What about Salesforce’s acquisition of Slack?

It’s been a long time since we’ve had a major announcement in the small world of the Digital Workplace, and here we are: Salesforce has just gotten its hands on Slack for the modest price tag of $27.7 billion.

Since then, projections on the potential synergies between the two are going well as well as on the future of the Slack product. Let’s try to see a little more clearly.

About Slack

Slack is an enterprise collaboration solution vendor that, quite simply, has found the right middle ground between enterprise social networking and messaging, boosted by integration capabilities with just about every tool you can find in the enterprise.

Slack is very popular with tech companies and technical populations, much less so with the average user and large companies where it is most often under the radar or isolated at a team and department level.

Slack no longer communicates on its number of users since 2019 (12M).

About Salesforce

Salesforce is one of the leaders, if not the leader, in customer relationship management (CRM). It’s the pure player that, with a 100% Saas model, has raised the leaders of the moment (SAP, Siebel (Oracle)) to the status of antiques and set the example for a whole new wave of enterprise software. But it is clear that, apart from Salesforce and Workday (HRIS), none of them have made a lasting place for themselves in the sun alongside the “usual suspects” such as SAP, Oracle, Microsoft or IBM.

Salesforce has also tried to address collaborative work with Chatter or Work.com, but without much success.

What is Salesforce buying?

Salesforce buys what is the only “buyable” player in enterprise collaboration (by buyable I mean with a proven, scalable product with a real user base that doesn’t belong to another mastodon).

Collaboration isn’t new to Salesforce, but despite all the promise, it’s never been successful at it. Today, with the pandemic-related work transformation, it’s a growth industry where a player like Salesforce can’t be absent, and if in-house solutions haven’t caught on, it makes sense to rely on a specialist with a proven track record of success.

But it’s not the only thing, and to understand it you have to go back ten years or so.

At that time the subject was not so much messaging but enterprise social networks, even if the future showed that what worked was a hybridization of the two. We were in the middle of a debate on the ROI of social networks and (I had a front row seat at the time, working for a player in the sector) the model in which we had conversational spaces on one side and business tools on the other didn’t work. Without going back on the subject, I remember writing a ton of articles at the time on the need to couple what was called “social” with business tools. The logic was simple: business tools contain data on the basis of which decisions are made and these decisions are faster and of better quality thanks to the conversations generated in conversational tools by mobilizing stakeholders and experts. It was therefore necessary to link the conversational to a “business object”. As obvious as it may seem, we were faced with two worlds that thought they had the truth and did not want to talk to each other

Then came Salesforce Chatter, a conversational device embedded in Salesforce CRM but also available on a standalone basis with the promise of being able to create a conversational dynamic around any business process. And since the corporate social networking world of the day didn’t want to go to the process world so much, it might as well go the other way. I wasn’t a fan of scattered collaborative platforms, one per business application, but if we weren’t able to bring actionable business information into a global social network, we might as well choose the least bad approach. So for me Chatter meant the death of social networks as Standalone platforms. A subject on which I was wrong…or rather on which I was faster than the maturity of the market.

Then we saw Tibbr, from Tibco, with this promise also to marry business and conversational processes. Let’s not forget IBM Connections and its “embedded experience” that allowed to bring information from business tools into the social network and make it actionable with the idea of bringing business context into collaboration and not having to juggle with tools. In terms of collaborative project management, I also fell in love with ProjExec from Trilog. All this was part of the same logic.

And none of it worked. There are many reasons for this. Unfinished tools. Integrations that are too complicated (and expensive) to implement. A lack of perceived value or not the courage to engage the necessary means to prove that it works. A multiplication of conversational and collaborative channels (email, messaging, video, audio, social networks…) which constituted silos that hindered the fluidity of collaboration. A lack of market maturity. No sense of urgency.

