Salesforce’s planned US$8 billion acquisition of data management and integration specialist Informatica has left data industry observers scratching their heads and trying parse the longer-term implications of the deal for the rest of the IT industry.
The puzzlement comes from the CRM giant’s choice of purchase target, with responses focussed particularly on the overlap of the two companies’ capabilities, particularly in their extract-transform-load (ETL) integration capabilities.
It’s also opened a discussion on how tech providers and data management companies are positioning themselves in the age of artificial intelligence. In particular, it questions how established firms, whose cultures and technology pre-date the AI boom, can compete against or collaborate with startups that are focussed solely on AI.
Details Needed
Salesforce said it would buy its fellow California-based company last week after months of industry talk about the possibility of an acquisition. The CRM behemoth said the deal would secure in-house capabilities to integrate the high-quality data it needs to build out is AI business.
While that explanation makes sense, said Julia Bardmesser, chief executive of advisory Data4Real, the absence of details from either company on how their tie-up will work raises questions about whether the two can align their core operations.
Does Salesforce want Informatica “as an additional set of products that it’s buying for revenue or does it want it for Informatica’s capabilities to enhance Salesforce?” Bardmesser told Data Management Insight. “It makes sense at a high level but if you start digging in a little deeper, it doesn’t seem to make a lot of sense.”
Bardmesser’s scepticism is centred on the similarities between Informatica’s core ETL service and Salesforce’s MuleSoft, an ETL business it purchased in 2018. The two businesses compete and, in many cases, both reside in the tech stacks of financial institutions.
Bardmesser is not alone in her scepticism.
“It feels like the deal strategically makes sense – it’s aligned to the narrative Salesforce has been driving around investment in AI in-house, and clearly having clean, well-governed data is the rocket fuel for AI across the industry,” said Niamh Kingsley, Head of Product Innovation and Artificial Intelligence at Delta Capita.
“But I suppose there is a little bit of scepticism… there’s also product overlap, because they acquired Mulesoft in 2018 so I think some people are asking if there is some cannibalisation of data management within Salesforce, and what does that look like in terms of merging the tech stack?,” Kingsley told Data Management Insight.
Changed Brand
If the deal is completed, as is expected by 2027, Salesforce’s business profile will have changed dramatically from a CRM technology provider to a CRM and data management giant. Bardmesser, who is also an adjunct professor teaching data management and strategy at New York University Stern School of Business, questions if that will have an impact on the Salesforce brand and customers’ perceptions of what it will provide them.
“Salesforce’s brand is CRM, but soon it will be saying its brand is also all of your data engineering, which has nothing to do with CRM,” Bardmesser said, echoing one headline from an investment banker on LikedIn, which shouted ‘Is Salesforce still a CRM company—or is it losing itself in the noise?’
“I’m not a marketing person, but can you do something with that?” Bardmesser wondered.
Courting Partners
Both observers noted that Informatica had been courted by other companies seeking to give themselves the data management expertises to progress AI projects. But both asked whether Salesforce could have found a more suitable partner.
“Legacy went for legacy,” said Bardmesser. At a time when financial institutions are experiencing what Kingsley calls an “AI winter”, in which initial enthusiasm for the technology has begun to wane, Bardmesser said she would have advised Salesforce to have sought a younger AI-exclusive data company to future-proof itself and properly embed the technology into its product offerings.
So where does this deal leave the data management space?
Observers expect data management companies that compete with Informatica to be rubbing their hands with glee, potentially losing a key market rival to the CRM fold. For the same reason the deal may also play well for data security companies.
Kingsley also joins others in suggesting the proposed Salesforce deal is a sign that data-management-for-AI and AI-for-data-management are maturing as concepts.
Longer-term it signals a new phase in the AI-development strategies of business intelligence and other big-tech companies, Kingsley said, suggesting they will start to buy in those capabilities rather than build them in-house.
“This marks a shift from a data management provider being a partner to a big technology or AI-driven firm to being an acquisition target,” she said.
“We are definitely seeing data management firms start to use language around data readiness, or AI preparedness, for example, that they are essential to your AI journey, rather than ‘I’m an AI company, I can solve your data management challenges’.”
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