Reports emerged last week that CRM giant Salesforce was in talks to buy techie-friendly chat and collaboration service, Slack – and the deal was announced December 1, 2020 for $27.7 billion.
This move likely has (at least) two motives behind it – staving off competition and gaining additional revenue from existing customers.
This, to me, is further evidence of Salesforce’s aspiration/need to compete with Microsoft – this time focused on Microsoft Teams. As Redmond put more and more focus on Dynamics 365, it becomes a bigger threat to Salesforce’s CRM customer base. However, one of Microsoft’s strengths is their broad portfolio, often meaning that even if their product doesn’t stack up feature to feature against a competitor’s – the fact you can also buy other products from Microsoft wins them the deal. This could be due to the interoperability benefits of having multiple products from the same vendor and/or the additional negotiating power it affords a customer – buying 3 products from 1 vendor may well give you a better overall price than if each came from a different vendor.
Back in June 2019, Salesforce spent over $15 billion to acquire Tableau Software – a move I believe was, at least in part, an effort to compete with Microsoft’s ability to offer Dynamics 365 + Power BI. CRM and Business Intelligence are logical bedfellows and now, particularly with COVID-19 shifted workforces, adding remote collaboration to the party makes a lot of sense.
Microsoft have recently added a Power BI app into Teams meaning organisations with Dynamics 365, Power BI, and Teams will be able to surface key customer data, KPIs, and insights right inside their employee’s communication hub. This level of integration may well be enough for organisations to overlook instances where Dynamics 365 doesn’t quite match up to Salesforce CRM and/or where Tableau may have additional features over Power BI. To help retain existing customers and continue to win new deals, Salesforce must ensure they can match the story being told 800 miles further up the West coast.
Additional revenue streams
Again, like Tableau, this acquisition – if it happens – will help Salesforce win additional revenue from their existing customers. If you are a happy Salesforce customer looking to improve your organisation’s remote collaboration, it’s likely you’d be more inclined to go with “Salesforce Slack” over Microsoft Teams – not only netting Benioff et al. more revenue but also depriving Microsoft of an opportunity to make headway on the CRM side too.
Equally, it was said at the time of the Tableau acquisition that Salesforce were “buying growth because organic growth is slowing” and the rumoured acquisition of Slack could be more of the same. If the core business isn’t growing as fast anymore, adding additional elements to the business – that have more growth available – makes sense.
For execs such as CIOs and CTOs, acquisitions like this – and their potential ramifications further down the road – are important to consider. If you’re primarily a Microsoft house but use Slack – what does this mean for you? Will it be more beneficial for you to go all in one way or the other – all Microsoft or all Salesforce?
If the big head to head battle of the ‘20s is Microsoft v Salesforce, what does it mean for customers? What are the potential benefits and risks – especially if you use products from both? Will it enable to you play them off against one another to obtain better pricing and more favourable terms…or will you be caught in the cross-fire, suffering the slings and arrows of restrictive licensing rules and bundles that mean you end up paying for things you won’t use?
It seems Salesforce are looking to position themselves as the “go-to” vendor for the undeniably different working landscape of the 2020s – CRM, Business Intelligence, and remote collaboration all in one place is a strong message. However, Salesforce will need to be mindful that they don’t lose their way and become a loose collection of disparate products, causing the overall focus of the business to slip.
About Rich Gibbons
A Northerner renowned for his shirts, Rich is a big Hip-Hop head, and loves travel, football in general (specifically MUFC), baseball, Marvel, and reading as many books as possible. Finding ways to combine all of these with ITAM & software licensing is always fun!
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