree began in June 2010, when the company acquired Vancouver’s SiteMasher for a reported US$20million. In March 2011, Salesforce shelled out a whopping US$326-million for Radian6 Technologies Inc., a social media monitoring firm based in Fredericton, N.B.
After snapping up Rypple in December — the company’s software offers a social approach to the notion of performance reviews — Salesforce once again turned to Canada to bolster its portfolio earlier this month when it purchased Halifax’s GoInstant in a deal the Wall Street Journal reported was worth more than US$70-million.
Of course, it’s not just Salesforce. com that is looking to cash in on the evolving trend of the social enterprise. Microsoft Corp. recently spent US$1.2-billion to acquire Yammer Inc., makers of a popular enterprise social network.
For John Wookey, Salesforce executive vice-president of social applications, the shift to social business software reminds him of a time when email was first introduced to offices, where some executives felt it was a hindrance rather than a productivity tool.
“You cannot imagine walking into an office now and not having an email system, in order to connect to your customers, suppliers, each other and so on — it would be kind of crazy,” he said.
“Social networks are going to be the same way in businesses very soon. People will find it’s a much more effective way to stay connected to all the people you have to work with. Frankly, very soon, when people in their 20s and 30s walk into a company, and the company doesn’t have a tool like Chatter to allow them to work more effectively, they’re going to think it’s not a forward-looking company, and they’re not going to want to work there.”
Marcel Lebrun, the former chief executive of Radian6 who now holds the title of senior vice-president and general manager of the company — which builds social media monitoring tools that are used by companies such as General Electric and Pepsi — said that as much as Salesforce has helped accelerate his Fredericton-based company, Radian6 is helping to transform Salesforce.
“They have incorporated our thinking, particularly around where things are changing in the marketing world,” Mr. Lebrun said.
“Obviously [Salesforce] are already leaders in the sales and customer service world, so for us it’s exciting because we’re not just the division on the side that’s kind of forgotten and sometimes sold to customers. We’re at the core of the vision of where the company is going.”
Instead of moving the offices of its Canadian acquisitions to Silicon Valley, Salesforce has instead doubled down on Canada. Both Mr. LeBrun and Mr. Debow said their teams have increased by roughly 50% since their acquisitions, while Mr. Wookey said Toronto is now the site of Salesforce’s second largest North American office.
“Social [media] is maybe the most impactful transformation that the software industry is going to go through, and that organizations are going to go through, in terms of how they think about their customers, their people and their operations,” Mr. Wookey said.
“I look at social today the way the cloud was viewed a decade ago, where there were just a few companies looking at it, convinced that it mattered, and who made investments that way.”
While there might be some who would worry about an American corporation scooping up promising Canadian technology companies, Mr. LeBrun said people shouldn’t look at the deals as companies leaving Canada, but rather bringing Salesforce and its global brand into the country instead.
“I look at it as we just brought a Silicon Valley leader to Atlantic Canada, versus we took a Canadian company to the U.S.” he said.
“We’re growing. We’re investing and now we have this great brand here. Now there’s a Salesforce in my building, there’s RIM in the building next door, and we’re creating an ecosystem; an ecosystem of developers who have these great resumes because they’re working for these great leaders. This is a really good thing to bring these leading companies here, as opposed to those who might think that we’re losing our IP to the U.S.”