This week, I take a look at and provide my perspective on Salesforce’s recent acquisition of field service management software vendor ClickSoftware. I also provide my thoughts around Microsoft’s recent Home Use Program change geared at getting more Office 365 users.
Salesforce Buys ClickSoftware to Help Increase Service Cloud Growth
Salesforce announced last week that they were buying ClickSoftware, a private equity-backed field service management (FSM) software company for $1.35B. It is important to remember that Salesforce and ClickSoftware have been partners in 2016, so there is familiarity that will be beneficial for both vendors but presumably their respective customer bases as well.
This acquisition makes perfect sense since Salesforce is looking for ways to accelerate the growth of its Service Cloud business unit which includes preventing competitors (such as IFS, Oracle, Microsoft, SAP, ServiceMax, etc.) from bolstering their own offerings by buying companies like ClickSoftware.
Salesforce is focused on Service Cloud growth and is continuing to find ways to enhance offerings within it like field service management because they realize it has now become (from a revenue-generating perspective) on par with Sales Cloud. In Q1 FY20, Salesforce’s quarterly Service Cloud revenue clipped $1B for the first time. Sales Cloud revenue was ~$1.07B, whereas Service Cloud was ~$1.02B. Each now represents roughly a third of Salesforce’s revenue. Salesforce made it clear that future growth is not only expected but will be relied upon to help them reach the lofty $26 to $28 billion revenue goal they announced back in March.
The other reason Salesforce is so focused on enhancing their Service Cloud offerings and making acquisitions like ClickSoftware is that they realize that the available market is larger than Sales Cloud. Analysts and reports have indicated that Service Cloud market is around $20B where the Sales Cloud market is roughly $13B.
Salesforce is specifically focused on building out and strengthening their current field service management solutions (e.g., Field Service Lightning) and go-to-market offerings as they realize enterprises are increasing investments in this space as they look to provide their deskless workforce the digital tools they need to be the most productive. Field technicians that would benefit from such digital tools certainly make up a significant portion of the estimated 2.7 billion global deskless workforce and are a large portion of the employee base of utility, telecom and manufacturing customers. Salesforce also announced back in April, also with the goal of strengthening their offerings in this space, that they were acquiring location-based intelligence software company, MapAnything.
I fully expect Salesforce and their sales representatives to ramp up their efforts to lock down meetings with current Salesforce and ClickSoftware enterprise customers to discuss the benefits of the acquisition and why a possible portfolio expansion (i.e., adopt more products and spend more money) makes sense. If you are a Salesforce enterprise customer that has not yet made investments in Salesforce’s Service Cloud, not yet to adopted Field Service Lightning, or is looking to make investments tied to giving your field service employees the tools they need to do their jobs more effectively, you can expect an even more aggressive approach.
How you navigate the discussion from the outset will have an impact on the eventual cloud negotiation that will need to take place and the final deal you strike, whether that be part of a one-off or in term purchase or as part of a renewal negotiation. Assuming you and your enterprise decide to further adopt and make commitments in Salesforce’s offerings.
Microsoft Makes Another Change to Force Office 365 Use
Microsoft recently announced that they will no longer sell on-premise licenses for Office 2019 as part of its popular Home Use Program (HUP) that is included in the software assurance (SA) fees that enterprises pay Microsoft. To be more accurate, what they actually did is update their Microsoft Home Use Program FAQs to let customers who make it a habit to check the FAQs sections for updates know that “Office Professional Plus 2019 and Office Home and Business 2019 are no longer available as Home Use Program offers.”
Microsoft now will offer annual cloud subscriptions to Office 365 Personal and Office 365 Home at a 30% discount. I wonder how long this subscription price and discount will actually be available? The current understanding and position being taken by Microsoft is that future subscription renewals will be at the lower discounted price. I have been doing this for a long time and I recommend you make sure to get that in writing. Things change.
For those of you who are not familiar with Microsoft’s Home Use Program, it provides (or used to provide) enterprise employees discounted perpetual Office licenses that they can use at home. Enterprises and those who are responsible for their enterprise’s Microsoft relationship, liked this because it provided a benefit that their employees actually got value from while also creating a workplace environment that in some ways encouraged or at least supported employees to work at home.
Does this change or even the way it was rolled out really surprise anyone? Unfortunately, this is all part of Microsoft’s master plan and ties into other recent changes they are making to ultimately drive (force) more (all) customers to the cloud and specifically, in this case, Office 365. As I have covered, there are many reasons Microsoft is aggressively pushing enterprise customers to Office 365. Based on conversations I have been having as of late with enterprise customers, one of the reasons Microsoft is pushing aggressively is tied to them knowing that enterprise customers are starting to seriously consider Google G Suite as a viable alternative. Microsoft knows that by getting customers to adopt and use Office 365 as widespread as possible, it will make it harder (conceptually) for enterprises to move these users off of Office 365 and over to a new solution like G Suite.
If an enterprise does end up moving to Office 365, whether by choice or not, they need to do their best to ensure they do it the right way and on the enterprise’s terms, not Microsoft’s. At a minimum, they need to make sure they are paying the right price. More often than not, that special one-time discount being offered to entice adoption is often not “special” enough or even competitive. Enterprises also need to make sure they have the proper long-term price protections in place, a level of flexibility in their contract, and the proper amount of investments/funding from Microsoft to ensure a successful migration and adoption, among other things.
More From This Series:
- HEAD IN THE CLOUDS: Salesforce Weakens Price Protections and Google Cloud Ramps Hiring
- HEAD IN THE CLOUDS: Slack Goes Public and Cloud Vendors Chase Use
- HEAD IN THE CLOUDS: Google’s Cloud Outage and Google’s Effort to Land Enterprises
- HEAD IN THE CLOUDS: Salesforce’s Consultants on AppExchange and What Cloud Vendors Really Want
- HEAD IN THE CLOUDS: Microsoft’s Up-selling Practices and the #1 Cloud Negotiation Killer