Microsoft's Marketing Software Challenge: To Build or To Buy Again?

Microsoft is rumored to be one of a handful of companies in the running to acquire marketing automation software provider Marketo. That's based on speculations from sources like Credit Suisse, and on a Bloomberg report earlier this week that Marketo is working with Morgan Stanley to weigh a possible sale, among other strategic options. Microsoft, as well as SAP and Adobe, have been floated through the rumor mill as potential acquirers, though it is also possible no deal will emerge.

Marketo offers a compelling mix of strengths to complement a CRM software suite that lacks its own successful marketing platform. But with a $1.2 billion market cap and a history of losses and negative cash flow as it grows revenue, such a company is only a viable acquisition prospect for a select few other software vendors.

Microsoft late to the marketing automation party

Yes, Microsoft already has Dynamics Marketing, which continues to incrementally add traditional marketing automation (MA) features beyond its core of marketing resource management (MRM). But Microsoft Dynamics Marketing's uptake over the last couple of years has been sluggish, according to multiple CRM partners. The channel has struggled to find a place for it with their CRM clients and prospects, either to offer classic MRM capabilities or as an option for more conventional marketing automation functions that compete with dedicated MA solutions. 

Microsoft's CRM product management team clearly has some big plans in areas other than marketing. It has pushed the CRM product line forward in a range of other functional areas like customer service, project service, mobility, and social ...