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Tech giants filling 'holes in their portfolios' with pricey data analytics deals

The acquisition of Tableau Software Inc. by inc. is the latest multibillion-dollar deal highlighting the importance of data analytics to large technology companies.

In its largest deal ever, the cloud-based software company said June 10 that it plans to buy data-visualization platform Tableau. The deal has a gross transaction value of $17.17 billion, according to S&P Global Market Intelligence data.

Salesforce said it is looking to improve its analytics capabilities through the deal and to expand its reach to a broader range of customers and users. Tableau offers a self-service analytics platform used by more than 86,000 organizations globally.

"What we're seeing is the fact that every digital transformation project starts with data, and that's really why Salesforce paid so much for Tableau," said Ray Wang, principal analyst and founder at technology research and advisory firm Constellation Research.

Wang said the deal plays well to the strengths of both companies allowing Salesforce to diversify beyond its pure cloud offerings and enabling Tableau to provide its data insights that speed up business processes in the cloud. Business intelligence and data analytics represent the future of cloud computing, he said.

"In 10 years, if Salesforce is selling software, they've missed the point," Wang said. "Every cloud company realizes that."

Notably, a few days before the Tableau deal was announced, Alphabet Inc.'s Google LLC unit also struck a deal to buy business intelligence software and data analytics platform Looker Data Sciences Inc. for $2.6 billion.

According to data from research firm IDC, the worldwide business-analytics services market reached $12.7 billion in 2018, representing a 10% jump from $11.5 billion at the end of 2017.

Bernstein analyst Zane Chrane said in a June 10 research note that Salesforce has a solid record of driving revenue growth in its acquired companies, and this deal should help the company "get a fuller picture" of its customers.

"Tableau is a tool that enables users of different levels of sophistication to get insights from data in an intuitive way and is, therefore, a very valuable solution," Chrane wrote.

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Wedbush Securities analyst Steve Koenig was also bullish on the deal, calling it "transformative" for the software industry. He said the move puts more pressure on Salesforce's biggest cloud competitors, including Microsoft Corp., Google and Inc., to keep up in the space.

"Salesforce is positioning itself for the future of analytics, which is cloud, self-service and machine-assisted," Koenig wrote in a June 10 research note.

On a call with analysts to discuss the deal, Salesforce's Chairman and Co-CEO Marc Benioff said his company's customers want to see and understand data, which is what made Tableau such a "powerful" acquisition target. Similarly, Tableau CEO Adam Selipsky said that the combination will allow customers to get a more comprehensive view of their businesses.

As Salesforce and other cloud giants continue to incorporate more advanced capabilities into their businesses, including machine learning, Tableau can also benefit from that shift, according to IDC analyst Dan Vesset. Machine learning helps "make suggestions to the business user," noted Vesset, and automates what "would have required multiple clicks in the past or time by the business user."

Overall, Vesset said both Salesforce and Google "filled a hole in their portfolios" with these recent deals, as they position themselves to not only be application- and data-based providers but also to provide analytics and business intelligence.

"Whether you are on the front lines or you are in the office or in the executive suite, you make some type of decisions on a daily basis," Vesset said. "The idea is that they would be better decisions if you were supported by data and supported by that data at your fingertips, which this type of software theoretically enables."