What’s driving eyebrow-raising matches and consolidation in SaaS?

As sales enablement startups grapple with profitability, those of us watching the industry closely have noticed some unusual partnerships and consolidation in the past few years. It may not yet be a bubble, but there is a lot of capital flowing into this space and many firms aren’t turning a profit.

Salesforce spent north of $22 billion on bold, strategic acquisitions. It bought MuleSoft for $6.5 billion and acquired best-of-breed juggernaut Tableau for a cool $15.7 billion. Additionally, SAP now owns Qualtrics, Oracle has NetSuite and IBM spent a massive $34 billion to snare Red Hat.

Entrepreneur Myk Pono predicted the first wave of this in 2017: “A major shake-up is happening in the sales enablement (aka sales acceleration) market, and not every SaaS company will come out alive. A few startups will survive, some will be acquired or will merge, several will morph into lifestyle businesses, many will go out of business, and a very few category leaders will benefit disproportionately.”

I expect to see more M&A activity and consolidation as companies face these three key challenges:

• differentiation
• broad oversaturation
• the Big Data problem

Differentiation

Right now, there are dozens of sales enablement tools that provide the same functions with minimal differences among them, so customers tend to go with the products with the most name recognition—the perceived safe bet. M&A activity is likely to grow as companies look to provide unique offerings to outperform their competitors. In fact, we at Triptych expect to see some rather unusual marriages here as a result, with firms not only looking to differentiate, but also to disrupt.

Broad oversaturation

There is a strong appetite for bundling as an account manager’s tech stack can easily turn into a pile. They want one product to address their many challenges. Smart firms will address this customer demand through increased M&A activity.

It is also a savvy business play, as it sets a competitive advantage over startups and less agile firms. It’s difficult for new market entrants to develop the full suite of product capabilities to serve all needs. According to Pono, “New startups can focus on solving one problem, but to be successful, this product has to bring such a greater value that it offsets the costs of switching. And as the state of tech stands, very few products can offer such a better product until the next innovation S-curve.”

The Big Data problem

Big Data is only getting bigger, and AI continues to be necessary for firms to get leaner, quicker and scalable. Most CRMs and sales enablement products managing workflow well, but they also need to manage huge sums of forever-growing data in order to be truly effective and game-changing for the industry.

Customers want AI integrated into their SaaS products because AI can provide the salesperson with more information about their customers and run predictive scenarios to truncate the sales cycle. The key is making the abundance of data actionable. We need machines to evaluate and automate the information that’s actually useful so salespeople aren’t trying to do this manually.

Expect more consolidation and unlikely partnerships as AI and Big Data are making sense of some otherwise unusual corporate marriages.

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