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Tuesday 16 April 2019

Salesforce.com buying philanthropic reseller Salesforce.org

logoThe facts of Salesforce.com’s proposed acquisition of philanthropic reseller Salesforce.org which provides heavily discounted or free software to nonprofits and education are clear enough.

Salesforce.com is paying $300m for the company that will operate within Salesforce.com as a vertical serving NfP and education, led by current Salesforce.org CEO Rob Acker. Its status will change from a public benefit organisation to a business corporation. The move will add $150m-$200m to Salesforce.com’s FY20 top line (and it is raising guidance as a result) but the low margin business will cut into the bottom line so the adjusted profit forecast has been reduced. The $300m being paid for the company will go to the Salesforce Foundation which funds philanthropic projects.

In terms of the rationale, management says the move has been planned for some time with the aims of simplifying operations and scaling up philanthropic efforts.  

The incoming business will operate as a vertical segment, indicating Salesforce.com plans to extend its vertical lineup that includes Financial Services Cloud and Health Cloud, and grow its footprint within NfP and education. Salesforce.org had revenue of $250m in FY18 so there is business to be gained and there is a move across the wider software sector towards vertical go-to-market approaches and solutions. The new vertical unit will take the Customer Success Platform to its sector and develop vertical applications. Salesforce.com says it will continue to provide free and discounted software yet according to comments made during the conference call to discuss the transaction, it is also anticipating raising the operating margin over time.

Philanthropy has been a guiding principle under founder and co-CEO Marc Benioff and we can't see that changing so the question is what has to give to maintain both growth and margin objectives? 

Posted by Angela Eager at '08:52' - Tagged: acquisition   education   saas   cloud   software  

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