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Why Salesforce’s SaaS play for Tableau is just the beginning

Pras Subramanian

We saw another big deal in the high-flying SaaS (software as a service) space this week, with Salesforce (CRMgobbling up data visualization firm Tableau (DATA) for $15.7 billion. As “The Final Round” host Myles Udland says, SaaS stocks have been the hottest names across the board over the last several months, and a lot of the premium these names are getting is based on this thesis: that someone will buy them out.

While Salesforce’s Tableau deal is its biggest acquisition to date, and a monster one in the sector, don’t be fooled into thinking the buying spree in this space is cooling off.

“I think we’re still in the midpoint of that (acquisition) cycle, heading on our way up, [and] part of the reason is because we have a lot of enterprise software players that haven’t run their course in terms of growth,” says Ray Wang, founder and research analyst at Constellation Research, on “The Final Round.” “There’s still a lot of investment on the B2B (business to business) side and because of that investment, you see companies like Microsoft (MSFT), IBM (IBM), Google (GOOGGOOGL), Salesforce, Oracle (ORCL), and SAP (SAP) still in the mode to make acquisitions.”

Another factor at play here in the SaaS spending spree is the need for vertical integration in the space, where a platform provider like a Salesforce feels the need to bolt on another SaaS company, for instance Tableau, to provide additional services to its clients.

For Wang, it’s all about big data, and these acquisitions are meant to help the Salesforces of the world deal with immense amounts of it. Platforms need to clean data, prepare it, and present it in a way that business customers need.

“The next step is taking that data and pumping that into AI and machine learning systems,” Wang says. “Getting that data infrastructure is hard, visualizing that data isn’t easy as well — that’s why there’s this race to be build these data-driven, digital networks, that are popping up.”

And if the last few months are any indication, it’s why investors — big and small — are continuing to bid up these high-flying SaaS names.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter here.

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