Amid a flurry of announcements surrounding Dreamforce this week, Salesforce.com has announced its intent to acquire a leading Ruby application platform-as-a-service company. Salesforce.com offered about $212 million for Heroku.
Ruby has become the leading development language used to write next-generation apps that are social, collaborative and deliver real-time access to information across mobile devices. Founded in 2007, Heroku powers more than 105,000 apps written by Ruby developers. Last week alone, developers added 2,600 new apps to the platform.
"The next era of cloud computing is social, mobile and real time. I call it Cloud 2," said Marc Benioff, chairman and CEO of Salesforce.com. "Ruby is the language of Cloud 2, and Heroku is the leading Ruby application platform as a service for Cloud 2 that is fueling this growing community. We think this acquisition will uniquely position Salesforce.com as the cornerstone for the next generation of app developers."
The Database.com Tie-In
With a growing community of more than one million developers, Ruby is the development language used to write apps for Groupon, Hulu, 37 Signals, and Twitter. Salesforce.com is betting the Heroku acquisition will help it accelerate the shift to the next era of cloud computing in the enterprise -- and across the entire industry.
Al Hilwa, an analyst at IDC, called the Heroku acquisition a good buy. However, he added, the valuation is eye-popping. As he sees it, firms that provide a hosted platform for Ruby represent the kind of new application workloads that Salesforce hopes to attract to its own cloud offering.
"In theory, Heroku customers will be candidates for Database.com, and so the synergies for cross-selling are one of the main attractions. The two leaders of the Ruby space are Heroku and Engine Yard," Hilwa said. "This move will likely precipitate an acquisition of other such application-platform boutique firms and drive up their valuations."
Grabbing Cloud Market Share
Salesforce said it expects the Heroku acquisition to help it attract and serve a critical mass of developers, customers and ISVs wanting an open, scalable and trusted Cloud 2 platform. To be sure, Salesforce is betting on the trend of apps moving to the cloud increasingly requiring technologies that support collaboration and mobility.
The purchase could also empower Salesforce to take an increased share in the worldwide market for public IT cloud services, which market-research firm IDC forecasts will grow 27 percent a year, to $55.5 billion in 2014. Heroku offers a diverse opportunity, running social-media apps from companies like FlightCaster, which helps users avoid delayed flights, to Best Buy, which created an app to help consumers improve their shopping experience.
"Cloud platforms may be the new disruptive model, but they still need customers and applications," Hilwa said. "The acquisition gives Salesforce.com a ready set of new-age applications written in Ruby that may be candidates to use Database.com or other assets they are building."