Chatter is a failure. Little used within Salesforce solutions, let alone outside of them. What has become of the star players in the social networking market: Jive and Tibbr are surviving in micro niches, IBM has (as part of a more global strategy) sold Connections to HCL, blueKiwi is dead, Yammer is dying, whatever people say, in the shadow of Teams. The only good news is that the disappearance of Sharepoint from the collaboration market is not so much a failure as a logical repositioning now that Microsoft’s portfolio is rich enough that we no longer have to believe that Sharepoint can and does everything, including enterprise social networking.

While one wave was breaking another was being born and the first to surf it was Slack. Neither social network nor messaging but a bit of both, useful in standalone but brilliant in its ability to integrate with the tools people actually use to work. A rapid and undeniable success with a certain population and type of business and a global footprint that cannot be overlooked. The embodiment of the lightweight, versatile, connected and multi-purpose collaborative work environment. Then there were Teams. Slack at its best with all the firepower of Microsoft, and video.

Slack is a bit what Chatter should have been or could have been if it had been designed a few years later based on the lessons of a changing market. Salesforce got it right too early and did little to evolve what was a “nice to have” product at the time for the vendor, and now that it’s a “must have” has made the logical choice to buy something that works rather than restarting development from scratch.

That’s what Salesforce is buying: in a world where remote collaboration is exploding, a versatile and open collaboration solution that can accelerate customers’ work with its solutions, make their organizations more agile, and enable them to gain a foothold in a market that’s both historic and buoyant. And, to be honest, the only solution of its kind apart from…Teams. Not only a successful product in a new market, but also a way to seriously update an in-house solution that has taken a serious hit without ever having taken off.

Salesforce also buys the ability for its multicloud customers (Sales cloud, marketing cloud, commerce cloud…) to facilitate collaboration between each other’s users in order to better manage the customer lifecycle. When tools don’t talk much (except on slides), the most effective way to get things done is to have people talk to each other.

Salesforce also buys an ecosystem, since today Slack integrates with more than 2,400 enterprise applications.

Salesforce is finally buying (a sin of pride?) the ability to compete on its own ground with an industry giant it didn’t have much to oppose at the moment: Microsoft.

What future for the Slack product?

I don’t think we should expect a revolution at Slack. All indications are that Salesforce will exploit it in two ways: still as a standalone product and integrated into its own products as a replacement for Chatter. Chatter is more likely to undergo a major facelift, to put it mildly, to say that it’s in danger of disappearing.

What opportunities in terms of business?

Salesforce will increase its value proposition to its existing customers and will also be able to enter new markets with an installed base. The potential for cross-sell will be carefully considered:

  • Sell slack to Salesforce customers (Slack would replace Chatter within Salesforce solutions, but there would be a premium version for customers wanting to use it beyond Salesforce)
  • Selling Salesforce to slack customers

The integration of Slack into Salesforce (the product, not the teams) will not be done in a day, so initially we can expect to see Salesforce push Slack “Standalone” to the maximum since it is marketable as is. And see Salesforce create a new offering, a “collaboration cloud”? It’s more than likely. Otherwise, it would mean that Salesforce is giving up some of the “market” value of the product and, ultimately, existing customers. I don’t buy that.

What may be questionable is the maintenance of the free version of Slack. Free isn’t part of the culture at Salesforce or any major vendor, but it’s key to Slack’s success. It’s by getting “free” into companies and creating new needs that it generates paid subscriptions.

So far, marriage is attractive, isn’t it? Now let’s look at the other side of the coin

Salesforce, its Culture, and the Enterprise Software Market

First of all, as in any takeover, the question of integration will arise, not of the product this time, but of the teams. Slack is still a young company (created in 2013) and like any startup it has a very strong culture. It’s easy to create myths about corporate cultures and I always take speeches on this subject with a grain of salt, but Slack has developed a very “employee centric” culture. Demanding, because you don’t get to where they got to by playing teddy bear but “people centric”.

Salesforce also has a strong culture, and it’s no secret that it’s more “result centric” than people centric. It’s a fulfilling company for those who love challenges and hard work but can easily crush others.

To put it another way, nothing says Slack graft easily into Salesforce, and when you consider that Salesforce isn’t in the habit of letting its acquisitions live their lives on their own…

It’s a sensitive topic in all acquisitions, not just Slack and Salesforce, but in this case it’s likely to be even more sensitive.

