Salesforce.com said Wednesday that it will acquire InStranet, which provides knowledge management software for call centers, and integrate its technology with its existing CRM customer service and support offering. Simply put, Salesforce.com is acquiring traditional enterprise software for $31.5 million and turning it into a service in an effort to target Oracle, SAP and Clarify.
In some respects, Salesforce.com is making a departure from its current playbook, which is to acquire SaaS companies and smaller firms that built businesses on its AppExchange or Force.com platform. This go round Salesforce.com is taking entrenched software, melding it into its SaaS lineup and creating something new. Salesforce.com and InStranet were partners on various integration projects. InStranet is used by 350,000 call center agents and counts TD Ameritrade, MySpace, HP and Qualcomm as customers. Those InStranet customers will also give Salesforce.com an avenue to sell more services.
Salesforce.com said InStranet's technology will become part of the Force.com platform as a service effort and be available in calendar 2009. Since InStranet isn't a SaaS provider Salesforce.com will have to devote a little time on the product integration.
According to Al Falcione, senior director of product marketing at Salesforce.com, the game plan is to use InStranet's Knowledge Base Dimensions technology and meld it with CRM data. The end result would be more effective call center responses. For instance, if I'm a wireless customer and typed in "dropped signal" into a self-service help site I'd typically get a bunch of answers to peruse. With the Salesforce.com-InStranet combination I'd get just one or two options because the service would know that I owned a Blackberry and was most likely asking about that topic.
Falcione says that Salesforce.com sees an opportunity to go after call center products built on "1990s keyword search technology." Salesforce.com is betting that customers will want an integrated CRM-knowledge management package that can deliver answers over multiple channels. With InStranet, customers can categorize the knowledge base to filter out what Falcione calls noise--answers that clearly don't belong.
The rub: The demo that Salesforce.com gave me only works if a customer has the company's CRM service also. It's unclear how many InStranet customers use CRM tools from Salesforce.com rivals such as Oracle and SAP. Given that InStranet and Salesforce.com were strong partners it's possible that the customers overlap. However, InStranet's site lists Oracle (and its BEA and Siebel units) and Amdocs among others as partners. It'll be interesting to see if Oracle's InStranet partnerships last going forward.
More color on the deal is likely to emerge when Salesforce.com reports its second quarter earnings after market close. Wall Street is expecting earnings of 8 cents a share on revenue of $260.5 million. The InStranet purchase won't impact Salesforce.com's financial results.