Salesforce partner demand soars, M&A follows
The Salesforce skills crunch has generated a wave of acquisitions in the partner ecosystem. But M&A isn't the only remedy: Consultants have also boosted training.
It's déjà vu all over again: The rapid expansion of the Salesforce market has overrun the supply of trained personnel and sparked acquisition activity among Salesforce partners.
Global systems integrators and IT services firms Accenture, Atos and Booz Allen Hamilton purchased Salesforce specialists this year. IBM acquired two Salesforce consultancies. OSF Digital, meanwhile, bought four Salesforce partners since obtaining a $43 million funding boost in May 2021 (see chart).
Sound familiar? From 2015 to 2016, the Salesforce partner ecosystem saw a series of deals amid high demand for implementation services. Those deals featured the top independent SaaS consultancies of the time. Accenture got the trend started in October 2015, when it acquired Salesforce specialist Cloud Sherpas. The following year, IBM purchased Salesforce consultancy Bluewolf, while Wipro Ltd. acquired cloud services firm Appirio. Wipro kept Appirio's Salesforce business but eventually sold the company's Workday and Cornerstone OnDemand practices.
"Cloud Sherpas, Appirio and Bluewolf opened the floodgates for these cloud services organization to be looked upon as targets of acquisition," said Eran Gil, co-founder of Cloud Sherpas and now CEO at AllCloud, a cloud professional services firm and Salesforce Consulting Partner based in Lakewood, Colo. AllCloud was founded in 2014, just before the consolidation of the earlier-generation Salesforce consultancies.
Future acquisition phases seem likely as a spike in demand for skills fuels the growth of the Salesforce partner ecosystem. "It will be cyclical market for years to come," Gil said.
Nonstop demand for Salesforce partner services
The vitality of the Salesforce partner ecosystem has closely tracked the vendor's explosive growth.
In fiscal year 2016, during the earlier consolidation phase, Salesforce posted $6.67 billion in revenue. Over the next five years, the company's topline more than tripled to $21.25 billion. Salesforce plans to exceed $25 billion in revenue for fiscal year 2022, which ends Jan. 31, and hit the $50 billion mark before the end of the decade.
Salesforce's SaaS sales has a multiplier effect for service providers, said Gerard Szatvanyi, president and CEO at OSF Digital, a digital transformation partner and Salesforce Platinum Partner based in Quebec City. Each dollar customers spend on Salesforce licensing generates $3 to $5 dollars in services.
That demand for services "has to be fulfilled by the partner network," Szatvanyi noted.
Meeting that demand can prove challenging, however.
"It's very hard to hire people in [the Salesforce] space," said Chip Schorr, senior managing director of One Equity Partners, a middle-market private equity firm that invests in IT services firms.
The COVID-19 pandemic and shift to digital business have contributed to the strain on cloud resources, including Salesforce consultants. "We are seeing this wave of post-pandemic transformation in organizations that may have [previously] been a little lagging or just taking their time to transform into the cloud," Gil said. "That is driving demand to a state where there is a lack of talent in the marketplace."
The talent shortage, in turn, sparks acquisitions. Platform players in the Salesforce services market must acquire companies to keep pace, Gil said.
Eran GilCEO, AllCloud
Given the lack of skills in the market, larger service providers may need to acquire, rather than hire, to jumpstart their Salesforce practices, Szatvanyi added. OSF Digital, however, has a different motivation for acquiring Salesforce partners. The company aims to strengthen its go-to-market strategy, using acquisitions to reinforce its presence in regional markets and support for global clients that need services delivered across multiple countries.
OSF Digital selects its acquisitions targets based on several factors. Knowledge of an acquisition candidate's founders and executives is the primary driver behind individual transactions, Szatvanyi said. OSF Digital may encounter companies on projects or through Salesforce's partner advisory boards or learn about them through Salesforce partner awards. "We have multiple touchpoints with them," he said.
Home-grown Salesforce talent
Training, rather than M&A, is the "main engine" OSF Digital uses to cultivate Salesforce specialists, Szatvanyi noted. "We do train a lot of people, and many are from scratch," he said.
Excellarate, a technology services company and Salesforce partner based in Wayne, Pa., has also prioritized the nurturing of talent. The company established a bootcamp of sorts for recent college graduates. The program steeps new hires in technology fundamentals and then trains them in Salesforce so they can attain certification.
When Excellarate decided five years ago to specialize in Salesforce, the company found many of its employees' Java skills helped smooth the transition. Java is an important technology underpinning for Salesforce, Excellarate chief people officer Vijay Bommisetti said. Apex, for example, is a Java-like development platform for building apps on top of the Salesforce platform.
A Java developer can prepare for Salesforce certification in about 12 months, Bommisetti noted. A new hire out of college would typically take somewhat longer to train. Salesforce specialists may also get trained in specific domains, which takes additional time. Excellarate specializes in the financial services, healthcare and insurance vertical markets.
Cloud consultants cite several areas of demand for their Salesforce services. At Excellarate, top areas include consulting and integration, said Jim Sloan, CIO and executive vice president of financial services at the company. "We see the need to build out customer-facing solutions and integrating behind the scenes with CRM, onboarding tools, and other financial and banking applications," he said.
Product engineering and custom Apex development represent additional growth areas. Excellarate also offers horizontal and vertical frameworks that aim to speed up development.
In addition, the evolution of Salesforce's Digital 360 business will drive demand for Salesforce skills into the future, Szatvanyi said. Digital 360, he said, focuses on creating a superior customer experience, analyzing data to understand and anticipate what customers want, and feeding information on buying patterns into the manufacturing supply chain. Salesforce continues to acquire technology to realize the Digital 360 vision, he added.
As more pieces come together, digital transformation projects will become much broader than they are today, Szatvanyi said. Projects currently focusing on marketing or B2B/B2C commerce will more tightly integrate with supply chain, analytics, service and distribution channels, among other systems.
"We are still just scratching the surface," Szatvanyi said.