Salesforce: Where’s the Payback for Slack?
Salesforce is buying collaborative software vendor Slack to counter two massive threats, and to grow business. Salesforce might succeed in countering some of one threat and more of the second. I am more optimistic about Salesforce using Slack to develop enough business data to pay for the $28B price tag, possibly within three to five years.
Threat 1: There is no software loyalty
Slack can extend Salesforce’s reach into the increasingly intertwined digital workspaces of most customer and partner enterprises. This may help to counter the growing trend of business software reconsideration and re-platforming that threatens Salesforce.
Salesforce’s moves into enterprise Marketing, Sales, Finance et al have been attempts to extend and entrench business in functional groups that tend to standardize on, and remain loyal to, business management software and vendors. Unfortunately for Salesforce, the functional, cultural, organizational, technological and other boundaries that defined and limited user groups (and the data that they use) are disappearing.
Hence we see thousands of user enterprises reconsidering even their core business software. Thousands more are already migrating legacy environments – including early-gen SaaS platforms like Salesforce – to more capable, adaptable, and affordable cloud services environments. And with enterprise software buying becoming more transactional and less relationship-based, longtime market leaders like Salesforce face further diminishment.
The added capability and caché of Slack may counter some reconsideration and re-platforming by Salesforce customers. Integration of Slack with Salesforce’s recently-announced Anywhere app, its Service Cloud, Work.com, and the Community Cloud, may further entrench Salesforce’s presence. And it could boost Salesforce even more with developers – a critical, usually-overlooked consituency for cloud software vendors.
Threat 2: Microsoft hegemony
Salesforce CEO Marc Benioff has long sought means to counter Microsoft’s encroachment into its markets. Salesforce’s above-mentioned function/role-based solutions, platforms and communities were a significant effort in this. Slack may be able to strengthen Salesforce’s – and Slack’s – positioning against Microsoft, including in some non-traditional, cloud-platform arenas. Microsoft’s LinkedIn, for example, has become a low-barrier-to-entry enterprise CRM, Sales, and Talent Management platform.
Slack’s own battle with Microsoft is considered one for survival. Slack CEO Stewart Butterfield has gone on record as saying that “Microsoft is out to kill us.” The company has also filed antitrust motions against Microsoft.
This is because Microsoft is winning. In software-as-a-service markets, the number of daily users (and uses) is increasingly important as a metric and means of revenue. When Teams was launched, Slack reported six million daily active users (DAUs). As of mid-2020, Slack reports more than 12 million DAUs – significant growth in three years. But Microsoft reports 75 million current Teams DAUs, up from zero three years ago.
That being said, Microsoft’s biggest competitive advantage is with developers and channel partners. Efficient integration of Slack as an experience hub with messaging and file sharing within Salesforce’s App Cloud, Force.com, Lightning, and AppExchange service could enhance Salesforce’s developer and channel partner interactions and value.
It’s the data, right?
Given all the above, it is still challenging at best to justify Slack’s $28B price tag.
That is, until we look at user and business data, the business oxygen of the 21st century. No business can survive without it. Those that provide valuable data position themselves to thrive.
Slack is all about interaction; Salesforce is all about interaction data. Slack generates and gathers a tremendous amount of user-specific and environmental data. Should Salesforce successfully merge Slack with its other apps and operations, it could have a tremendous new data capability to mine. That capability could also be used to feed and connect all of its cloud platforms, applications, developers, customers, and partners. It could also significantly improve and enhance Salesforce’s internal communication and collaboration capabilities, and therefore, improve operations (sorry, Chatter).
Given Salesforce’s current revenue and market value, it’s quite possible that such improvements would pay for the Slack acquisition within three years, perhaps five years at the outside. Assuming, of course that Salesforce can make it work. Stay tuned.
Thanks to Analyst Syndicate colleagues Tom Austin and Karen Hobert for their contributions.