Will Salesforce Acquire Apttus CPQ?

When Salesforce, Inc. acquired Steelbrick, Steelbrick became the “go-to CPQ solution” for Salesforce users - at least for SMBs. Larger B2Bs in the upper middle market and enterprise are asking why Salesforce has not also acquired a CPQ designed for them too. The more important question is: will Salesforce acquire an enterprise-grade CPQ? Will they create one seamless CPQ that could scale from SMB to multinational? Will this happen within the next couple of years?

When Salesforce, Inc. acquired Steelbrick, Steelbrick became the “go-to CPQ solution” for Salesforce users - at least for SMBs. Larger B2Bs in the upper middle market and enterprise are asking why Salesforce has not also acquired a CPQ designed for them too. The more important question is: will Salesforce acquire an enterprise-grade CPQ? Will they create one seamless CPQ that could scale from SMB to multinational? Will this happen within the next couple of years?

Why Is a Prospective Salesforce CPQ for Enterprise Important?

Growing, mid-market B2Bs will hesitate before implementing an SMB solution they might outgrow within a couple of years. Ideally, a Salesforce CPQ customer would want some assurance that an enterprise edition will be forthcoming. If an enterprise solution is on the horizon, then implementing Salesforce CPQ (previously Steelbrick) would carry more long-term value for this market segment.

The answer is important no matter how Salesforce CPQ might achieve continuity between SMB and enterprise, but some experts believe an Apttus acquisition would be an obvious choice. In the following blog, we look at the evidence and weigh in. Will Salesforce acquire Apttus CPQ?

Points in Favor | Apttus Would Welcome a Salesforce Acquisition

Steelbrick is a well-engineered CPQ for SMBs. Apttus is enterprise-grade. At face value, acquiring Apttus would potentially bring Salesforce customers a sustainable CPQ solution that would span the difficult gap between mid-market and enterprise. It does not hurt that Salesforce has already invested millions in Apttus, nor that Apttus CEO Kirk Krappe has expressed significant interest in exit via a Salesforce acquisition: “We will be IPOing this year. That may be a function to figure what Salesforce wants to do and they may think about that. There’s no reason why they can’t buy us too.” (Techcrunch, “Apttus CEO Kirk Krappe Chats Candidly About 2016 Exit”).

But how does Salesforce feel?

CEO Marc Benioff was asked about the strategic intent of the Steelbrick acquisition earlier this year. Many CPQ vendors on the AppExchange® were rightfully concerned that Salesforce might be signalling entrance into the CPQ market. Edgespring led Salesforce to the Business Intelligence market; Pardot and ExactTarget led the charge into Marketing Automation. Was Steelbrick a sign of a larger strategy?

Mr. Benioff’s response is edifying:

“It [the Steelbrick acquisition] was not a part of our strategic plan. It was really an indication of how excited we are about lightning... I thought it [Steelbrick] was the best example I had seen of an ISV building and executing on the platform [Sales Cloud Lightning], and I just wanted to bring that to all of our customers. It wasn’t strategic. I know there are implications to our ecosystem, but at the end of the day, these are mega markets. And there is plenty of business for everyone as our business continues to thrive.” (Anderson, “Why Salesforce Acquired Steelbrick”)

Benioff’s statement was not a promise by any means, but stating that CPQ was not in the corporate strategy is important. What does he mean, and can we believe him? Let’s remember that Gartner estimated the quote-to-cash market is worth $31 billion in 2016, and $41 billion in two years. That is a lot of cash to leave on the table, even if the quote is bad.

Points Opposed | The Apttus Opportunity Has Closed

We are confident Apttus was the first pick, not the second. Krappe is interested in acquisition, but his price is too high and, in the end, Salesforce CRM would be too confining. In April, Microsoft Dynamics CRM announced that they were bringing the Apttus Intelligence Cloud to their suite. This deal suggests an IPO is far more likely because any acquisition — either by Microsoft or Salesforce — would reduce Apttus’ market by almost half.

An Apttus-less Salesforce makes sense in the broader trajectory of CPQ.

The CPQ market is over three decades old, but it remains diversified. Gartner analyst Robert Desisto has reasoned that there were significant barriers to consolidation in the CPQ market (Desisto, “Configure, Price, Quote: The market that won’t go away and makes investors millions in the process.”) Despite the cloud, which has changed CPQ for the better, the diversity of needs prevents one solution from dominating.

The process of configuration must accommodate products and services, integrate with other IT systems, and have the features that digitally replicate all necessary and useful steps in the company’s workflow. Many of these steps are unique, making it difficult for vendors to justify solving them on a case-by-case basis, and they have also proven to be significant challenges for mid-market firms during implementation.

Conclusion: Will Salesforce CPQ Acquire Apttus?

A larger software company might be attracted to a CPQ investment, but no CPQ solution will monopolize the market, even from within a smaller CRM subset. Enterprise solutions must interact with other pricing, configuration and revenue software to add value, and many of these programs are beyond the scope of CRM.

If we trust Benioff and Desisito’s analysis of the market, adding an enterprise solution to the Salesforce suite of products would add little value at this time. Even if Salesforce were to acquire Apttus, significant development would be necessary to create a seamless transition from Salesforce CPQ: SMB (Prev. Steelbrick) to Salesforce CPQ: Enterprise (Prev. Apttus). The only way Benioff would bite at Apttus would be if Apttus becomes distressed. Judging from the rising estimations of the CPQ market, that possibility seems extremely remote, as well.

We will take Benioff at his word for now. And if CPQ is not a strategy, then we cannot expect a Salesforce CPQ for Enterprise anytime soon.

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