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    Salesforce announced on Tuesday 1st December that it plans to add Slack, the popular collaboration and chat tool, to its product portfolio for around £21 billion with the sale expected to close mid 2021

    Slack is a workplace collaboration and communications application that has developed a dedicated following amongst many businesses and individuals, especially those working remotely during the COVID-19 pandemic.

    Following extensive negotiations a definitive agreement was reached between the two companies with the sale made up of a combination of cash and Salesforce stock. For now, Slack will be lead as an operating unit within Salesforce by current Slack CEO Stewart Butterfield. Early suggestions are that Salesforce Customer 360 software, which draws customer info together in one place, will use Slack as its new interface.

    Slack has seen growth this year as one of a range of collaboration tools which have become essential to many businesses whose staff have been operating remotely during the pandemic. A further cash injection from Salesforce could help fuel further and faster growth allowing them to compete more effectively with their larger rivals such as Microsoft’s Teams product

    Here’s a quick overview of what the acquisition means for Slack’s competitors, features and its army of chatters.

    Slack – what is it?

    Used primarily as a workplace collaboration tool Slack is an alternate to email in the workplace and also used widely by groups and families who have adopted it for their personal communications. Used as a desktop app, a web app or on a mobile, Slack users receive chat messages instantly in an alternate to the traditional inbox format associated with email. Chats and Chat Groups can be set up as private or public and allow team, department or company-wide conversations alongside direct one to one messaging. For the mainstream user it’s a fun app to help you through your virtual day with plenty of GIFs, animated emojis and novel details. More appealingly for Salesforce the service has been designed to integrate well with other workplace tools such as Trello and Google Docs

    Why now?

    Even before the global pandemic, but more so during 2020, companies have been moving their skilled workforce to a remote working model and have found traditional ways of communicating in need of a refresh. Slack, which has been a popular tool for many years operating both a free and paid premium service, suddenly found itself in the vanguard of technologies enabling employees to collaborate effectively on projects, communicate with colleagues and even to replace watercooler based socialising with workmates. The so called ‘zoom-boom’ has been widely recognised during 2020, both within business and by families who have embraced video chatting. Slack’s growth hasn’t quite matched that phenomenon, but its contribution has been key to many during the crisis.

    Salesforce’s announcement included the comment that…“The events of this year have greatly accelerated the move by companies and governments to an all digital world, where work happens wherever people are”. Their overarching hope is that the introduction of Slack software will create a more credible unified platform allowing Salesforce to square up more effectively to its growing rivals in the CRM space and for their customers to benefit from an aesthetic user interface and the high virality of its products among users.

    To give a flavour of the competition in this sector, specifically from Microsoft, according to Tuesday’s announcement Slack has approximately 12 million daily users and 142,000 paying customers. Microsoft Teams claims to have more than 10 times the number of daily users, although its numbers are often disputed due to Microsoft’s integrations of Teams into other Office products. The deal announcement also included a snapshot of sales data for the Quarter with 12,000 new pay customers for Slack and total sales revenues in the region of £176 million.

    As the world looks forward to a Corona virus vaccine becoming widely available in the New Year there’s no suggestion that a return to the daily commute for many workers is imminent. Twitter has stated that its employees can opt to work remotely indefinitely and Facebook predicts that half its workforce will be fully remote within 10 years. The financial impact of the enforced changes in working patterns over the past year, the effects on mental and physical wellbeing and exactly what the ‘new normal’ will like in the post-Covid economic rebuild are all fluid topics of discussion. However what is clear, and what this acquisition represents, is that the strategists in Silicon Valley and the cloud giants like Salesforce are betting that remote working and the technology that supports it are here to stay.

    Why does Slack suit Salesforce?

    Salesforce is famous as a pioneer of cloud based CRM technology. Beyond that it is also well known for it’s high profile CEO – Marc Benioff, the Salesforce Tower in San Francisco and increasingly as an active acquirer of enterprise technology businesses. Whilst it failed in their rumoured efforts to bag what would have been landmark acquisitions of social tech giants Linkedin and Twitter, the Slack purchase represents the largest acquisition in all of Salesforce’s 21 year history.

    Purchasing Slack gives Salesforce a tool with which to fight its rivals as several of the Cloud giants encroach on its long standing dominance in the CRM sector. These include Microsoft, which has been pushing MS Teams heavily during the pandemic, and Google which has also given priority to marketing its suite of collaboration and video tools.

    Salesforce CEO, Marc Benioff welcomed Slack to the Salesforce family, or it’s ‘Ohana’ as Benioff stated, referencing his personal Hawaiian connection. “Stewart (Butterfield, Slack CEO) and his team have built one of the most beloved platforms in enterprise software history, with an incredible ecosystem around it”.

    According to analysts at Bernstein, “Salesforce has been interested in expanding into the collaboration space for many years (making multiple prior attempts) and Slack provides a clear channel into the space.”

    Opinion seems mixed about the wisdom of the move by Salesforce and indeed Salesforce stock dropped noticeably in trading in the days following the announcement. UBS analysts expressed a concern that the acquisition may stretch the business financially, following on from it’s £11 billion acquisition of Tableau in 2019, and also take its strategic focus away from its core market of CRM. UBS analysts stated, “Salesforce has a solid acquisition track record and many investors might simply give Salesforce’s CEO the benefit of a doubt on a Slack acquisition……but we’re less and less clear about the direction that Salesforce is heading”


    Why the acquisition may also suits Slack

    The context to this acquisition from Slack’s perspective is the presence and potency of its major competitor, Microsoft Teams. To better equip Slack with the resources to take on Microsoft the introduction of substantial finance and resources from a buyer like Salesforce is key. Although an unprofitable business, since its founding in 2009 Slack has impressed customers and analysts alike with their progress but the shift in priorities of some of the world’s largest tech businesses brought on by the Covid-19 pandemic has raised interest levels within the collaboration technology space.  Salesforce’s timely injection of cash and their track record of fuelling growth within the businesses it acquires will hopefully see Slack better able to compete within one of the hottest areas of the enterprise landscape.

    What will this mean for current Slack users?

    Not much is known at this point about exactly what the future holds for Slack’s brand and questions will persist about how the branding and products will integrate over time

    Stifel analysts referred to Slack as “wildly popular” amongst it’s user base and this is unlikely to be wasted on Salesforce strategists who are no strangers to acquiring and strengthening existing brands. That brand loyalty could be the key to how much of the Slack product is tweaked or left alone and perhaps it could be the users of Salesforce that could see more changes in the short term as Slack will act as the new interface for it’s Salesforce Customer 360 offering.

    For now at least there’s no immediate prospect of the Dancing Otter Slackmoji being replaced by Earnie the Salesforce Badger.

    Back to News
    Salesforce’s £21 billion acquisition of Slack. Why it’s happened and what it means for remote work

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