- Salesforce’s announced acquisition of Slack came as a surprise, especially given the $28 billion price tag.
- Although Salesforce and Slack make a natural union, the deal suffers significant drawbacks. Salesforce raised eyebrows last week by revealing its intention to acquire Slack. Careful deliberation of the journey which led to the announcement reveals what likely lies ahead for the pairing.
Slack came from humble beginnings as the in-house messaging tool for a company called Tiny Speck. In August 2013, the tool became widely distributed under the name ‘Slack’ and its parent was renamed Slack Technologies. Slack is an e-mail alternative centralizing people, information, and tools into ‘channels,’ thus making teams more productive.
Today, Slack Technologies goes by ‘Slack’ and has risen to new heights on the shoulders of platform enhancements, partner relationships, and fresh blood in the management ranks. Slack has drawn a global, loyal following of 12 million+ daily active users across 750,000 organizations. Despite its allure, Slack finds itself searching for profitability and in need of a well-funded suitor to rescue it. Just in time perhaps, Salesforce has come along.
Founded in 1999, Salesforce has grown into one of the world’s largest software companies, valued at $220 billion. Accompanying its flagship CRM software are business platforms like customer support, e-commerce, subscription billing software, analytics, and internal communications. Recently, Salesforce found itself lacking collaboration components to accelerate its Salesforce ‘360’ strategy to transform customer engagement, increase growth, and enable the workforce to function from anywhere. Salesforce needed bold action to close the capability gap with key rival Microsoft, whose Teams offering has gained strong momentum. Acquiring Slack fit the bill.
Salesforce and Slack make a natural union. Virtually overnight, Salesforce gains a collaboration platform on top of its CRM and enterprise social networking capabilities. Once Slack has been incorporated, Salesforce can credibly claim a combination of team collaboration, CRM, enterprise social networking, and customer contact more integrated than even Microsoft’s. Slack will benefit from an influx of much-needed cash to sustain operations as well as an expanded customer base.
In addition to functional compatibility, the companies share a cultural affinity. Salesforce’s developer and integration-driven methodology, which has underpinned historic acquisitions such as Heroku and MuleSoft, will be embellished by the addition of Slack. The integration mantra of Slack and its tech/IT leaning user base make it a more appropriate fit with Salesforce than other potential partners.
The acquisition is not absent drawbacks. Salesforce will make its collaboration market debut armed with a Slack platform that’s a distant challenger to well-entrenched giants such as Microsoft and Cisco and canny OTT players. Salesforce must achieve positive ROI on its $28 billion investment while competing against hyperscale competitors (e.g., Microsoft and Google) that have invested significantly in R&D and M&A. Slack marks the 28th acquisition for Salesforce in the last five years; retaining autonomy and identity for Slack while navigating the complexities of weaving disparate operations into a holistic entity will prove arduous.
Now that the deal has been finalized, here are recommendations for Salesforce and enterprise customers:
- Salesforce needs to articulate its roadmap for Slack as soon as possible.
- Security is enterprises’ top concern. Salesforce must explain how it intends to embed security and compliance into its solutions given their exposure to customer data and internal systems.
- Buyers should already be considering digital transformation strategies knowing that their vendors will be making changes at unprecedented speed.
- Enterprises are increasingly demanding collaboration and productivity tools be tightly unified; hence, they should consider how the combined Salesforce and Slack could enhance their operations by combining CRM, customer insight, customer contact, and internal collaboration tools.