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PODCAST: Thoughts on the Salesforce acquisition of Demandware

Salesforce Demandware Podcast

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Welcome to Just Clarity, a periodic podcast about Digital. Just Clarity is produced by the team at Digital Clarity Group. We help leaders transform the experience they deliver to customers, prospects, and their employees through the effective selection, integration, and adoption of customer experience management technology. Learn more at

Transcript: Thoughts on the Salesforce Acquisition of Demandware

Jake Dimare (JD): Welcome to DCG podcasts, my name is Jake Dimare, I’m the Director of Marketing for Digital Clarity Group and I’m joined by Principal Analyst Jill Finger-Gibson (JFG). So we’re here today to talk about the recent Salesforce acquisition of Demandware and we’ve got some questions about that.

So Jill, what do you think are the most important aspects of this deal where Salesforce acquired Demandware.

JFG: Sure. So just for those who are of our listening audience who maybe aren’t as familiar with these companies, these are two major software vendors. Salesforce provides a suite of services and perhaps a lot of folks know it best for its CRM capabilities, but they also do a lot more than that. Demandware is primarily an E-Commerce platform and so Salesforce earlier this month in June paid about 2.8 billion for Demandware and this is significant. One of the points that makes this significant is that Salesforce did not, although they had several different prongs to their solution, they did not have a commerce offering, and as they’ve been trying to sell more and more into larger enterprises, this has been a sort of a gap in what they’re able to offer to the world’s biggest companies. So this plugs a hole there for Salesforce. The parts of the deal was, it was a tender offer for all shares of Demandware because Demandware was publically traded at about $75 dollars a share in cash. The deal’s closing in July was July 2006, and Demandware will cease to be known as such and will become a new product for Salesforce called the Salesforce Commerce Cloud. So in essence, the entire Demandware company will become a division of Salesforce and Demandware is expected to add incremental revenues of 100 million.

JD: Whoa.

JFG: Yup.

JD: That’s considerable.

JFG: Yes. So another thing to note here is the 2.8 billion they paid is a pretty large multiple on what Demandware revenues were which were something like 200 million dollars. So one of the things that we’ve heard and as pretty much I think a given in the market, I think the CEO Marc Benioff of Salesforce has hinted that there was competition for Demandware with another party which may have helped to drive up the ultimate sale price.

JD: Ah so they got into a bidding war?

JFG: Yeah, apparently, although we don’t know who the bidding war was with. It was obviously somebody with a lot of cash on hand.

JD: So I mean effectively, if I understand this properly, Salesforce is now no longer in the Salesforce enablement business, they are actually in the E-Commerce platform business as well.

JFG: Yes and I think what they’re trying to do is, they basically want to play with the big boys right? They want to be punching at their weight of the Oracle’s and IBM’s of the world and be able to offer not just single solutions, but a whole suite of them. So they’ve previously acquired, one of their big acquisitions two years ago was Marketing Automation vendor, Exact Target and that is now within the larger Salesforce customer success platform and so what Salesforce is trying to do is to become a customer experience solution provider rather than just going beyond the sales enablement.

JD: That’s interesting. I’m trying to imagine what a typical scenario would be, I mean most of my experience and understanding of Salesforce is a lot of B2B and manufacturing, like I said earlier, enabling sales teams to be successful with everything that they have to do with these sort of long term, highly considered purchases and I think of E-Commerce like some of the work that I’ve done with clients where, you know, everybody is familiar with E-Commerce, it’s B2C, it’s going online to buy things that are very tangible and you can get your hands around and have delivered to your home or office. I’m wondering if there’s any conversation about how they’re going to sort of bridge the gap between those two verticals.

JFG: Yeah I think, well one of things Demandware provides to the deal is that they are very strong in B2C and in serving the retail in CPG sectors. So they’re known as, they basically offer a multi-tab solution that has been known as is popular for helping retailers to scale very quickly, and also can deal with the big surges and demand that retail often has. So one of the big issues with B2C commerce is that you know you have seasons, you have, especially seasons of huge demand like around the holidays you know Black Friday, Cyber Monday, where the platform really has to be able to scale for tremendous demand and Demandware is really well known for that. I think that one of the potential downsides of Demandware is what you pointed out that Salesforce, they help a lot of the B2B type companies and Demandware doesn’t really have a major B2B story.

JD: Right.

