San Francisco-based business software maker Salesforce announced last week that it will buy work-chat service Slack for $27.7 billion in a deal aimed at giving the two companies a better shot at competing against long-time industry powerhouse Microsoft.
The acquisition is by far the largest in the 21-year history of Salesforce, a pioneer in the software as a service (SaaS) market that allowed users to connect via any internet-connected device instead of the more cumbersome process of installing programs on individual computers.
With the dust now settling after the initial news, it is now possible to determine some of the potential implications for the workplace, remote work and the wider digital workplace technology market.
Slack and Salesforce's SaaS Marriage
For Eric Christopher, co-founder and CEO of Indianapolis-based SaaS management company Zylo, the acquisition underlines the ongoing and continued development of cloud computing and, specifically software-as-a-service (SaaS), which, he pointed out, is being adopted faster than ever to drive employee effectiveness, especially as it relates to customer experience.
Salesforce's acquisition of Slack brings together employees and customers in a single collaborative experience, which is exactly what’s driving the adoption of new SaaS applications. The challenge for companies now is to understand what they’ve invested in and whether those applications are being used to improve experience and effectiveness.
“They want to move from silos to integrated experiences and a central way to manage their growing portfolio of SaaS apps," Christopher said. "Just as COVID accelerated the adoption of SaaS for the digital workforce, this move will accelerate the move toward centralization of collaboration, experience and management. It will also force the giants in both customer and employee engagement – Microsoft, Google, Amazon – to respond.”
Breaking Down the Old Silos
This move towards integration of experiences and silos, while not new, is one of the major issues facing those working in and providing for the digital workplace. Even customer experience relationships and management will be impacted by this buy, said Tzachi Levy, senior vice president of product and engineering at Hackensack, NJ-based Vidyo, a video communication software firm.
The acquisition is an interesting move by the leader in the customer relationship management (CRM) industry and a clear indication of the ongoing battle between the giants in the workplace collaboration space, he said. "A battle that got a big boost from the COVID-19 pandemic," he said. “This move puts Salesforce in a unique position, placing CRM in the middle of the unified collaboration world.”
This is a concept that might make sense to many enterprises and could change the way organizations communicate internally, as well as define a new way of interacting with customers.
However, this is more than the unification of two established technologies – unified communication for Slack's part and CRM from Salesforce – said Sagi Eliyahu, CEO and co-founder at San Francisco-based Tonkean, a San Francisco business process software company. The deal will have major implications for the future of work and the kinds of technology that organizations will need and invest in.
Specifically, he said, it signals the end of the era that Salesforce itself heralded — that of full-stack packaged cloud apps liberated from the limitations of on-premise software. “That era — call it SaaS 1.0 — constituted a quantum leap in mankind’s ongoing march towards full digital transformation, mostly by making software more available. But it didn’t bring us all the way there,” Eliyahu said “Software remained siloed, and as a result, its value remained limited.”
The result was the emergence of two categories of software tools: one for where people worked, and another for where data was stored. The two could only be bridged manually or with a lot of deep technical work.
“Salesforce’s acquisition of Slack is an acknowledgment that this siloed approach is massively inadequate," he said. "In simple terms, you must meet people where they’re at."
Related Article: Overcoming Communication Silos in the Digital Workplace
Built for Easy Integrations
For Morten Brøgger, CEO of Switzerland-based Wire, a secure messaging app, the acquisition is simply a continuation of Slack’s original mission. Slack never actually meant to replace email or become the all-in-one solution itself. The goal has always been to position the platform as a solution that adds value via easy integrations.
There is, of course, a bigger picture. In a broader sense, this move illustrates a trend towards the separation of workplace tool suites and specialized collaboration tools. Workplace tool suites like Salesforce and Microsoft will win in terms of being a one-stop shop for everything, but specialized collaboration tools can now easily succeed by doing one or two mission-critical things extremely well, such as security/privacy and audio/video.
"In sum, this acquisition allows Slack to continue on without needing to address its subpar real-time communications (audio/video), Salesforce gets another piece of the workplace tool suite, and specialized collaboration tools can stay in the game by focusing on key features like security and real-time conferencing,” he said.
Accessing More Enterprise Software Customers
Slack is a solid addition to Salesforce’s portfolio, said Chris Stafford, senior manager in M&A at Chicago-based consulting firm West Monroe. Enterprise collaboration is a different part of the tech space and they’re buying a high-growth platform that has momentum. Slack has penetrated the enterprise space very well over the last couple of years and this is one more step toward becoming a bigger, broader platform that helps businesses operate more efficiently and effectively.
"It is also worth noting that Slack is often a preferred communication tool by the high-tech/software space and that market itself is growing like crazy," he said. "The acquisition may bite into Salesforce’s profitability in the short term but in the long term makes a lot of sense.”
The free bundling of Teams with Office 365 makes it hard for any other player to compete in the collaboration space, said Venkat Ramasamy, chief operating officer and vice president of marketing at enterprise file sharing company FileCloud.
Considering the competitive landscape, it is a smart move for Slack to join Salesforce. It gives them access to enterprise customers and potentially the same product bundling strategy that Microsoft has used to gain more customers. "How much this merger will facilitate the progress of remote work depends on its actual execution. It is hard to get the execution right, especially with big M&As," he said. "That is the main issue."