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Salesforce, ServiceMax and Silver Lake - a field service ménage à trois in search of a committed relationship

Stuart Lauchlan Profile picture for user slauchlan February 25, 2020
Summary:
Salesforce and ServiceMax are taking their relationship to the next stage, but what's the long term destination?

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Salesforce’s Ventures arm has taken a stake in ServiceMax, joining forces with the latter’s owner Silver Lake to pump $80 million into the field service management firm.

This isn’t the first time Salesforce has put money behind ServiceMax - it was involved in early funding rounds for the company, but ceased to be an investor when the firm was acquired for a time by GE Digital. But with Silver Lake having bought out 90% of GE’s ownership, Salesforce has returned to the fold.

The exact breakdown of the funding is not clear, but ServiceMax CEO Neil Barua said that it is “predominantly Salesforce”. The cash will be used, according to the official announcement, to “advance the future of field service management” and “invest in further innovation in asset-centric industries”.

Leaving aside the formal wording, what that means in practical terms is a far tighter and, in theory, far more collaborative relationship between ServiceMax and Salesforce. The former was built on Salesforce’s platform from its inception and all of its customers are Salesforce customers. But since those early days of the firm, Salesforce has developed its own interest in the field service space, a market that ServiceMax has dubbed a “$34 billion opportunity”. Salesforce’s own ambitions in the sector have been spelt out clearly enough. Late last year Bill Patterson, GM of Service Cloud  at Salesforce, talked up:

“this notion of front office, field office operations, creating a better economically viable notion for how organizations go out and serve their customers in field. And a lot of companies today that employ kind of remote workforces or field workforces are looking at that last mile of excellence as ways again to cement that differentiation. And that’s why I think, a lot of organizations are looking to technology like field service, that sets themselves apart…the opportunity is kind of large and profound. And I would say, it’s not limited to just, say, the technician marketplace; home health care professionals, financial advisers, organizations actually performing retail operations with this technology. There is a broad need for kind of modernizing the service operations that are out in field. And we see that need in such a way that's driving great opportunity for the platform of field service.

Those comments, coming shortly after Salesforce paid $1.35 billion to acquire ClickSoftware, which as Phil Wainewright noted at the time “pretty much wrote Salesforce's field service software back in 2016”, clearly indicate intent to take market share in field service. Similar sentiments over the years have also triggered speculation that ServiceMax would move to support other platforms, with founder Dave Yarnold telling me as far back as 2016 that:

We joined the Salesforce ecosystem early on and we’ve built a good business on that. We chose to build on a fantastic platform…Given recent developments, a new ISV might have some different considerations to those we had.

Salesforce’s field service moves also beg several questions about the reasons for this latest development. Is the “predominantly Salesforce” share of the $80 million essentially a ‘downpayment’ on the firm? Silver Lake is going to want to monetize its investment at some point, so will ServiceMax follow ClickSoftware’s path into Salesforce ownership sooner or later? And how is the new relationship with Salesforce going to manifest itself in terms of product development? If the future is now unshakeably ‘Salesforce First’, how much  - if any - of future direction will effectively need Salesforce sign-off? How easy will the shift be from ‘co-opetition’ to complete collaboration?

Downpayment? 

I caught up with Barua last night to talk over some of the questions, starting with the ‘downpayment’ suggestion. He told me:

That's an interesting choice of words…The most important piece of this is the money allows us to have a strategic partnership, by which we can collectively as two independent companies get Salesforce support to help innovate and push us towards innovating within our own remit, but also through their support of the great things they're building on their platform, to ensure that customers get the best-in-class value from both companies versus two independent companies that aren't really talking to each other.

From a Salesforce Ventures standpoint,..whenever Silver Lake decides to monetize their share in ServiceMax, I think this is Salesforce [wanting] to make sure that they benefit from the success that I think ServiceMax will have with their support, whether it be through an IPO process - which we have full ability to go do - or through many parties, including one which could be Salesforce. But that's not something we're worried about right now. We're taking this money, we're creating a strong tight-knit family, starting from senior executives of Salesforce, and driving solutions to the customers that are desperately needing us to do great things for them and innovate in such a in particular such an important space.

