Skip to main content

Salesforce in Acquistion Talks with Slack - Good News or not?

The News

Today various media outlets broke the news that Salesforce is in advanced talks with Slack Technologies about a possible acquisition. The news had two effects: Slack stock went up nearly 40 per cent during trading hours while Salesforce stock loses out by 5 percent, which basically says that Salesforce investors are not so convinced about this acquisition being a good thing, whereas Slack investors clearly are.


Slack and Salesforce share an integration, which is listed on AppExchange since 2019.


There have been speculations on Slack being a good target for Salesforce that date back till August 2016, basically ever since the integration between Salesforce and Slack got announced.

The Bigger Picture

There are several aspects to this news.

Salesforce already has Chatter, a tool that often gets negative feedback. The company also owns Quip, which is essentially a solution for the collaborative creation of documents and spreadsheets.
 
And Salesforce has created work.com, as a solution to increase business resiliency and to improve collaborative work.

On a larger scale, and accelerated by the Covid crisis, the need for fast and efficient communication and collaboration of distributed work forces and their customers, using various means of communication is there. Actually, it has been there for quite some time, as the emergence of solutions from Slack to Teams, Zoom, etc. proves. E-mail is still very important, but only a part of this communication, which includes near instant chat, voice and video communications as well as collaborative work on documents – inside and outside an organization.

Another part is, that this communication needs to be tied to business processes and enable three things: Better outcomes by connecting all documents and communications to business processes and business objects, the ability to use this additional data to feed models that enable better predictions and/or actions and a reduction of efforts for the involved people, e.g. when it comes to finding information. 

Businesses have a challenge here and are looking for solutions to fix it, and fast. This can be seen by the revenues of Zoom nearly quadrupling between Q2/19 and Q2/20 or the usage of Microsoft Teams skyrocketing from 13 million daily active users in July 2019 to 75 million daily active users in April 2020. At the same time Slack grew its paying customers between February and July 2020 by more than 20 percent, too.

Because of this, vendors of CRM solutions have increasingly been strengthening their built-in collaboration and productivity suites or are forming partnerships with companies in this space.

My Analysis and PoV

My first reaction was: Wow!

Slack, coming out of the developer community, has been an early player in the communications tools space. It does not only allow chat, voice and video communication for (smaller) groups but also allows embedding of bots as well as workflows. The company is clearly loved by small companies and startups and has been able to get a substantial number of customers.

As the numbers above show, Slack has not been able to capitalize on the Covid crisis and grow as fast as the competition. Further, Slack has not yet become a profitable business and also has a negative cash flow. Especially Microsoft putting an increased focus on Teams, put Slack, as well as Zoom, under significant pressure, as there is a considerable benefit to use MS Teams in an environment that already uses MS Office. Given that, I think that Slack is in a tight position. I dare saying that Slack on its own would not have been viable for much longer.

When it comes to Salesforce, Slack makes for a terrific addition to its portfolio for various reasons. 

Slack enables Salesforce to significantly strengthen its productivity/collaboration suite, bringing it to a level that is no more far behind Microsoft. Productivity/collaboration is one of the four core pillars for a platform player. While Salesforce already has Chatter, this tool only works within a company and does also not allow for voice or video communication.

Neither Oracle nor SAP have a similar technology, although Oracle has its Beehive product that offers web and audio conferencing, plus a strategic partnership with Zoom, which it increasingly embeds into its CX suite. SAP has a strategic partnership with Microsoft and deployed MS Teams throughout its organization.

Slack also comes with far more than 100,000 customers and an expected revenue of in excess of $860 million in FY 2021, which would nicely add to Salesforce’s platform revenues, which in Q2 of FY21 rose to $1.2 bn.

In addition, the customers that Slack brings, are predominantly SMB businesses. In FY 20, less than 900 of 110,000 paying customers spent more than $100,000 for using Slacks services. This opens up a huge opportunity for Salesforce to tap into the SMB CRM market, which is a market that all big players are trying to scale down into. It remains to be seen in how far especially the smaller Slack customers accept a Salesforce that is seen as an enterprise player, as a partner.

In conclusion: For Salesforce, acquiring Slack makes perfect sense. It enriches the platform and therefore the Salesforce CX play. It is at least a jab against Microsoft and ringfences the Salesforce portfolio in the Clash of Titans with Oracle and SAP. 