In the same way, when a “nice” young vendor is bought out by a big one, it often results in a change of culture that is badly experienced by the customers. Sometimes they don’t even wait for the cultural change: there is a preconceived idea that exists in the minds of the customers against which it is difficult to go. When you sign with a startup it’s for certain reasons and you don’t want to find yourself the next day talking to a sales representative from SAP, Oracle, Salesforce or other companies…. Knowing Salesforce’s reputation as a “hard seller,” I think some customers are already worried about what’s going to happen to them.

Another topic that comes to mind is how to integrate the product into Salesforce’s business. Integrating Slack teams and, why not, creating a “Collaboration Cloud” is easy, although cultural issues will arise, as we’ve seen. But then again, you have to add value to the product.

Because Chatter and Work.com’s failures are anything but trivial. There are things one can buy and things one can’t. A market culture is one of them. A marketing and CRM culture is one thing, a culture of ” internal ” solutions and more specifically in the field of collaboration is another. One does not “think” collaboration with the same people and the same DNA as one thinks marketing, sales or e-commerce. It’s not for nothing that even those with a large product portfolio are rather “labeled” as specialists in this or that product line.

If Chatter has not been improved over time it is a matter of culture before it is a matter of trade-offs or product management. If Salesforce hasn’t been in certain areas where it was expected (like HR, for example), it’s a question of culture. You just don’t make productivity tools for employees with the same mindset that you make tools for customer relationships, and although I think the former would benefit from being inspired more often by the latter. When you have a “sales and marketing” mindset, you don’t have a great passion for employees and HR. And recipropically.

By the way, do you remember that at one point everyone was convinced that Salesforce, after having invested in Seesmic, the startup of Loic Le Meur, was going to end up buying it? Well that didn’t happen and Seesmic died a happy death (finally bought by HootSuite but the result is the same) whereas its value proposition seemed to me very interesting and innovative in the field of customer relationships and even in the longer term in internal collaboration with employees who had yet to be invented. Without being in the secret of the gods, we can think that one of the reasons it didn’t go further is Salesforce’s lack of cultural sensitivity to these subjects.

It is not the first time that we would see a product emptied of its meaning and its DNA agonize little by little after a buyout. No matter the ambition that existed at the beginning and according to the established expression, corporate culture eats your strategy for breakfast.

Just because Marc Benioff, Salesforce’s CEO, had a vision and “figured something out” doesn’t mean the entire organization is going to have an epiphany. It’s a problem as old as the hills, and Slack may well learn it quickly at his own expense.

Slack and the shadow of Teams (or Teams and the shadow of Slack)

Slack is a real success, that’s undeniable. The company has not only established itself in the market for business productivity tools, it has created a new market, a market that it embodies itself. Or that it has long embodied.

Then Microsoft released Teams with a similar approach. If today the number of integrations proposed by Teams is far less than that of Slack, Teams took advantage of several things.

First of all, the implementation of Microsoft and Microsoft 365, which can be found in almost every company with a captive clientele.

Then the fact that Teams offers video and not Slack.

Finally the fact that Slack is expensive while Teams is perceived as free because it is included in Microsoft 365.

In the end we went from a situation where Teams was in Slack’s shadow to one where Slack is just a shadow in front of Teams.

Today Slack has stopped reporting on its number of users, which was 12M in 2019 (of which only 6M are paying users), which is generally not a good sign. More worryingly, the information converges to say that Slack has partly missed the “COVID effect” due to a major shortcoming: the lack of video. In contrast, Teams and Zoom have taken full advantage of this accelerated transformation of working modes.

According to the latest figures Teams now has 115 million active users daily. This was predictable and as I anticipated when Teams was released, Slack did not weigh heavily against Microsoft’s product. Let’s be clear, Slack is not dead, but the momentum is over and we already know that Slack will not grow outside of its usual markets.

