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Vlocity acquisition gives Salesforce a new run at telecoms

In agreeing to cough up US$1.33 billion for Vlocity, cloud-based customer relationship management (CRM) and enterprise apps giant Salesforce has made clear its intent to focus more on the specific needs of enterprise verticals, including telecoms.

It's also keeping Vlocity out of the hands of rivals.

News of the deal, announced late last week, didn't appear to shock the business world: Vlocity had developed and built its vertical-specific CRM applications on the Salesforce platform, and Salesforce Ventures, the investment arm of the business apps behemoth, was a significant investor in Vlocity, which had raised about $163 million in four rounds, the most recent being in March 2019. Salesforce has also been a go-to-market partner for Vlocity and the two have won deals together, including some of Vlocity's telecoms accounts.

Salesforce said bringing Vlocity completely in-house will help to "open up new industry capabilities built on the Salesforce platform and provide customers with even more tools and expert guidance to digitally transform." Vlocity had developed applications specifically for the communications, media and entertainment, energy, utilities, insurance, health and government sectors.

"By taking full ownership, Salesforce can have complete control over Vlocity's product roadmap," notes Heavy Reading senior analyst James Crawshaw. "It also helps to strengthen Salesforce's position in specific industry verticals, like telecoms and media," he adds.

What it won't do is move the needle on Salesforce's revenues: The CRM giant is expecting full fiscal year revenues of around $21 billion, while Vlocity's annual sales are at most $100 million per year, based on comments made by founder and CEO David Schmaier last October.

Once the deal is completed, which is expected before the end of June, Salesforce will not only get full control of Vlocity, but also be sure to keep it out of others' hands – Microsoft and Google could have made good use of Vlocity's know-how.

Impact on telecom sector
Salesforce has always courted the telecom sector and made a specific play for communications service providers (CSPs) a few years ago, with Vlocity as a key partner in that push.

Various players in the industry, including some big name operators such as Verizon (for its Visible subsidiary), will be waiting to see what, if any, impact this acquisition will have on Vlocity's strategy.

"Vlocity has a strong presence in the telecom vertical, with customers like T-Mobile, Telus and Telstra," notes Heavy Reading analyst James Crawshaw. "The CEO and other key employees had a heritage in CRM with Siebel Systems, which was acquired by Oracle in 2005, and actively pursued telecom operators that were still using those systems ten years later and which were struggling to change their product and service offerings to keep up with market demands … many operators – not just those using old Siebel systems – find they need new BSS capabilities to support the new digital proposition as their legacy systems lack the flexibility and simply take too long and cost too much to change," adds Crawshaw.

Vlocity has picked up business from CSPs as they have shifted more towards digital sales and customer engagement channels and struck an important relationship in 2016 with Matrixx Software to help deliver an integrated solution that could support so-called "digital transformation" strategies.

Which begs the question – could Salesforce move next for Matrixx? Answers on a digital postcard, please…

News of the deal came as Salesforce announced its latest financials and some significant executive changes: One of its co-CEOs, Keith Block, has quit the role (but is staying on as an advisor); and former BT CEO Gavin Patterson, who joined Salesforce last September as its chairman of the EMEA region, has been named as President and CEO of Salesforce International, overseeing the company's largest international markets outside of the US.

For more on Vlocity, see:

— Ray Le Maistre, Editor-in-Chief, Light Reading

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