What that means in practical terms is that Salesforce’s people and ServiceMax’s people are going to be talking a lot more. Salesforce will have an observer on the ServiceMax board, while both firms product teams will be committing to monthly catch-ups and consultations on product direction. Barua explained:

Our product teams will spend considerable time thinking about what are great things that Salesforce is doing on their platform, or with AI, that when we look at the asset-centric use cases that ServiceMax is focused on, what can we do and build together, or collectively do things that can make that use case a lot better in terms of value to the customer? What didn't happen up until today was those teams weren't talking to each other. There was no forum, there was no monthly meeting that is now going to occur, at which we could think about what is the best thing we can do together for customers.

What it also means is that any scuttlebutt that ServiceMax might move away from the Salesforce platform can now be laid to rest, he said:

Leaving aside any kind of uncertainty there was over the last few years that ServiceMax was going to leave the platform or not renew our agreement, all those things we have now done [away with]. A customer has zero risk of coming to us, assuming that we give them good value, around getting the best of Salesforce and getting the best of ServiceMax. So we feel like the customer base will not be asking that tertiary question around who's going to ultimately own [ServiceMax]. Ultimately the value to them is us together, developing the right solution set for what they're looking for.

He added:

When we build new capabilities or augment our existing capabilities, we absolutely will 100% think Salesforce. Will that mean that there won't be a module that might not be supported by the Salesforce platform and may have been built in the past during the GE days?  Will those still be supported? Absolutely, yes. We're not moving away from that. We saw the independence [under GE] and we have customers that we support,  but every decision going forward, we will be thinking about picking up the phone and meeting with [Salesforce Chief Operating Officer] Bret Taylor and Bill Patterson and thinking, ’Is there a better way to do this together with Salesforce?’. That absolutely is the thrust of this partnership.

But depite the new closeness, the two firms will not be doing joint sales pushes, Barua said:

We have two independent sales teams. We now will 100% focus, as we have, on asset-centric industries and will continue to reinforce our process and innovation there. And they'll continue with a sales team that sells a lot of different things. But our thrust is asset-centric. We are keeping our sales people completely separated. Marketing...we'll continue to look at those things as they present themselves.

My take

This feels like the first step in a journey towards what looks like a fairly obvious long term destination.

There’s clearly high-level support on both sides for making this work and it’s a big deal for all parties involved. As I understand it, as well being driven from the Salesforce side by Patterson and Taylor - and having Taylor full-square behind this is crucially important! - , the deal went right up to co-CEO Marc Benioff for sign-off on Friday night.

That being so, what we talked about on Monday evening is inevitably incredibly early days and there will be a lot that still needs to be worked out in practice. Barua told me:

There's a lot of barriers that we need to think through and work together. From my standpoint, this is the start of a relationship that can be really great...there's a lot to get done, but we start now with a lot of trust between the two companies and, in our view, that could do a lot for our customers.  But there's a lot of work ahead of us for sure.

That said, by the time Dreamforce comes around in November, there will be an expectation among customers and commentators of seeing some more meat on the bones and some proof points of the benefits of this ménage à trois between ServiceMax, Salesforce and Silver Lake.  And I do think that the “tertiary question” of ultimate ownership will still need addressing. 


As to that longer term ‘elephant in the room’, Silver Lake’s buyout of ServiceMax is just over one year old. Barua shipped his family from the East Coast to take up the CEO’s role with a five year timeframe in his mind. He told me Monday:

I think the opportunity is here to continue to run it for that long, if not longer.  But first things first - I think in terms of optionality from a private equity owner, the company needs to continue to build on the momentum…and do that for the next number of years. We think this partnership with Salesforce will ignite it even more…Silver Lake is in no rush to sell. They’re not a seller right now. They want to really grow the business, build this partnership, really well over the next number of years and then, you know, what happens after that will be determined based on the success we show over the next few years.

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