A rumored deal between Salesforce and Slack was officially confirmed on Tuesday, December 1st. Salesforce, the CRM powerhouse, bought Slack, a team collaboration platform, in a deal worth $27.7 billion. Marc Benioff, Chair and CEO of Salesforce, said: “This is a match made in heaven. Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world.” This move could be a smart win-win deal for both Salesforce and Slack. Let’s see why.
Why Did Slack Want to Be Bought?
We all know that Slack has been the canonical example of the ‘bottom-up’ product in corporate tech for a long time. Despite the platform ‘won’ over specialists and teams, it didn’t persuade their bosses to pay for versions that are tuned to a corporation’s security and data-compliance needs. Slack is still dependent on a relatively small number of big customers. About 40% of the company’s revenue in the latest fiscal year came from just 963 organizations writing at least $100,000 in annualized checks to Slack. It has been one of Slack’s biggest weaknesses in its competition with the deep-pocketed and expansive Microsoft, which has a huge ecosystem of products it can attach its Teams to.
Slack has said it has about 12 million daily active users. Microsoft Teams says it has 115 million daily active users. While Slack is broadly available as a standalone service and application with various pricing tiers, Microsoft Teams comes as part of an Office 365 subscription. It’s not news to anyone that Slack argues that Microsoft uses its market dominance with Office to force millions of people to install Teams, with no way of removing it or even knowing how much it costs.
Facing a formidable challenge from Microsoft, Slack was seeking a way to step up its market reach and product investment opportunities. Under the auspices of Salesforce, a $225 billion giant in the enterprise software space, Slack gets a huge enterprise ecosystem through which it can be sold and integrated.
Former Salesforce product management VP Anshu Sharma, who became an investor before confounding privacy API startup Skyflow, said:
“Slack won the product war but was losing the sales and marketing battle to Microsoft and Google, who have a distribution advantage and deep pockets. With Marc Benioff on their side, Slack will overnight have ten times more salespeople selling its product.”
Why Does a Deal Make Sense for Salesforce?
Purchasing Slack gives Salesforce a tool to fight one of its rivals, Microsoft, which has been pushing Teams heavily during the pandemic. Wedbush analyst Daniel Ives shares his thoughts about the balance of power in the market:
“For Microsoft, this would competitively change the landscape and make Salesforce even that much more of a competitor (Dynamics vs. CRM) in the field as these two stalwarts further compete in the trillion-dollar cloud opportunity over the next decade.”
Despite a wide array of applications in Salesforce’s portfolio, they don’t have significant reach beyond sales and marketing teams. The company wants its applications to be critical to every employee with an organization, to be the place they go to get their work done. And it considers the Slack platform to be the perfect software space to achieve this. According to the press-release, Slack will become the new interface for Salesforce Customer 360 and will be deeply integrated into every Salesforce cloud becoming the space through which people “communicate, collaborate, and take action on customer information.” With the acquisition, Salesforce now has a direct path to social collaboration across the enterprise.
Today’s employees want to have their calendars, task schedulers, email clients, and other native apps integrated into their workspace. Slack’s countless integrations and bots provide such functionality. But buying bots from Slack’s App Directory for the whole team can be too expensive. For example, an enterprise company consisting of 5K specialists can spend about $60K per year just for one bot. And if they use 5 or 10 bots?
In many cases, it can be reasonable to develop a custom Slack bot for internal purposes. At UpsilonIT, we provide a wide range of bot development services, helping companies using Slack to enhance their team productivity while saving thousands of dollars. For more details, contact our business development specialists.
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