Comments

Last Year's Top 5 Popular Posts

Clash of Titans - Platform Play

Platform Play, photo by Gabriel Jimenez A lot has evolved since my Clash of the Titans post that looked into how the big 4.5 (Microsoft, Oracle, Salesforce, SAP, and Adobe) and others are positioning themselves in the greater CRM arena. First, the commoditization of the business application has accelerated and the vendors’ focus on the underlying platform has increased. CRM, and enterprise software in general, has always been a platform play although this has not always been recognized and sometimes even negated. The obvious reason for it being a platform play is that the creation of positive customer and user experiences need a consistent technical platform. Or else we are ending up in engagements that are fragmented across interactions. This results in inconsistent and poor experiences. So far, so well known. A bit less obvious is the fact that there will be only few dominant platforms. Vendors, who want to become and stay successful on a grand scale need to

Zoho - A True Unicorn

End of January Zoho held its 2020 Zoho Days, an analyst summit, which I was happy to attend, along with more than 60 colleagues, as the only analyst from Germany, as it seems. Sadly, it took me quite a while to complete this – Zoho deserves a faster commentare. But hey, let’s look forward and get rolling. Zoho is a privately owned enterprise software company that has quietly evolved from a small software company in 1996 to an ambitious global player that serves the SMB- and enterprise CRM market with cloud applications. The company has a set of 45+ business apps with more than 50 million users, 10 data centres and counting, and is available in 180 countries. The company is profitable and maintained a CAGR of more than 30 percent over the past five years. But why quietly? Because Zoho managed its growth pretty unusually (almost) fully organically with only very minor acquisitions. Crunchbase lists one. Following this unique approach, which defies the tradit

SugarCRM supercharges its AI by acquiring Node.io

  The News On Monday, August 24 th , 2020 SugarCRM announced the acquisition of node.io . I had the pleasure to get pre-briefed by Craig Charlton , CEO SugarCRM and Rich Green , Chief Product Officer and CTO SugarCRM about this topic. Node was founded in 2014 with significant expertise , including ex-Google personnel and he creator of the Alta-Vista search engine.  According to Crunchbase , the company has acquired $43.5M US to innovate around AI as a service. The company applies deep learning to help organizations make better predictions and decisions that impact their bottom line and focuses on delivering accurate predictions even with minimum CRM data. It does this by taking advantage of large data sets that it acquired or has free access to, including company and available business related personal information. That way, it is possible to hand over only a limited amount of SugarCRM data to Node in order to achieve accurate predictions. Instead, the prediction engine runs almost e

CRMKonvo - Freshworks on Platform, CRM and useful AI

Freshworks has is now officially a fresh (sorry, I really couldn't resist this pun) member of the club of platform players. The company introduced its own flavour of CRM and a platform that they build upon. What is next? Lot's of ground to cover. A CRKKonvo with Prakash Ramamurthy, Chief Product Officer, Peter Stadlinger, Head of Products CRM and David Krauss, Senior Director Product Marketing at Freshworks. Together with Marshall Lager, Ralf Korb and Thomas Wieberneit they discuss market perspectives, what the value for customers actually is and how the innovations that the team has recently introduced fit in there. Prakash, Peter, and David bring a wealth of knowledge to the conversation, including a pretty interesting dive into how to train an AI based upon the idea that the human who is in front of the machine is still one of the most important trainers, due to tacit knowledge and wisdom that cannot be codified. Which also explains the trifecta of priorities that Freshwork

CRMKonvos - Mitch Lieberman on CX, CDP and Conversational Excellence beyondCXM

During this episode we talked with Mitch Lieberman who has quite some experience in the CRM industry, on the vendor- and analyst side. He was with Epiphany, Sugar, and with G2, to name but a few. He has the insight and the sharp mind that makes this conversation particularly interesting, without me diminishing the other ones, though. Mitch certainly got our grey matter into high gear during our conversation that started with CX, went into a solid discussion of the value (what is it?) of Customer Data Platforms, CDP, on to conversational systems - and back. We learned a lot. You can, too. This conversation is in English, apart from a few minutes at the beginning and the end.