Salesforce announced on June 1 its intent to acquire eCommerce software provider Demandware for $2.8 billion, augmenting its CRM platform with a capable and industry leading commerce solution.

This move positions Salesforce as a direct competitor to enterprise software companies like Oracle, SAP, and IBM - all of which have formidable commerce software offerings. This acquisition has serious implications for both companies and the industry as a whole.

Salesforce and its clients get the lion’s share of benefits, but at a high price. With the premium price that Salesforce is paying for Demandware (12x annual revenue - likely due to another company bidding aggressively for the assets), the acquisition will:

Fill a major hole in the Salesforce offering.

Until now, Salesforce customers had to use third party software tools to manage the buy phase of the customer lifecycle - arguably the most critical phase of the customer journey. With the addition of Demandware, Salesforce clients will be able to manage all customer interactions - including transactional interactions - from a single platform. All customer interaction data will live in one repository, allowing clients easy access to a more complete picture of customer data.

Provide greater access to the B2C market.

In acquiring a leading B2C commerce suite, Salesforce gains access to nearly 350 clients and over $230 million in incremental revenue.

Establish the framework for a new B2B commerce platform.

As Salesforce looks to provide commerce capabilities to its broad set of mid-market B2B clients, it’s likely that the B2C Demandware platform will become the foundation for a new B2B platform. In this scenario, Salesforce will be able to leverage its formidable sales and partner channel to target the B2B mid-market with a relatively low total cost of ownership (TCO) enterprise-class multi-tenant software as a service (SaaS) solution. Now, it is possible that Salesforce will leave Demandware as-is and continue to work with (or acquire) B2B commerce solution CloudCraze, but this is unlikely due to the high price already paid for Demandware.

Require Salesforce to justify the high price.

Financial analysts have stated Salesforce overpaid for Demandware, hich may lead to a reduction of shareholder value. In order to maintain shareholder value, Salesforce will have to move quickly to integrate the Demandware platform so that it is available for all clients in multiple verticals. Demandware and its clients will see minimal benefit over the next three years

Although the benefits of this acquisition for Salesforce are clear, the resulting benefits and limitations for Demandware’s clients appear mixed.

Demandware will likely:

Lose its laser-focus on specialty retail and branded manufacturers.

A core benefit of Demandware has been its laser-focus on the B2C specialty retail and branded manufacturer market. This attribute allows them to stand out compared with larger enterprise commerce solutions. This significant differentiator will disappear if the focus of Demandware is diluted across B2B and B2C.

Reduce investment in its Unified Commerce strategy.

To build a Unified Commerce platform capable of managing commerce transactions and experiences across stores and web, Demandware has acquired order management vendor Mainstreet and point of service vendor Tomax. However, Demandware is still in the early days of these integrations. With the potential shift to focus on building a B2B platform on Salesforce, it is likely that the work to integrate Tomax and Mainstreet will stall.

Gain improvements in its platform.

As Demandware is integrated into the force.com platform, it is likely going to gain improvements in its application program interface (API) layer, allowing the solution to become more extensible and compatible with other software solutions. This will allow Demandware customers to customize their solution with greater flexibility. While this is a potential positive improvement, it does not outweigh the downsides of the acquisition to Demandware clients.

Offer clients some relief in the pricing model.

Demandware continues to rely on a somewhat outmoded revenue share pricing model that directly increases costs for clients as their sales grow. In this scenario, retailers argue that they can't get scale from their commerce platform. Now that Demandware is part of a broader platform, it is likely that clients will have more pricing model options to choose from.

Salesforce has an opportunity to effectively reboot Demandware’s pricing model as it has no legacy to maintain in the eCommerce space. What it means: The consolidation of top-tier commerce suites is now complete

All leading eCommerce suites are now owned by enterprise software companies, marking the end of an era when individual software vendors led the development of emerging eCommerce software. eCommerce is all grown up, and is taking its rightful place side-by-side with enterprise applications such as ERP.

The next generation of engagement technology will need to be agile and plug into these enterprise commerce solutions, and it’s likely that the industry will continue to see a rise in microservices that plug into a CaaS, or commerce-as-a-service.

(About the author: Adam Silverman is a principal analyst at Forrester Research serving ebusiness and channel strategy professionals. This post originally appeared on his Forrester blog, which can be viewed here)

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