Analysis: Can Salesforce's pick up of Slack dethrone Microsoft Teams?

Last week news broke that Salesforce was pitting its enterprise software prowess against Microsoft with its recent US#27.7 billion acquisition of Slack. This marks its third major acquisition after MuleSoft in 2018 and Tableau last year

Over the past decade, Salesforce has been actively trying to build its own workplace collaboration tools, similar to what Slack offers. In 2016, it acquired collaborative productivity software Quip for more than US$500 million, and in the same year, it lost the LinkedIn bid to Microsoft, which the latter acquired for US$26.2 billion, the reported the Wall Street Journal then. Six years before that, Salesforce launched Chatter, its cloud-based enterprise social collaboration application and platform.

While it has yet to be seen whether Salesforce can truly take on Microsoft with this acquisition, the move certainly intensifies the competition between both companies. Meanwhile, Microsoft previously mulled the purchase of Slack for US$8 billion in 2016, TechCrunch previously reported, but it later unveiled Microsoft Teams. 

Can Salesforce dethrone Microsoft?

This acquisition, according to Forrester's analysts, makes sense on paper. CRM is important for employees who are involved in work that impacts customers. Adding in the aspect of collaboration allows employees, who are now mainly working remotely, to better understand their consumers and collectively organise workflows and processes. 

In reality, however, Salesforce's Chatter, which is a free social collaboration tool similar to Facebook and Twitter, but for organizations on the platform, has never fulfilled that need, Forrester said. Moreover, Slack has been rather quiet in a year it should have ideally been thriving as remote working becomes the new normal and more collaboration tools are required as a result.

As such, Salesforce is up against its old competitor Microsoft, which has dominated the space in recent years due to the large install base for Skype for Business - which is now moving towards Microsoft Teams. Forrester added that Microsoft has also had success in bundling Teams in Microsoft 365. According to Forrester, as of October this year, Teams had 115 million daily active users, while Slack only had 12 million in 2019, which was the last time it reported active users.

Likewise, Gartner's VP and analyst Jason Wong said even though Slack might value add to Salesforce's workstream collaboration offering, Microsoft Teams has become the "800-pound gorilla" over the years. He added that "it has been challenging to compete with the gravitational pull of Microsoft Office 365" despite Slack being deployed alongside Microsoft Teams in some enterprises.

According to Gartner's vendor rating, Salesforce's overall financial position has been robust, thanks to acquisitions that have fuelled its platform growth and continued increases in sales of core application products such as sales cloud and service cloud. However, Gartner noted that the company faces new challenges as it expands into the non-CRM markets, such as integration, analytics, and app development platform, that makes up a significant portion of its total addressable market.

"Salesforce already competes with Microsoft in segments of the CRM market, as well as in the data and analytics market with Tableau versus Microsoft Power BI, and development platforms market with Salesforce Lighting and Heroku versus Microsoft Azure and Power Apps. This acquisition further increases the enterprise overlap between these two mega-vendors, particularly from a cloud and SaaS perspective targeting frontline and knowledge workers," Wong said.

Also weighing in on the conversation was Rika Sharma, MD of Digitas Asia Pacific who said the deal allows Salesforce to compete with a combined offering side by side to other tech companies.

"I think [this acquisition] is a clear reflection of the impact of Covid and the acceleration of digital transformation this year. It also reflects how companies start to prepare for the future of work," she said.

Sharma added that although there might have been past conversations and opportunities for such an acquisition, the current context created a more immediate need to reconsider both companies' perspectives for the future and take action. The question, Sharma said, is how the solution will evolve after the acquisition to maintain both a distinctive offering as a collaborative tool in Slack but integrated with the CRM leader.

Can Salesforce extend the reach of its CRM with Slack?

Despite the reality that Salesforce will still have to compete with Microsoft's prowess in the workplace collaboration space, Forrester's analysts believe that the acquisition will still allow Salesforce to continue its trajectory growth. Reason being, Salesforce has not yet dipped its feet into the back office, instead spreading its reach, and fueling its revenue stream, by purchasing MuleSoft  and Tableau. 

This new offering will extend Salesforce's reach within the companies. According to Forrester, Slack demos often incorporate bots and workflows that operate on systems-of-engagement or systems-of-record data. The purpose is to serve users who are not “heads-down app users”, for example frontline workers in retail stores, with a simpler interface that is more geared toward conversations and collaboration. "While this may open up Salesforce to a reduction in classic Salesforce licenses, it does pull in a wider user base able to work on its overall platform," Forrester added.

Salesforce also has the opportunity to exploit Slack's relationship with developers. It now has a bigger and tougher opportunity to tie together the entirety of its portfolio and embed workflows and communications via Slack, into its portfolio that includes a mix of data, CRM, interoperability, and employee engagement platforms.

According to Forrester, the end game is to make employees more engaged with Salesforce applications in the way they work and communicate. If Salesforce can’t deliver on this, it paid a huge price tag that will result in relatively little impact.

On the other hand, Gartner's Wong believes that the three recent acquisitions over the past two years have now turned Salesforce into more than just a CRM company. They position Salesforce "more strongly and broadly" in the digital workplace space and employee experience world. Given the size of this acquisition, Wong said the strategy, just as with MuleSoft and Tableau, should be all about growth in this new addressable market, for Salesforce’s stated revenue ambitions.

"Salesforce dipped its toes into these employee-facing areas with Chatter and Quip, and most recently with its offerings to aid in the pandemic response and recovery for workforces. In Slack, Salesfprce now has the opportunity to offer more general purpose and horizontal employee workstream collaboration capabilities to its 150,000 customers," Wong said.

He added that the company now also has broader collaboration technology to tie customer experience with employee experience. Gartner predicts the strategy of interlinking multi-experience, customer experience, employee experience and user experience to form a superior shared experience to be a 2021 top strategic trend, which it calls total experience. The research firm explained that organisations require a total experience strategy because they must continuously enhance their customer experience and employee experience, especially as these interactions have become more mobile, virtual and distributed. According to Gartner, by 2024, organisations providing a total experience will outperform competitors by 25% in satisfaction metrics for both customer and employee experience.

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