JFG: I mean they do offer some B2B solutions, but they’re really not, there are some various requirements for B2B commerce that are different from B2C. Things like being able to do custom quoting for procurement people who are doing deals and things like that. So that’s something that I think remains to be seen how Salesforce and Demandware try to address that part of the market.

JD: It makes me wonder if what’s really going on here is, Salesforce is sort of making a play for the future of B2B where you know, I’ve heard a lot about this whole notion of channel compression and a lot of people that do selling for say large scale B2B or manufacturers are concerned frankly about their future in that role because of the way the digital is starting to move into that space, or is Salesforce now maybe a play for B2B sales and they’re going to go out there and compete with other B2B E-Commerce platforms.

JFG: Yeah I think what they’re trying to do is cover all those bases because if they’re truly going to serve some of the world’s biggest customers they have to be able to do both. To be you know the sort of Oracles, IBM’s, Hybris’s of the world do both and a lot of companies are both like some of the biggest manufacturers like 3M, they’re B2B and B2C and they sell directly consumers and they’re also a major supplier to businesses. So I think being able to marry those two things is going to be important.

JD: Interesting, very interesting. What does this mean for the CEM, E-Commerce software ecosystem in the near term and also a little bit further out in the long-term?

JFG: I think in the near term, what’s happening is that it really gives Salesforce more of a positive aspect to getting into seeing larger customers that may be interested in a more complete suite solution rather than just choosing best of breeds. So the fact that they can now say, “Look we have a commerce practice and we also have CRM marketing automation and so forth,” Gives them more of a foot in the door with the larger enterprise players. So I would imagine that that’s going to help open some doors. I think though that in terms of commerce, I’m not sure it’s really going to change much in the world of commerce platform selection because for companies that are looking more specifically just at commerce solution because Demandware, you know they’ve carved out this very specific niche. As I said they don’t necessarily about the B2B story and they also, you know being a pure commerce platform, they partner with content management firms for engagements where there’s a big, rich, content components, and Salesforce doesn’t have a content platform to speak of as well.

So I don’t necessarily see that changing. I think we’re still going to see you know, there’s still Hybris, Oracle, IBM serving the largest enterprises and then there’s serving the mid-market, there’s kind of a more crowded competitive niche where Demandware if it’s going to grow, it’s going to have to expand beyond its retail CPG roots.

JD: So we’re not going to see Salesforce show up on the B2B wave anytime soon.

JFG: Well I mean it might, who knows, but I don’t imagine so no. I don’t think Salesforce will be, when Salesforce Commerce Cloud comes out, I don’t think it’s going to be on a B2B wave.

JD: So what does this mean for customers and prospects of these vendors?

JFG: Well I think in the short term what’s going to happen is, as far as I’m aware, Demandware, they’re not having major layoffs or changes. You know their headquarters is still in Burlington Massachusetts and it’s going to remain so. Customers of Demandware who are concerned, probably you know can get reassured by their account managers that not much will change, I don’t believe their overall relationships will change, and in particular, Demandware customers who are already Salesforce users will probably not see much friction at all.

I think that Salesforce customers who are considering commerce platforms, I think they need to be a bit more careful because Salesforce does have other vendors with which it has partnerships who do address other types of commerce markets. For example: CloudCraze, which has built itself as a B2B platform and that relationship isn’t going away. So if you are a B2B company and you want to work with Salesforce for commerce, make sure that you understand the differences between its other partners and what Demandware’s strengths are.

JD: That actually raises a sort of interesting follow-up question. Who is the ideal customer that’s currently thinking about maybe an E-Commerce platform selection play that may want to consider this new, merged organization?

JFG: I think probably, it would be you know an existing Salesforce user or one who already has CRM and marketing automation in place, and is in the B2C segment, I think that’s who it’ll appeal to the most. So retailers, CPG companies, those sorts of companies.

JD: Excellent. Anything else we failed to cover?

JFG: No I think that was pretty comprehensive and we’ll see as time goes on, the deal closes officially July 31st so it’s not yet complete, but it’s expected to go through and we’ll be keeping a close eye on it and what it means for customers as time goes on.

JD: Awesome, well thank you so much Jill, it’s been great talking with you, have a great day.

JFG: Thanks, you too.

You have been listening to another episode of Just Clarity. Produced by the team at Digital Clarity Group. For more information on the topics we discussed today or the subject of customer experience management, please visit us at


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