Worse yet, while Slack is a hit in tech companies and enjoys a real love affair with users, the large companies that are still Salesforce’s core target audience are all Teams or even Webex customers.

Would integrating Slack into the Salesforce offering boost adoption in companies where Teams is installed? If the integration with Salesforce products is good and it “looks free,” why not. But it wouldn’t be good for Salesforce, so the value proposition for the customer would have to be very high so that the product doesn’t just spread to existing customers but helps Salesforce sign new ones. Far from obvious.

So Salesforce buys a product that, while not losing momentum, is now dominated by the competition, is locked into a market niche that’s hard to break out of, has a competitor that’s already well established among its customers, and lacks a key feature: video.

Panic Buy, Panic Sell or both?

In the world of sports we talk about “Panic Buy” when a club buys a player in a hurry in the last minutes of the transfer period because they have not been able to recruit the players they wanted before. Or in other words, when a club buys under time pressure a player that it would not normally buy, simply because it has to buy someone.

Salesforce is on the borderline between “Panic Buy” and the sin of pride.

The sin of pride to begin with. Behind Slack’s takeover there is one and only one objective: to compete with Microsoft by playing on its home turf. I don’t want to be defeatist but everyone who tried this game lost. Worse: they lost at a time when they sometimes had better products than Microsoft, whereas in recent years the Redmond-based company has made a real effort on its user experience and the complementarity of its solutions. We are far from the time when they sold Sharepoint like a Swiss army knife that did everything.

The Panic Buy next. Since Slack was the only player worthy of being bought on the market and we’re in the midst of a boom in remote collaborative uses, we can have the impression that Salesforce said “let’s buy them before someone else does” and for the industrial project we’ll see afterwards.

At the last news Slack was aiming for 1 billion in annual revenue which makes a purchase at 27 times the turnover. When you consider that Salesforce had only paid “only” $2.8 billion for the purchase of Demandware, $237M in sales (E-commerce), which is a multiplier of 14 and $15.7 billion for Tableau Software, which had a turnover of $1.2 billion (data analysis and visualization), which is a multiplier of 13, which are more ” core business ” for the vendor. So okay, Slack is profitable whereas Tableau was not and Demandware was barely profitable.

It’s still expensive for a product with uncertain integration into Salesforce’s business and culture. As a reminder, Microsoft had paid 1.2 billion for Yammer (revenue not disclosed) in 2012.

If we look at things from a Slack perspective even though it may look like a “Panic Sell”, the movement is more rational. Despite a nice track record Slack is today and for the reasons mentioned above in a dead end or rather under a glass ceiling. It was necessary to find an industrial relay at all costs, otherwise it would stagnate… and in this sector when you stagnate you always end up declining and disappearing. There wasn’t yet any urgency, but it was close and when Salesforce showed interest it was difficult to be picky, especially at a price that must have delighted the shareholders and that they would probably never have gotten in the future.

The most beautiful marriages on paper are not the happiest ones

I often say that the marriage of two lame people does not make a valid one. Here we don’t have two cripples, but on the contrary two successful companies, even if one of them has surely eaten his white bread.

So a guaranteed success?

On paper it is a very promising marriage. But for me, Slack is too far from Salesforce in terms of culture and product to deliver all the expected results. I’m not saying it won’t work, I just think that 1+1 won’t make 3 and maybe not even 2. Between 1.25 and 2 maybe. That may sound pessimistic but when you see the number of marriages that end up destroying value, that wouldn’t be bad.

And when it comes to Salesforce competing with Microsoft in the collaboration and productivity solutions market, I don’t believe it for a second. For me, after a little bit of stalling between 2007 and 2012, Microsoft has completely shut this market out for a long time.

Image : Slack by justplay1412 via Shutterstock

Bertrand DUPERRINhttps://www.duperrin.com/english
Head of People and Business Delivery @Emakina / Former consulting director / Crossroads of people, business and technology / Speaker / Compulsive traveler
Head of People and Business Delivery @Emakina / Former consulting director / Crossroads of people, business and technology / Speaker / Compulsive traveler

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